Hungary Introduces Beneficial Ownership Regulations to Combat Money Laundering

Introduction

As of May 22, 2021, Hungary has implemented the 4th and 5th anti-money laundering EU directives, introducing a register for ultimate beneficial owners (UBOs) in the country. The UBO Register is a central database managed by the Hungarian Tax and Customs Authority (TA), requiring data on UBOs to be reported by account holder banks.

What are Ultimate Beneficial Owners (UBOs)?

• A natural person who directly or indirectly owns or controls at least 25% of a company, other organization, trust, or foundation.
• If no such person exists, the executive officer will be considered the UBO.
• Special definitions apply to UBOs of foundations and trusts.

Reporting Requirements

• Law firms, as service providers obliged to perform AML screening, must notify the TA if they find discrepancies in a UBO’s data compared to the register.
• This can result in an adverse change to the trustworthiness index (TT index) of relevant companies.

Trustworthiness Index (TT Index)

• Initially set at 10 points
• Decreases by 1 point for each discrepancy reported by service providers and 2 points for each report from authorities, prosecutors, or courts.
• If the TT index drops below 6 points, the data will be classified as “unreliable,” and transactions above HUF 4.5 million (approximately EUR 12,000) may be rejected.

Access to the UBO Register

• The UBO Register will be accessible to various entities, including:
  • Data provider organizations
  • Authorities
  • Service providers
  • Anyone with a legitimate interest
• Starting from July 2022
• By February 1, 2023, other EU member states will have access to the Hungarian UBO Register, while Hungarian authorities and service providers will gain access to UBO databases of other member states.

Purpose of Implementing Beneficial Ownership Regulations

The implementation of beneficial ownership regulations in Hungary aims to combat money laundering and enhance transparency in business operations.