Hungary Tightens Know Your Customer (KYC) Requirements for Banks

In an effort to combat money laundering and terrorist financing, Hungary has strengthened its Know Your Customer (KYC) regulations for banks. The new rules require financial institutions to collect and regularly review customer data, including identification information, business activities, trading habits, and source of wealth.

Why is KYC Important?

The Hungarian government and European Union have emphasized the importance of KYC requirements in preventing and combating money laundering and terrorist financing. Banks must ensure that they have up-to-date and accurate customer information to fulfill their statutory obligations and protect the financial interests of their customers.

Key Benefits of KYC

Prevents money laundering and terrorist financing
Protects financial interests of customers
Ensures compliance with statutory obligations
Enhances transparency in the banking sector

What Information Must Customers Provide?

Customers are required to provide identification data, including:

Name
Address
Date of birth
Nationality
Companies must also provide documentation on their existence, place of registration, activities, and ownership structure.

Additional Requirements for Private Individuals and Companies

Private individuals and companies must certify any changes in their data with valid personal identification documents or company register extracts.
Ownership tree diagrams are required to be submitted by private individuals and companies.

What is an Ownership Tree Diagram?

An ownership tree diagram is a visual representation of a customer’s ownership structure, including the different ownership ratios. The diagram must include information on corporate name, registered office, country of registration, and ownership ratio for companies, as well as name, country of residence, and ownership ratio for private individuals.

How Will Banks Use Customer Information?

Banks will use customer information to update their registries and ensure that all data is correct and up-to-date. This will enable them to better understand their customers and identify potential unlawful activities.

Bank’s Responsibility in Maintaining Accurate Customer Data

Regularly review and update customer data
Ensure accuracy and completeness of customer data
Protect confidentiality of customer information

No, banks are required to treat customer information confidentially, in accordance with laws concerning bank secrets and data protection.

Bank’s Obligation to Maintain Confidentiality

Protect customer data from unauthorized access
Ensure that customer data is not shared with other financial institutions without consent
Comply with laws concerning bank secrets and data protection

What Are the Consequences of Not Meeting KYC Requirements?

If a bank fails to meet KYC requirements, it may provide certain banking services in a limited extent or not at all to its customers. Additionally, the bank may be subject to regulatory penalties and fines.

Consequences for Banks Failing to Meet KYC Requirements

Provision of banking services may be restricted
Regulatory penalties and fines may apply
Reputational damage may occur

Are Existing Customers Exempt from Providing Information?

No, all existing customers must also comply with the new KYC regulations, regardless of when they established their relationship with the bank. The bank is required to periodically review customer data to ensure that it meets regulatory requirements.

Requirement for Existing Customers to Comply with New KYC Regulations

All existing customers must provide updated information
Banks are required to periodically review customer data
Compliance with new KYC regulations is mandatory