The Central Register of the Beneficial Owners
In accordance with the directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, the Hungarian Parliament has re-codified the Hungarian money laundering act (Act CXXXVI of 2017 on the prevention and combating of money laundering and terrorist financing), in which the central register of the beneficial owners appears as an additional item under Article 25.
One of the additions of the directive – which has been transposed by the Hungarian legislation into a national law – is that beneficial ownership information will be stored in a central register located outside the company, in full compliance with Union Law. Therefore, the use of a central database which collects beneficial ownership information, the business register, or another central register shall be required. To fulfill that obligation, the service providers – financial institutions, insurance companies, lawyers, notaries, accountants, real estate agencies, etc. – shall identify the so-called beneficial owners of the business associations mandates, who may not be the same people within the company registry or any such database.
Beneficial owner shall mean the natural person who owns or controls at least twenty-five per cent of the shares or voting rights in a business association directly or indirectly. Where no natural person is identifiable, the person who ultimately owns or exerts control over a business association, senior managing official(s) shall be considered as the beneficial owner(s).
The verification of the identity of the beneficial owner shall take place prior to the establishment of the business relationship with the service provider. According to the new Act, the central registry shall include surname, forename (birth name), nationality of the beneficial owner, address, in the absence of such address, place of residence of the beneficial owner and beneficial ownership, including the details of the beneficial interests held. Additionally, if the beneficial owner shall be qualified a ‘politically exposed person’, then the basis of such qualification.
The central register of the beneficial owners has not been technically established in Hungary yet, therefore the fulfillment of the obligation of service providers to upload such data is practically impossible. Thus, although the identification obligation of service providers is in effect from October 1, 2017 (and consequently, the clients are obligated to provide data), the data transmission obligation is not yet effective.