You should take this request seriously, because a failed identification could result in your business being blacklisted, even if it is otherwise operating in accordance with the law.

Companies not only have an obligation to keep up-to-date information in the actual ownership register, but it is also in their best interests.

Increased attention should be paid to companies where the ownership circle is

- a foreign national owner or

- a company (especially if it is a foreign company),

- there has been a change in ownership following bank identification.

We recommend that you contact your account-holding bank urgently if you have not yet received a request to identify the beneficial owner.

The new rules came into force on 1 February 2022. The register of UBOs - ultimate beneficial owners - has been created, based on data provided by banks. This database is accessible to tax and other authorities, prosecutors, courts, and supervisory bodies for identifying the beneficial owners of businesses.

The register contains the company data and its TT-index, an indicator of trustworthiness. The firms’ index is initially set to 10 if the bank can identify the company owners.

If the bank fails to do so, then the company is not entered in the register, and the account-holding service is instantly terminated.

As of the 1^st of July 2022, the maximum score may be reduced by penalties. If the actual ownership data of a company is not identical with the registered data, then penalties are applied. Discrepancies can be reported by the authorities, banks, or service providers.

A discrepancy in the actual ownership data reported by public authorities will reduce the value of the enterprise's TT index by 2 points, while a discrepancy reported by service providers will reduce the value of the enterprise's TT index by 1 point.

If an entity's TT-index falls below 8 points, its rating becomes “uncertain”, and if it falls below 6 points, its rating becomes “unreliable”. In the case of an “unreliable” classification, the Tax authority (NAV) will publish the name and tax number of the entity on its website immediately.

In the case of an “uncertain” classification, the publication comes 180 days after the classification is enforced. This may occur even for a company that is operating in a basically transparent form, if this stricter reporting obligation is not fulfilled.

Furthermore, a company with unreliable beneficial ownership data will be required to be treated as partner with high risk by the service provider, and to implement corresponding (stricter) customer due diligence measures. From the 1^st of July 2022. the service provider will be obliged to refuse executing transactions above HUF 4.5 million initiated by the company in case until the beneficial ownership data is confirmed or amended.

The legislation imposes an obligation to verify the identity of their customers on certain service providers. These are: lawyers, accountants, auditors, tax advisors, notaries, trustee foundations, seat service providers and even trade partners (!) who receive cash of HUF 3 million or more from their business partners.

These service providers are required to check the information provided to them against the UBO's records - which they must also keep up to date - as part of the checks required by the Money Laundering Act. If they find discrepancies in the actual ownership data of their customers, they are obliged to report them to the registry (NAV).

If you have any questions on this subject, please contact us on e-mail: nemeth.melinda@colling.hu.

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