A bill has been submitted on the establishment and operation of a reporting framework for the identification obligations of financial and other service providers, which aims to transpose the provisions of the EU Money Laundering Directives 4 and into national law. The bill provides, inter alia, for the establishment of a central register of beneficial ownership data, to which authorities, prosecutors, courts and supervisory bodies have unrestricted access. The introduction of the register will impose a number of obligations on the service providers subject to the obligation, such as lawyers and law firms.
The bill, tabled on 20 April 2021, establishes the beneficial ownership register. Following the directives, the bill provides for the creation of a central register of beneficial ownership (‘ultimate beneficial owner’) data (not a public register) which must contain adequate, accurate and timely information on all economic and non-profit organizations. The data stored there will be accessible without restrictions (from different dates) to authorities, prosecutors, courts and supervisory bodies, however, access to the data will be necessary for the sole purpose of due diligence by the obligated service providers, including, inter alia, lawyers and law firms.. The public will only have access data to the name and nationality of the beneficial owner, as well as the nature and extent of the beneficial ownership against payment of a fee.
Service providers are obliged to monitor and report to the registration body (the National Tax and Customs Office) withing five working days if they detect any discrepancy between the beneficial ownership data known to them and the data recorded in the register. No new notification of discrepancy with the same beneficial ownership data may be sent within thirty days. To report a discrepancy, the service provider must at least start costumer due diligence in accordance with Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing (‘AML’). In case of an indication of a discrepancy, the service provider is obliged to disclose the discrepancy recorded by it and the date of recording. It is important to emphasize that it is only necessary to report a discrepancy if it affects the identity of the beneficial owner or the nature of the beneficial interest held. If the discrepancy has no material effect on the identification or determination of beneficial ownership, there is no need to report it.
In case of doubt as to the identity of the beneficial owner, service providers are obliged to take all further measures until the identity of the beneficial owner is ascertained. Furthermore, within ninety days of entry into force, they are obliged to draw up internal regulations for the performance of duties falling within the scope of the obligations specified in the bill, which may form part of the internal regulations specified in the AML. The internal regulations shall be subject to the rules of the AML.
The bill also amends the provisions of the AML on costumer due diligence. In this context, the use of non-public registers for verification purposes will be allowed as a complement to the verification of the identity of customers, with the supervisory authorities providing guidance on the registers to be used. The service provider will be entitled to use the registers only for the verification of identity as a complementary measure and will be obliged to make copies of documents or to record and register requests from the public registers during the costumer due diligence. It is possible to use data obtained from the beneficial ownership register, however, it is not possible to rely solely on this data to record the costumer’s beneficial ownership data. Once measures have been taken, the service provider is also obliged to record the date of recording the beneficial ownership data in its register. Costumer due diligence measures may be carried out in other ways in addition to the usual methods: on the basis of copies of documents and declarations sent from the costumer’s identified e-mail address or uploaded to the online interface operated by the service provider, or based on electronic documents. The internal regulations must specify the cases in which the costumer is allowed to send documents from the costumer’s e-mail address or upload them to the online platform.
In addition to the above, the bill allows for more flexibility in the provisions of AML on simplified and enhanced costumer due diligence. In the case of simplified costumer due diligence, a distinction can be made between data that service providers are obliged to record (‘minimum data set’) and data that can be recorded in addition on the basis of a risk-sensitive approach (‘maximum data set’). For a significant proportion of wholly and majority state-owned companies, the executive officer is considered to be the beneficial owner. However, enhanced costumer due diligence (with some exceptions) is only required where the executive officers of the majority state-owned company are also considered to be politically exposed persons.
A new rule introduced to the AML is that the service provider is obliged to carry out the identification and verification of the identity of the costumer, as well as the procedures related to the identity of the beneficial owner and the determination of the politically exposed character before establishing the business relationship. These measures may be taken in the course of the business relationship if the probability of money laundering or terrorist financing is low and no indications of such a possibility have been identified. In this case, the service provider is obliged to take the measures not later than during the periodic data verification obligation imposed on existing customers.
In addition to the above, the bill deals thoroughly with the definition of the qualifications of the data provider and its beneficial owners, the legal consequences that may be derived from certain data discrepancies and the rules applicable to the complaint handling in the event of their occurrence.