Deadline extension regarding customer due diligence for banks and other service providers: 24 June 2019

Banking and finance

Deadline extension regarding customer due diligence for banks and other service providers: Parliament extended due diligence deadline until 31 October 2019 and introduced new information obligation

As it is known, according to Art. 79 of the Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing (hereinafter: AML Act) the two-year transition period for harmonizing the results of the customer due diligence carried out in respect of transactions concluded under the previous AML Act (that is before 26 June 2017) with the new provisions of the AML Act will expire on 26 June 2019. Pursuant to the AML Act, service providers must refuse to carry out transactions for customers in respect of whom the outcome of the customer due diligence requirements specified under the AML Act (eg. copies of the customers’ ID cards) is not fully available on 26 June 2019.

However, upon notice of the Hungarian Banking Association, stating that in respect a significant number of customers the due diligence process cannot be carried out before the deadline, the Government submitted a draft legislation proposal on 21 June 2019, which has been adopted in an urgency procedure by the Hungarian Parliament on 25 June 2019.

According to the adopted proposal, the deadline set out in Art. 79 of the AML Act will be extended until 31 October 2019, making it possible to carry out customer due diligence procedures without blocking financial transactions after 26 June 2019 in respect of more than one million customers.

By adopting the proposal, the new deadline will be 31 October 2019 not just for the financial institutions but for all service providers under the scope of the AML Act, including insurance companies and pension funds.

 

The adopted proposal also introduces a new information obligation in order to ensure that the consumer due diligence could be carried out properly within the extended deadline: the service providers shall inform their affected consumers withing 3 days from the entry into force of the proposal. This information shall be given in writing or in a manner set out in the parties’ contract.


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