E-signatures in finance and NPL transactions in Hungary

  1.  E-contracting, e-statements and e-signatures in banking & finance transaction contracts and legal statements
    1. Which are the typical documents (contracts, legal statements, etc.) where written form, paper format and wet-ink signatures are mandatory?
    2. Which are the typical documents where written form is mandatory, and electronic form and e-signature are allowed?
    3.  If the written form is mandatory and electronic form and electronic signature is allowed in banking & finance transactions and agreements, what kind of e-signature is sufficient?
    4. Is there any other electronic signing/acceptance/ statement making method which meets the criteria of written documents in banking & finance transactions and agreements?
    5.  If written form is not mandatory, what kind of e-signature or other e-acceptance method is sufficient?
  2.  Electronic attorney countersigning, notarial deed and Apostille
    1.  Is the attorney countersigning accepted in electronic form? If yes, in what form and on what conditions?
    2.  Is the notarial deed accepted in electronic form? If yes, with what conditions? 
    3.  Is the Apostille accepted in electronic form (e-Apostille)? Is your jurisdiction member of the e-Apostille Program (e-APP)?
  3. Electronic AML customer authentication/identification
    1.  Is the AML customer authentication/identification allowed in electronic way?
    2. Which electronic AML customer authentication (verification)/identification methods are accepted? 
    3.  Are the beneficiary owner declaration and PEP declaration accepted in electronic form? If yes, with what kind of formalities?

Agreements on financial services, including all finance transaction contracts and their modification and termination, must be in writing and in most cases can be signed electronically (see next question). However, there are some cases where only a wet-ink signature is sufficient on a paper document. These are:

  • documents to be submitted to the land registry, e.g. mortgage agreement, mortgage transfer documentation, option over real estate, power of attorney related to these transactions;
  • documents with an apostille.

In these cases an electronic signature is not sufficient.

1.2 Which are the typical documents where written form is mandatory, and electronic form and e-signature are allowed?

Except for cases when paper and wet-ink signatures are mandatory (see point 1), almost all finance transaction agreements and documents can be prepared, concluded and signed electronically, with certain type of electronic signatures, including the following:

  • powers of attorney, except for those to be submitted to the land registry (see point 1);
  • facility/loan agreements;
  • guarantees (bank, corporate, cost overrun, etc.);
  • various security documents, except for the security documents specified in point 1 above, e.g. quota pledge, claim pledge, account pledge, deposit account, fixed charge, option over quota;
  • direct suretyship, subordination, sponsor’s and owner’s undertaking agreement;
  • agreement to purchase receivables, including factoring and forfeiting;
  • escrow agreements (for a list of single purchase prices);
  • notices to bailiffs;
  • specimen signatures (for electronic signatures only);
  • financial leasing agreements.

1.3 If the written form is mandatory and electronic form and electronic signature is allowed in banking & finance transactions and agreements, what kind of e-signature is sufficient?

According to the guidelines of the Central Bank of Hungary, in the case of finance transaction agreements, other agreements on financial services, auxiliary financial services and any legal statement related to those services and transactions, where the written form is mandatory, a QES and AES are sufficient to electronically sign the documents, and documents signed with them qualify as written documents. 

If the signer is a private person with a Hungarian e-ID card, they can sign the document with the qualified electronic signature belonging to the e-ID card. Representatives of customers, in their corporate position, are not entitled to use this e-signature function of the Hungarian e-ID card. Furthermore, the limit on any transaction to be signed with this QES is HUF 50 million.

The simple electronic signature does not meet the criteria of written documents.

1.4 Is there any other electronic signing/acceptance/ statement making method which meets the criteria of written documents in banking & finance transactions and agreements?

Based on guidelines from the Central Bank of Hungary, biometric signatures also create written documents and are sufficient.

Furthermore, there are other e-contracting methods which create the written form and which the Central Bank of Hungary accepts as compliant. These are:

  1. e-contracting by using central electronic identification services such as the Central Identification Agent or document authentication based on identification, based on an agreement between the financial institution and the government organisation;
  2. e-contracting in an audited, certified, closed electronic contracting system with an e-signature limited to the use in this system between the institution and its clients;
  3. VideoBank e-contracting with direct live video customer authentication and video contract acceptance.

The financial institution must announce the e-contracting solution to the Central Bank of Hungary and must prepare a legal and technical analysis, legal, business, IT and security risk assessment and risk management documentation and other documentation.

1.5 If written form is not mandatory, what kind of e-signature or other e-acceptance method is sufficient?

For legal statements related to the agreements mentioned in point 1.1, the written form is not mandatory. They can be made in any other way and can also be signed electronically with a simple electronic signature (e.g. document management systems with e-signing).

The written form is not mandatory and a simple electronic signature is sufficient for the following legal statements and documents in banking & finance transactions:

  • in financial services and auxiliary financial services:
    • a payment order for a single payment transaction;
    • any complaint submitted by any client relating to the activity of the financial institution;
  • in investment services and pertaining ancillary services:
    • a mandate to execute transactions relating to the financial instruments under the portfolio management services, if there is an existing written framework agreement in force and effect and the investment firm records the mandate electronically; and
    • any complaint submitted by any client relating to the activity of the investment firm.

2. Electronic attorney countersigning, notarial deed and Apostille

2.1 Is the attorney countersigning accepted in electronic form? If yes, in what form and on what conditions?

Electronic countersigning: an attorney at law is entitled to countersign a document in an electronic way on the following conditions:

  1. the signer (party) signs the electronic document with an AES based on a qualified certificate or QES (no personal presence before the attorney at law is necessary; remote e-signing is sufficient); and
  2. the attorney at law signs the electronically signed electronic document with his/her AES based on a qualified certificate or QES and puts a time stamp on it.

No electronic countersigning is allowed if the electronic document is signed with a SES or AES if it is not based on a qualified certificate.

An attorney at law countersigning or a notarial deed is mandatory for mortgage agreements. However, mortgage agreements must be submitted to the land registry on paper, so only wet-ink countersigning is sufficient. 

2.2 Is the notarial deed accepted in electronic form? If yes, with what conditions? 

Based on the relevant act on public notaries, there are electronic notary public procedures available in Hungary. However, none of them ensure a full digital process and remote electronic signing:

  • The notary public is entitled to authenticate the signer’s advanced or qualified electronic signature; however, the signer must be present and must sign the document with an AES or QES before the notary public. The remote authentication of electronic signatures is not possible.
  • The notary public is entitled to create a notarial deed in electronic form; however, the signer of the document must be present personally and must sign the document with a QES or AES based on a qualified certificate before the notary public, and then the notary public signs this notarial deed with his/her qualified electronic signature and puts a time stamp on it. Notarial deeds cannot be prepared remotely.
 Notarial deed is mandatory by lawNotarial deed is not mandatory, but isoften/mostly used
Power of attorneyYes, in certain circumstancesNo
Facility agreementNoYes
Mortgage agreementNoYes
Pledge over Business QuotaNoYes
Pledge over Rights and ReceivablesNoYes
Charge over Assets (Certain Group of Assets/Individual Asset Charge)NoYes
Pledge over Bank AccountsNoYes

There are agreements and documents where a notarial deed is mandatory or where it is not, but the financial institutions often incorporate them into the notarial deed because execution is more effective:

2.3 Is the Apostille accepted in electronic form (e-Apostille)? Is your jurisdiction member of the e-Apostille Program (e-APP)?

The e-Apostille Program (e-APP) is an initiative connected to the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents (Apostille Convention) which facilitates the issuing and use of electronic Apostilles (e-Apostilles) and the creation and operation of electronic Registers of Apostilles (e-Registers). The e-Register is able to verify the origin of an apostille online, using the number and date of Apostille, and it works for both e-Apostilles and paper apostilles. The e-Apostille is an electronically created and issued apostille, signed with qualified electronic signature.

The apostille is not accepted in electronic form in Hungary and there is no e-Register of Apostilles in Hungary.

Hungary has not implemented the Electronic Apostille Programme (e-APP). 

3. Electronic AML customer authentication/identification

3.1 Is the AML customer authentication/identification allowed in electronic way?

Yes, based on the relevant Hungarian act on the prevention and combating of money laundering and terrorist financing (the “AML Act”), finance institutions are entitled to identify and verify their customers (including legal entities, their representatives and private persons) via a safe, secure and previously audited electronic means of communication. This electronic identification and verification procedure also includes presenting and checking the signer’s official ID documents and their validity as well as ascertaining their authenticity electronically.

The relevant regulation of the Central Bank of Hungary on the use of a safe, secure and previously audited electronic communication tool (the “CBH Regulation”) contains IT security and other requirements on and conditions of auditing those electronic communication tools.

3.2 Which electronic AML customer authentication (verification)/identification methods are accepted? 

The CHB Regulation allows indirect (non-real time) and direct (real-time) customer authentication and identification methods in Hungary: 

In practice, indirect (not real-time) customer verification can be processed by taking a photo of the official ID document and sending it to the bank, taking and sending a selfie photo and identification through the Central Identification Agent Service/reading the personal data in e-ID card or biometric passport chip.

In practice, the direct (real-time) customer verification process can be carried out by taking a photo of the customer in real time in a videocall, the customer shows their ID card in the videocall and the bank sends an SMS code to the customer’s mobile device, which must be entered into the videocall software.

3.3 Are the beneficiary owner declaration and PEP declaration accepted in electronic form? If yes, with what kind of formalities?

According to the Hungarian AML Act, the beneficiary owner declaration and PEP declaration can be made in electronic form in the following ways:

  1. signing with an AES or QES; or
  2. via a safe, secure and previously audited electronic means of communication, e.g. in the aforementioned indirect or direct customer verification process.
Portrait ofKatalin Horváth
Katalin Horváth
Senior Counsel
Budapest
Portrait ofKitti Tulner
Kitti Tulner
Associate
Budapest