The new Transparency Register and Financial Information Act on Money Laundering (TraFinG Gw) came into force on August 1, 2021. The main change was the conversion of the previous catch-all register into a full transparency register.
When the law came into force, all companies subject to transparency requirements were generally obliged to identify their beneficial owners and actively notify the transparency register for registration. This obligation also applies if the required information is already available in other electronically accessible registers (such as the commercial, cooperative or partnership register).
The fictitious notification previously applicable in this regard has been abolished. For companies that previously benefited from the notification fiction, only the following transitional periods apply.
- Stock corporation, SE, partnership limited by shares until March 31, 2022
- Limited liability company (GmbH), cooperative, European cooperative or partnership until June 30, 2022
- in all other cases (e.g. registered partnerships) by December 31, 2022 at the latest
This means that companies that were previously exempt from a reporting obligation must now check whether they need to register in the transparency register.
Anyone who fails to comply with the notification obligation risks a fine.
Caution is also required when planning projects requiring notarization. Before notarization, notaries will request complete information on the beneficial owner. If this documentation is missing or incomplete, this may lead to a ban on notarization.
Have you already done your homework?
We have taken the imminent expiry of the above-mentioned transition periods as an opportunity to summarize the key information once again.
The existing obligations
Legal entities under private law and registered partnerships (hereinafter referred to as “legal entities”) must provide information on the beneficial owners
- to catch up,
- to be stored,
- up to date and
- electronically to the office keeping the register without delay.
The obligations are therefore divided into (i) the obligation to obtain information on beneficial owners and the resulting (ii) obligation to notify the transparency register.
Correspondingly, the beneficial owner has a corresponding duty of disclosure to the respective legal entity (Section 20 para. 3 sentence 1 of the German Act on the Tracing of Profits from Serious Crimes – Money Laundering Act – GwG:). The same obligation applies to shareholders who are either themselves beneficial owners or are directly controlled by the beneficial owner (Section 20 para. 3 sentence 2 GwG).
The legal entities subject to the reporting obligation have a duty to investigate in accordance with Section 20 para. 3a AMLA. They are obliged to request information on the beneficial owners from their shareholders to a “reasonable extent” and to document both the request for information and the information obtained.
Furthermore, any shareholder who becomes aware that the beneficial owner has changed is obliged to inform the respective legal entity. Exception: The new information is already known there.
Furthermore, the legal entities are obliged to notify us if their company name or legal form has changed or if they have been dissolved through reorganization measures or in any other way.
The term “beneficial owner”
is the beneficial owner within the meaning of the GwG:
- the natural person in whose ownership or under whose control a legal entity, other company or a legal structure within the meaning of Section 3 (3) GWG (foundation with legal capacity and legal structures with which assets are managed on a fiduciary basis) or
- the natural person at whose instigation a transaction is ultimately carried out or a business relationship is ultimately established, Section 19 para. 2 in conjunction with Section 3 para. § Section 3 (1) and (2) GwG.
In the case of legal entities, the beneficial owner is any natural person who directly or indirectly
- holds more than 25 percent of the capital shares or
- controls more than 25 percent of the voting rights or
- exercise control in a comparable manner.
Indirect control exists in particular if corresponding shares are held by one or more legal entities pursuant to Section 20 para. 1 AMLA, which in turn are controlled by a natural person (Section 3 para. 2 sentence 2 AMLA).
Control exists in particular if the natural person can directly or indirectly exercise a controlling influence (within the meaning of Section 290 (2) to (4) HGB) on the legal entity.
If no natural person can be identified as the beneficial owner, the legal representative or managing partner or partner of the contracting party is deemed to be the beneficial owner (Section 3 (2) sentence 5 GwG).
Communication of information
The following information on the beneficial owner must be provided to the Transparency Register:
- first and last names
- Date of birth
- Place of residence and
- Nature and scope of the beneficial owner’s economic interest
- Nationality
It must be possible to determine the status of the beneficial owner by specifying the type and scope of the beneficial interest. According to Section 19 (3) GwG, this can generally result from the shareholding, in particular the amount of capital shares or voting rights, the exercise of control in other ways (contracts) or the function as legal representative, managing partner or partner.
The newly introduced Section 23a GwG also creates a reporting obligation for cases in which discrepancies arise between the information in the transparency register and the obligated parties’ knowledge of the beneficial owners. Failure to comply with the discrepancy report may result in fines.
Declarant
The legal representatives of the legal entities as well as trustees and fiduciaries are obliged to register information about their beneficial owners.
Exceptions to the notification obligation
In principle, there are no exceptions. The notification fiction mentioned at the beginning has been dropped. In this respect, there are only simplifications for associations. Only for these associations is the data automatically transferred from the register of associations to the transparency register, provided that the respective association only has “fictitious” beneficial owners – which is the case for typical associations with members – and the board of directors is based in Germany and has German citizenship. In addition, changes to the management board must be reported to the register of associations “without delay”, as otherwise the fictitious effect for the transparency register no longer applies.
Management of the transparency register
Bundesanzeiger Verlags GmbH has been entrusted with the management of the register until December 31, 2024.
Sanctions for violations?
Anyone who violates the statutory transparency obligations, for example by not reporting to the Transparency Register, or not reporting on time or in full, is committing an administrative offense that can be punished with a fine of up to EUR 100,000 (Section 56 (1) GwG).
Serious violations can result in a fine of up to EUR 1 million; in special cases even up to EUR 5 million.
Further notes and information
The Federal Office of Administration has published FAQs on its website which reflect the legal opinion of the Federal Office of Administration.
Further information is also available on the Transparency Register homepage.
Conclusion
The tightening of reporting obligations and the abolition of the previous notification fiction will result in new reporting obligations for companies and thus an administrative burden.
Affected companies should quickly clarify whether and, if so, which beneficial owners and information must be reported to the transparency register, not least in view of the fact that the transitional periods will soon expire.
The author and your usual contacts will be happy to answer any questions you may have!
Christian Schon
schon@tigges.legal
+49 211 8687 284