I. Obligation to report beneficial owners

Pursuant to § 20 para. 1 sentence 1 German Money Laundering Act (Geldwäschegesetz – GwG), legal entities under private law and registered partnerships are obliged to obtain and retain certain information on their beneficial owners, keep it up to date and report it to the transparency register. This reporting obligation serves to combat money laundering and terrorist financing.

II. Beneficial owners in the meaning of the Money Laundering Act

The beneficial owner of a legal entity, other company or legal structure is generally the natural person who ultimately owns or controls the legal person, other company or legal structure (§ 3 para. 1 no. 1 GwG). In this context, it is irrelevant whether direct or indirect control is involved; such control can also be obtained, for example, through voting pool agreements. Beneficial ownership exists in the case of legal entities and other companies if a natural person (un)indirectly holds more than 25% of the capital shares, controls more than 25% of the voting rights or exercises control in a comparable manner (§ 3 para. 2 sentence 1 GwG). For the calculation of the capital shares, only those shares are relevant that are not held by the company itself.
Only natural persons can be considered as beneficial owners. If no (or not exclusively) natural persons are shareholder in a legal entity or other company, but (also) legal entities or other companies, there is a so-called chain of ownership (Beteiligungskette). In this case, the decisive factor is whether a direct shareholder of the company under consideration, i.e. at the first level of shareholding, capital or voting shares of more than 25% (or, in individual cases, control in a comparable manner) exist. From the second level of shareholding onwards, the decisive factor is whether a natural person can exercise a “controlling influence (beherrschender Einfluss)” over the legal entity or other company with a significant shareholding at the first level of shareholding. A controlling influence (beherrschender Einfluss) is to be assumed in any case if the respective natural person holds more than 50% of the capital or voting rights of the intermediary company (§ 3 para. 2 sentence 4 GwG in conjunction with § 290 para. 2-4 German Commercial Code (Handelsgesetzbuch – HGB)).
When applying the principles described above, it should be noted that the qualification as beneficial owner can arise not only on the basis of capital shares or voting rights, but also on the basis of the exercise of control in a comparable manner. It has not yet been conclusively clarified which constellations are covered by this undefined legal term. The exercise of control in a comparable manner is predominantly assumed in the following two cases of practical relevance.
If a natural person has direct or indirect control over decisions in the members’, general or shareholders’ meetings on the basis of rights of objection or veto, this person is also deemed to be the beneficial owner. In particular, if the natural person de facto controls the company. However, the decisive factor here is the assessment in the specific individual case.
In the case of a GmbH & Co. KG (a limited partnership with a limited liability company as general partner), it should be noted that a general partner (usually in the form of a GmbH (limited liability company)) can also exercise comparable control due to its special position under company law as a partner with unlimited liability and managing partner, which establishes a beneficial entitlement or, in the case of a partnership, conveys such entitlement for a natural person standing behind it. This applies even if the general partner itself does not hold a share in the capital of the GmbH & Co. KG and does not control any voting rights.
If no beneficial owner can be identified for a company, the legal representative or the managing partner is deemed to be the fictitious beneficial owner and has to be reported to the transparency register (§ 3 para. 2 sentence 5 GwG). If – in the case of a mere fictitious beneficial owner – there are several legal representatives or managing partners, it has not been conclusively clarified whether all or only one of the fictitious beneficial owners must be reported to the transparency register. The Federal Administrative Office (Bundesverwaltungsamt) as the competent supervisory authority as well as the predominant voices in the literature assume that all fictitious beneficial owners have to be reported to the transparency register. For reasons of legal certainty, all fictitious beneficial owners should therefore always be reported – in line with administrative practice.

III. Omission of the notification fiction of § 20 para. 2 GwG

Under the notification fiction pursuant to § 20 para. 2 GwG (old version), which applied until the amendment of the Anti-Money Laundering Act on 1 August 2021, the notification obligation to the transparency register did not apply to legal entities under private law and registered partnerships, insofar as the information on the beneficial owners already resulted from the documents and electronically retrievable entries in public registers (e.g. the commercial register, partnership register, register of cooperatives, register of associations or company register).
As a result of the omission of the notification fiction without replacement, legal entities under private law and registered partnerships that were not obliged to notify to the transparency register until 31 July 2021 due to a notification fiction have to submit notifications to the transparency register within the transitional periods specified below (§ 59 para. 8 GwG):

• stock corporations, SEs and partnerships limited by shares (Kommanditgesellschaften auf Aktien) until 31 March 2022;
• limited liability companies (Gesellschaft mit beschränkter Haftung), cooperatives, and European cooperatives or partnerships until 30 June 2022; and
• in all other cases, in particular commercial partnerships until 31 December 2022.

IV. Draft of an EU Money Laundering Regulation

On 20 July 2021, the European Commission adopted draft regulations introducing an EU Money Laundering Regulation to create a single set of EU rules to combat money laundering and terrorist financing. A number of significant changes are intended to achieve a higher degree of harmonization and convergence in application in the member states. In contrast to the existing EU money laundering directives, an EU money laundering regulation directly applicable at the national level of the member states is to be issued for the first time. The draft of the new EU Money Laundering Regulation provides for the following innovations, among others:
The term of beneficial owner is to be defined in a uniform manner. An effective and efficient combating of money laundering and terrorist financing requires that sufficient transparency be ensured, even in the case of complex corporate structures. According to the draft EU Money Laundering Regulation, this can only be ensured if the individual member states do not interpret the existing EU regulations differently, as they have done in the past, and thereby create different levels of transparency. For this reason, the EU Money Laundering Regulation is to introduce a uniform definition of the beneficial owner. The uniform definition according to the draft EU Money Laundering Regulation corresponds to the current regulation in the GwG, however, new and more detailed provisions are envisaged for its uniform determination.
In the case of chains of ownership (Beteiligungkette), a beneficial ownership in the form of an indirect shareholding in the company will also be deemed to exist from the second level of ownership onwards if the shareholding exceeds 25% of the capital, voting rights or other ownership rights. In addition, the draft EU Money Laundering Regulation contains a more extensive list of case groups in which beneficial ownership is established by “other control”.
The draft EU Money Laundering Regulation also provides for the content and scope of the information on beneficial owners to be harmonized. The information specified in this context expands the information previously required under GwG to include the place of birth, the national identification number including its source such as passport or ID card, and, if applicable, the tax identification number or equivalent number assigned to the person by the country of his or her habitual residence. In addition, a description of the control and ownership structure shall also be provided in the future.