In addition to certain associations and legal formations, legal persons under private law and registered partnerships (hereinafter referred to as “
Reporting Companies”) have been required since October 2017 to obtain information on natural persons (“ Beneficial Owners”) who are behind corporate structures and control the company and to report this information to the Transparency Register.
The Transparency Register was introduced in 2017 as a so-called collection register alongside certain other public registers (e.g. the Commercial Register). With the Act Implementing the Amending Directive to the Fourth EU Anti-Money Laundering Directive (“
Fifth Anti-Money Laundering Directive”), which came into force on 1 January 2020, the legal regulations in the Money Laundering Act concerning the Transparency Register have also been amended and supplemented for the first time. Almost simultaneously with the entry into force of the new legal provisions, the Federal Office of Administration [Bundesverwaltunsgamt] (legal and technical supervisor of the Transparency Register) published updated FAQs at the beginning of this year, in which it sets out its (legal) opinion on the interpretation and application of money laundering regulations which is important for practice. The key reforms of the Transparency Register resulting from recent developments will be examined in more detail below.
II. Practice-relevant changes to the Transparency Register
1. Scope of the reporting obligation and reporting fiction
Since 1 January 2020, Reporting Companies must not only report the first name and surname, date of birth, place of residence and type and scope of the economic interest of their Beneficial Owners but also their nationality to the Transparency Register. Despite this expansion of the information required to be reported, the legislator still prevents a double burden on companies through a so-called reporting fiction. The obligation to report to the Transparency Register will continue to be considered fulfilled even if only the information to be reported until 31 December 2019 is already shown in electronically retrievable entries and notifications in the public registers (e.g. Commercial Register). Reporting Companies that could refer to the reporting fiction will also be able to do so in future. If a (new) notification to the Transparency Register is (or will be) required, it is necessary to also disclose the nationality of every Beneficial Owner.
2. Reporting obligation
A Reporting Company is required to notify the Transparency Register immediately if it has changed its name, merged or dissolved or changed its legal form. This new reporting obligation serves – as stated in official justification for the Implementation Act – to ensure that changes to the association are reported and those can be traced.
3. Limited investigation obligation
With the implementation of the Fifth Anti-Money Laundering Directive, the German legislator has laid down a (limited) investigation obligation for Reporting Companies. All Beneficial Owners are obliged – under both the old and the new legal situation – to provide their Reporting Company with all information and changes to such information required to fulfill the reporting obligation to the Transparency Register without being requested to do so. Reporting Companies requirements are now obliged to conduct their own investigations into their Beneficial Owners. However, the obligation is limited to requesting information from the shareholders of the company subject to reporting requirements on the Beneficial Owners to an appropriate extent and to document this request for information and the information received. In addition to this investigation obligation, since 1 January 2020, shareholders of Reporting Companies have been obliged to report any changes they are positively aware of with regard to Beneficial Owners and to document this information in a verifiable manner. However, shareholders are not obliged to conduct their own investigations.
4. Notification of discrepancies by Obligors
In future, a special reporting obligation will apply to those who have to comply with obligations under money laundering law (“
Obligors”). Under certain conditions, Obligors must immediately notify the Transparency Register of any inconsistencies they have identified between the information on Beneficial Owners available in the Transparency Register and the information and discoveries on Beneficial Owners available to them. This does not regulate an obligation to verify such information. The legislator is thus pursuing the goal of increasing the accuracy and quality of entries in the Transparency Register.
5. Public access to the Transparency Register
The most far-reaching legal change concerns the access to the Transparency Register. Since the beginning of this year, anyone, regardless of a legitimate interest, can access the Transparency Register. As a consequence, this means that in future not only the interested public but also competitors will be able to obtain detailed information on the internal structures of Reporting Companies. Against this background, it is not surprising that family businesses in particular voiced sharp criticism of the “right of access for everyone” during the legislative process. It remains to be seen in practice whether the statutory obligation to register prior to obtaining access and the possibility for the Beneficial Owner to restrict access if there are interests that are predominantly worthy of protection (e.g. if the Beneficial Owner is under-aged or legally incompetent) can create an appropriate balance between the existing interests.
6. Sanctioning and publishing of infringements
The newly introduced obligations of Reporting Companies, shareholders and Obligors are punishable by fines. On the side of the legal consequences, it is also particularly relevant in practice that the legislator has closed a loophole in the old law so that the Federal Office of Administration can now (also) practice so-called “naming and shaming”. In the future, companies must therefore expect that the Federal Office of Administration will not only punish violations of obligations in connection with the Transparency Register “anonymously” by imposing an appropriate fine, but will also publish the violation on its website.
III. Conclusion and need for action
The numerous new regulations with regard to the Transparency Register mean that there is a need for action for Reporting Companies, Obligors and shareholders.
Reporting Companies which do not have all the reportable details of their Beneficial Owners should – if they have not yet done so – promptly submit a request for information to their shareholders and verifiably document this request and the information received from the shareholders. All Reporting Companies should carefully check whether and to what extent their Beneficial Owners have to report to the Transparency Register and whether there are any interests that are particularly worthy of protection that would enable a restriction of “access by anyone”.
Obligors within the meaning of the German Money Laundering Act [Geldwäschegesetz] should also adapt their compliance management system to the updated legal requirements, in particular in order to be able to fulfill their obligation to report discrepancies in the future. In particular, shareholders should be aware of their obligations with regard to the information to be reported, especially when selling and acquiring new shares.