As of 10 July 2027, the new Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (EU Anti-Money Laundering Regulation) will come into force. The European Commission’s aim is to standardise and harmonise the current legal framework on anti-money laundering in the EU. Unlike previous EU legislation in this field, the Commission has now adopted a regulation that is directly applicable in the Member States, leaving national legislators no discretion as to its implementation. For businesses, the new EU Anti-Money Laundering Regulation will entail more stringent reporting obligations, particularly in cases of indirect control. The relevant changes are explained below – including the resulting need for action.
I. Current Legal Framework under the German Money Laundering Act (GwG)
Under Section 20 (1), first sentence, of the German Money Laundering Act (GwG), legal persons under private law and registered partnerships are obliged to obtain and retain information on their beneficial owners, keep that information up to date and report it to the Transparency Register. Pursuant to Section 19 of the GwG, this information comprises the beneficial owner’s first name and surname, place of birth, place of residence, the nature and extent of the beneficial owner’s economic interest, and all nationalities of the beneficial owner.
Under the current legal framework, the beneficial owner of a legal person, another company or legal arrangement is the natural person who ultimately owns or controls the legal person, other company or legal arrangement. Under current law, beneficial ownership is defined as a natural person holding, directly or indirectly, more than 25% of the capital shares, controlling more than 25% of the voting rights, or exercising control in a comparable manner.
Where a legal person or other company is held, either wholly or in part, by legal entities or other companies rather than exclusively by natural persons, this constitutes a so-called chain of ownership. Under the current legal framework, at the first level of the chain of ownership, the decisive factor was whether a direct shareholder held more than 25% of the capital or voting rights (or, in individual cases, exercised control in a comparable manner). From the second level of shareholding onwards, the decisive factor is whether a natural person can exercise a controlling influence over the legal entity or other company holding a decisive stake at the first level of shareholding. Controlling influence is deemed to exist in any event if the natural person in question holds more than 50% of the capital or voting rights in the intermediate entity.
In the case of foundations, under current law, the members of the foundation’s board and any natural person who has been designated as a beneficiary, or the group of persons for whose benefit the assets are to be managed or distributed, provided that no beneficiary has yet been designated, are subject to registration. Furthermore, in the case of foundations, all natural persons who in any other way exercise, directly or indirectly, a controlling influence over the management of assets or the distribution of income must be registered in the Transparency Register. In addition, anyone who can exercise a controlling influence over a company that is a member of the foundation’s board or has been designated as a beneficiary must also be registered.
II. Changes introduced by the EU Anti-Money Laundering Regulation
The EU Anti-Money Laundering Regulation, which comes into force on 10 July 2027, introduces significant changes, particularly regarding the identification of the beneficial owner in cases of indirect control, and also leads to extended reporting obligations.
1. Identification of the beneficial owner
The EU Anti-Money Laundering Regulation has intended, in particular, to standardise the concept and definition of the beneficial owner. In terms of terminology, the German term no longer refers to the ‘beneficial owner’ (wirtschaftlich Berechtigter) but to the ‘economic owner’ (wirtschaftlicher Eigentümer).
A key change is the adjustment to the threshold in Article 52 (1) of the EU Anti-Money Laundering Regulation: in future, a holding of 25% or more (rather than more than 25% as previously stipulated in the GwG) will be deemed the relevant threshold. Consequently, shareholders, holders of voting rights or other holders of exactly 25 per cent will already qualify as beneficial owners and thus be subject to the reporting obligations.
Moreover, the methodology for determining beneficial owners in chains of ownership will be standardised across the EU – departing from the approach currently applied under the GwG. In accordance with Article 52 (1), second sentence, of the EU Anti-Money Laundering Regulation, the shares, voting rights and other ownership interests are multiplied along the chain of ownership up to the natural person. Where a natural person holds interest through several intermediate companies in parallel, the results of the respective chains are added together.
The following example illustrates this calculation method: The target company is A-GmbH, and its beneficial owners are to be identified. The following diagram outlines the existing shareholding structure:
Along the first chain of ownership, B-GmbH holds 20% of the shares in A-GmbH. The sole shareholder (100%) of B-GmbH is C-GmbH. In turn, a natural person holds 50% of the shares in C-GmbH. Accordingly, through the first chain of ownership, the natural person holds an indirect 10% interest in the target company (calculated by multiplying along the chain of ownership from the bottom up: 20% × 100% × 50% = 10%). Based on this chain of ownerhsip alone, the natural person has therefore not yet reached the 25% threshold and, viewed in isolation, would not yet be a beneficial owner within the meaning of the EU Anti-Money Laundering Regulation.
However, X-GmbH also holds a 40% interest in A-GmbH. X-GmbH, in turn, is wholly owned by Y-GmbH. The natural person holds 50% of the shares in Y-GmbH. Accordingly, through this second chain of ownership, the natural person holds an indirect 20% interest in the target company (calculated by multiplying along the chain of ownership from the bottom up: 40% × 100% × 50% = 20%). This chain alone is likewise not sufficient to qualify the natural person as a beneficial owner of A-GmbH.
However, under the EU Anti-Money Laundering Regulation, the interest held through these two chains of ownership must be added together, as the same natural person is at the end of both. Adding the 10% interest held through the first chain to the 20% interest held through the second chain, the natural person (indirectly) holds a total of 30% of the shares in A-GmbH and consequently qualifies as a beneficial owner and thus is subject to the reporting obligation.
2. Beneficial owners of foundations
The EU Anti-Money Laundering Regulation also expands the scope of beneficial owners subject to reporting requirements in the case of foundations. Pursuant to Article 57 (1) of the EU Anti-Money Laundering Regulation, the beneficial owners of a foundation will now include the founders; the members of the management body in its management function (foundation board); the members of the management body in its supervisory function (foundation council); the beneficiaries; and any other natural person who directly or indirectly controls the foundation.
With regard to beneficiaries, it should be noted that, in accordance with Article 59 of the EU Anti-Money Laundering Regulation, the category of beneficiaries and their general characteristics must be specified in the central register. As soon as specific beneficiaries have been identified or named, they must be specified. Exceptions where only the category of beneficiaries needs to be disclosed include, for example, certain pension schemes, in accordance with Article 59(2) of the EU Anti-Money Laundering Regulation.
3. Extended reporting obligation to the Transparency Tegister (new: central register)
In accordance with Article 62 of the EU Anti-Money Laundering Regulation, companies must submit information on their beneficial owners to the Transparency Register, which is now referred to in the Regulation as the central register.
The information required in this context pursuant to Article 62 of the EU Anti-Money Laundering Regulation expands on the information previously required under the Anti-Money Laundering Act (GwG) to include the place of birth, residential address, national identification number – including its source, such as a passport or identity card – and, where applicable, the tax identification number or equivalent number assigned to the person by the country of their habitual residence. In addition, a description of the control and ownership structure must also be provided in future.
III. Action required by companies in preparation for the entry into force
Before the EU Anti-Money Laundering Regulation comes into force on 10 July 2027, companies should review their shareholding structures and, where necessary, update the reports on beneficial owners submitted to the central register.
Based on the updated shareholding structures, the beneficial owners must be identified in accordance with the new calculation methodology for multi-level shareholding structures, as set out in Article 52 (1). Especially, trust and pool agreements or voting rights binding agreements should not be overlooked.
Shareholders or holders of voting rights who were previously below the threshold set out in the Anti-Money Laundering Act (GwG) must now be registered or are subject to a reporting obligation under the EU Anti-Money Laundering Regulation when they (i) hold a stake of exactly 25%, or (ii) did not have a controlling influence at the second or higher level of shareholding under the previous calculation method for indirect shareholdings, but will in future, as a result of the multiplication and aggregation of shareholding chains, hold an indirect stake of at least 25% in the capital or voting rights.
Foundations should take into account the expanded group of persons subject to reporting requirements, irrespective of any threshold. To prepare for reporting to the central register, companies should expand their data collection to include place of birth, residential address, identity document number and tax identification number.