Transparency register: What is changing and what needs to be considered?

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Who is the beneficial owner?

According to Section 3 (1) of the German Money Laundering Act ( GwG), beneficial owners are natural persons who are behind an association (e.g. a partnership or corporation) and control it. Such control exists if a natural person:

• holds shares of more than 25 percent
• controls more than 25 percent of the voting rights
• controls the parent association (in the case of shares and voting rights otherwise held or controlled by an association)

Control can also be exercised indirectly. This is the case if corresponding shares in an association pursuant to Section 20 para. 1 GwG are held and controlled by a natural person (see Section 3 para. 2 GwG). In particular, if the natural person can directly or indirectly exercise a controlling influence over the association.nullAn example: A GmbH holds more than 25 percent of an AG. If the GmbH is more than 50% owned by a natural person, this person has indirect control over the AG. Consequently, the person must be reported as the beneficial owner.

What obligations arise from the law?

Previously, information on the owners and shareholders of an association did not have to be recorded in the transparency register if this information was already stored in another register (e.g. the commercial register). This so-called notification fiction pursuant to Section 20 GwG affected almost 90 percent of all associations.nullIn August 2021, this simplification was removed without replacement as part of an amendment to the law. Associations that previously benefited from the fictitious notification must register later. Regardless of whether the required information is already available in other registers. According to Section 59 (8) GwG, the following transitional periods apply:

• Stock corporations, SEs, partnerships limited by shares: Until March 31, 2022
• GmbH, cooperatives, EC or partnerships: Until June 30, 2022
• other cases (e.g. registered partnerships): Until December 31, 2022

The associations themselves are obliged to report. In the case of legal structures within the meaning of Section 21 GwG, notification must be made by the trustees or trustees of the trusts. There are simplifications for associations (§ 20a GwG). In some cases, the data is automatically transferred from the register of associations to the transparency register.nullPursuant to Section 19 (1) GwG, the companies concerned are obliged to obtain and retain the following information on the beneficial owners and to transmit it to the Transparency Register:

• First and last name
• Date of birth
• Place of residence
• Nature and scope of the economic interest (Section 19 (3) GwG)
• all nationalities

To report the above information, the associations concerned must first register on the Transparency Register homepage and then enter the data. Registration and data transmission is free of charge, but the Bundesanzeiger Verlag charges an annual fee of €4.80 per association for maintaining the Transparency Register.

Failure to meet the transparency register deadline: these penalties apply

Violations of the reporting obligation are considered an administrative offense pursuant to Section 20 (1) GwG. Anyone who fails to provide the required information on beneficial owners contrary to their obligations is deemed to have committed an administrative offense:

• does not catch up
• not or not completely stored
• does not keep up to date
• not, not completely or not in time transmitted to the Transparency Register

The amount of the fine varies - depending on the individual case - between 50 and approx. 10,000 euros. In the case of serious, repeated or systematic violations, the fine can be up to 1 million euros by law. In addition, the corresponding fines are published on the website of the competent authority.

Who is obliged under the MLA?

The Money Laundering Act also imposes an obligation to prevent money laundering. This is a preventative measure designed to help identify illegal money flows at an early stage. The aim is to prevent money from criminal activities - such as drug trafficking or prostitution - from being smuggled into the regular economic cycle. Obligated parties must immediately report any anomalies to the competent authority. According to Section 2 para. 1 no. 1-16 GwG, this obligation is imposed on the following "obliged entities", among others:

• Capital and financial service providers
• Banks and credit institutions
• Auditors and notaries
• Real estate and rental agents

Obligated parties must check new customers before entering into a business relationship with them. Existing customers must also be checked at regular intervals. Internal security measures must be put in place to reduce the risk of money laundering. These are primarily

• the identification of the contractual partner
• clarification of the beneficial owners/li>
• the identification of politically exposed persons (Section 1 (12) GwG)
• the purpose of the business relationship

Money Laundering Act and Transparency Register: The most important facts in brief

• Since August 1, 2021, the Transparency Register and Money Laundering Act have been tightened.
• The required information must be submitted to the register by March 31, 2022 (AG, European companies, KGaA), June 30, 2022 (GmbH, partner companies, European cooperatives) or December 31, 2022 (foundations, trusts).
• The reporting obligation applies to all associations covered by the transparency register, such as corporations and partnerships.
• The most important information of all beneficial owners within the company must be transmitted.
• The notification is made via the homepage of the Transparency Register
• Violations of the reporting obligations are punishable by a fine

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