On 26 June 2017, the new German anti-money laundering act will come into force. This law is based on the Fourth Money Laundering Directive of the EU (No 2015/849; the 4MLD). Besides inter alia meeting increased risk demands and the intensified financial penalties, the 4MLD prescribes a transparency register in the foreseeable future.
The register is based on Art. 30 of the 4MLD and shall allow more transparency inside of the companies with the intention to complicate the abuse of the financial system by terrorists, money launderers and other persons having controlling power. The European Union wants to create a European network of registers via the Central European Platform.
Its basic goal is to centrally store information about the beneficial owners of all entities and partnerships as well as of foundations and trusts and to make such information accessible to governmental authorities, the people who need to perform customer due diligence and any other person who shows a legitimate interest in having such information.
What is the content of the transparency register?
The transparency register gives information about every beneficial owner, who has a direct or indirect financial stake or controls the company. The register will be in electronic form and the information will be presented in a chronological order.
Via the website of the transparency register, the following information is available:
- entries in the transparency register itself (as described more fully below)
- notifications of shareholdings pursuant to Sec. 20 para. 6 Aktiengesetz (German Stock Corporation Act)
- voting rights notification, Sec. 26, 26a Wertpapierhandelsgesetz (German Securities Trading Act)
- list of shareholders of a private limited liability company and business association according to Sec. 8 para. 1 No. 3, 40 GmbHGesetz (German Limited Liability Companies Act; GmbHG) and the articles of association, if it serves as a list of shareholders, Sec.8 para. 1 No. 1, 2, Sec. 1a para. 2 GmbHG
- entries in the commercial register
- entries in the partnership register
- entries in the register of cooperatives
- entries in the register of associations
On application, the operator of the register will issue printouts of data, which are stored in the transparency register regarding a particular company.
Who has to comply with the requirements?
Any legal person organized under private law and any registered partnership in Germany must provide information to the register, including stock corporations (AG, SE), partnerships by shares (KGaA), limited liability companies (GmbH and UG), cooperatives (Genossenschaften), registered associations, limited partnerships, general commercial partnerships (KG, oHG) and professional partnerships, but interestingly not unregistered civil law partnerships or unregistered associations.
When do entities need to comply?
The obligation to send information to the transparency register will apply for the first time on 1 October 2017.
Who is a beneficial owner?
A beneficial owner is any natural person who ultimately owns or controls the company who needs to be identified under money laundering rules. As regards companies or partnerships, a beneficial owner is a natural person directly or indirectly holding 25% or more of the voting rights and/or shares of capital in the legal entity or partnership or exercising control in a similar manner.
In case of trusts or foundations of similar structure where assets are managed or distributed on a fiduciary basis, the beneficial owner is (i) any person which acts as trustor, trustee or protector (if part of the structure); (ii) any person who is a member of the management board of a foundation; (iii) any person named as a beneficiary; (iv) any group of natural persons or whose benefit the assets shall be administered or distributed, and (v) any natural person which in any other manner directly or indirectly exercises a dominating influence on the asset management or distribution of assets.
What kind of information must be submitted to the transparency register?
Subject to the exemption for information that can already be derived from other public registers (see below) every entity or partnership needs to submit the following details about the beneficial owner (Sec. 19 para. 1 GwG):
- birth date
- private address and
- type and scope of the economic interest
The type and scope of the economic interest shall be stated as one of the following categories (Sec. 19 para. 3 GwG):
In case of legal entities and partnerships
- the participation in the company, especially the size of participation in the capital or voting rights
- the exercise of control in any other way, in particular based on
- an agreement between a third party and a shareholder;
- an agreement between shareholders;
- the power given to third parties to elect a legal representative or a member of a management body
- the function as legal representative, managing partner or partner
No indication must be made if the nature of the beneficial ownership is already detectable from other public registers.
Are there any exemptions according to these information?
The obligation to supply the information to the transparency register is deemed fulfilled if the relevant information on the beneficial owner can be retrieved from another existing public register.
The relevant public registers are:
- the commercial register (Sec. 8 Handelsgesetzbuch (German Commercial Code; HGB))
- the partnership register (Sec. 5 Partnerschaftsgesellschaftsgesetz (German Partnership Act))
- the register of cooperatives (Sec. 10 Genossenschaftsgesetz (German Cooperative Act))
- the register of associations (Sec. 55 Bürgerliches Gesetzbuch (BGB) (German Civil Code))
- the companies register (Sec. 8b HGB)
In this case, there is no necessity of keeping the data in the transparency register. It is sufficient, that the information can be gathered from the documents and the other public registers.
Publicly listed companies who are subject to transparency obligations regarding significant holdings of voting rights and listed in an EU regulated market or who are subject to similar transparency obligations according to international standards are fully exempt from the obligation to provide information to the transparency register.
How to get this information?
If a legal person or partnership does not have the necessary information it has a legal right against the beneficial owner and any entity controlled by the beneficial owner to obtain this information without undue delay, including any change of the relevant information.
The same obligation to provide information applies for a person who controls more than 25% of the votes in an association or a cooperative. In case of foundations the obligation to provide information is incumbent upon the persons whose data need to be filed with the register.
In the latter two cases the information obligation also applies to entities under the direct control of a beneficial owner. In case of indirect control, the information obligation applies to the beneficial owner. No information obligation applies where the information is in another public register or already in the hands of the company who needs to file this information with the transparency register.
Who is allowed to have access to the transparency register?
The parties who are allowed to access the register are:
- responsible authorities
- the supervisory authority competent to enforce the GwG
- the Central Office for Analysis of Financial Transactions
- the competent authority under Sec. 13 Außenwirtschaftsgesetz (German Foreign Trade Act)
- the criminal enforcement authorities
- the federal central tax office and the local tax offices
- the police authorities
- the entities and persons who must perform customer due diligence and who can demonstrate that they need to identify the beneficial owners of a customer under the GwG
- every person who has a legitimate interest at the inspection.
The legitimate interest is an uncertain legal term and has to be defined in every individual case. Also NGOs who have an agenda to fight money laundering and corruption and investigative journalists could claim a legitimate interest. It will not be possible to search for individuals, but only for companies. For all beneficial owners, third parties will only get access to the month and year of birth (but not the day) and no address information other than the country of residence.
Information can only be accessed after completion of an online registration process and access can be monitored.
Are there any exemptions for the inspection?
The beneficial owners are allowed to apply for a limitation or completed blocking of access by interested parties based on the argument that their legitimate interest is higher than the interest of other people. This is the case, in particular, if there are any facts which justify the assumption that the economic beneficiaries could be a victim of crime, e.g.
- blackmail or extortion
- criminal offence against life and limb
or the beneficial owner is underage or legally incompetent.
Fees and expenses
For the management and the inspection into the transparency register, there will be fees to pay.