The new Transparency Register and Financial Information Act on Money Laundering (TraFinG Gw) came into force on 1 August 2021. The main innovation was the conversion of the previous "fallback" register into a full transparency register.
With the entry into force of the Act, all companies subject to transparency requirements were in principle obliged to identify their economic beneficiaries and to actively notify the transparency register for registration. This obligation also exists if the required information is already available in other electronically retrievable registers (such as the commercial register, register of cooperatives or partnership register)
The fiction of the notification previously applicable in this regard has been dropped. For companies that have benefited from the fiction of the notification so far, the following transition periods apply:
- Stock corporation, SE, limited partnership on shares (KGaA) until 31 March 2022
- Limited liability company (GmbH), registered cooperative, European registerd cooperative or European partnership by 30 June 2022
- in all other cases (e.g. registered partnerships) by 31 December 2022 at the latest
This means that companies that were previously exempted from a reporting obligation must now check whether they have to register in the transparency register.
Those who fail to comply with the obligation to notify risk a fine.
Caution is also advised when planning projects that require notarisation. Before notarisation, notaries are asked for complete information on the beneficial owner. If this documentation is missing or incomplete, this can lead to a prohibition of notarisation.
Have you done your homework, yet?
The imminent expiry of the aforementioned transitional periods has prompted us to compile the essential information.
The existing obligations
Legal entities under private law and registered partnerships (hereinafter referred to as "legal entities") shall
- communicate information on the economic beneficiary electronically to the entity keeping the register without delay.
The obligations are therefore divided into (i) the obligation to obtain information on economic beneficiaries and the resulting (ii) obligation to notify the transparency register.
Correspondingly, the economic beneficiary has an obligation to notify the respective legal entity (Section 20 (3) sentence 1 of the Act on the Tracing of Profits from Serious Crimes - Money Laundering Act - GwG:). The same obligation applies to shareholders who are either economic beneficiary themselves or are directly controlled by the economic beneficiaries (Section 20 (3) sentence 2 GwG).
The legal entities subject to the reporting obligation have a duty to investigate under Section 20 (3a) GwG. They are obliged to request information on the beneficial owners from their shareholders to a "reasonable extent" and to document both the request for information and the information obtained.
Furthermore, any shareholder who becomes aware that the economic beneficiary has changed is obliged to inform the respective legal entity. Exception: The new information is already known there.
Moreover, the legal entities are obliged to notify if their company name or legal form has changed or if they have been dissolved by measures under transformation law or in any other way.
The concept of the "economic beneficiary"
The economic beneficiary within the meaning of the GwG is:
- the natural person who owns or controls a legal person, company or legal arrangement within the meaning of section 3(3) GwG (foundation with legal capacity and legal arrangements with which assets are administered on a fiduciary basis) or
- the natural person at whose instigation a transaction is ultimately carried out or a business relationship is ultimately established, section 19 (2) in conjunction with section 3 (1) and (2) GWG. § Section 3 (1) and (2) GwG.
In the case of legal entities, any natural person is the economic beneficiary who directly or indirectly
- holds more than 25 percent of the capital shares or
- controls more than 25 percent of the voting rights or
- exercise control in a comparable manner.
In particular indirect control exists if shares are held by one or more legal entities according to section 20 (1) GwG, which in turn are controlled by a natural person (section 3 (2) sentence 2 GwG).
Control particularly exists if the natural person can directly or indirectly exercise a controlling influence (as defined in section 290 (2) to (4) HGB) over the legal entity.
If no natural person can be identified as the economic beneficiary, the legal representative or managing partner or partner of the contracting party is deemed to be the beneficial owner (section 3 (2) sentence 5 GwG).
Notification of information
The following information on the economic beneficiary must be communicated to the Transparency Register:
- first name and surname
- date of birth
- place of residence and
- nature and extent of the beneficial interest of the economic beneficiary
The nature and extent of the beneficial interest must indicate the beneficial owner's position.. In principle according to Section 19 (3) GwG, this can result from the shareholding and in particular from the amount of capital shares or voting rights, the exercise of control in other ways (contracts) or the function as legal representative, managing partner or partner.
The newly introduced Section 23a GwG also created a reporting obligation for cases in which inconsistencies occur between the information in the transparency register and the obligated parties' knowledge of the economic beneficiary. Failure to report inconsistencies may result in fines.
Reporting Obligated Parties
The legal representatives of legal entities as well as trustees and fiduciaries are obliged to register information on their economic beneficiary.
Exceptions to the notification obligation
In general, there are no exceptions. The fiction of notification mentioned above has been abolished. Facilitations only exist for associations. Only for those the data is automatically transferred from the register of associations to the transparency register, provided the respective association only has "fictional" beneficial owners - this is the case with typical associations with members - and the executive board has its registered office in Germany and German citizenship. In addition, changes in the executive board must be reported to the register of associations "without delay", otherwise the fictional effect for the transparency register will cease again.
Management of the Transparency Register
Bundesanzeiger Verlags GmbH has been entrusted with keeping the register until 31 December 2024.
Sanctions for violations?
Anyone who violates the statutory transparency obligations, e.g. by not reporting to the Transparency Register, or not reporting on time or in full, commits an administrative offence which can be punished with a fine of up to EUR 100,000 (Section 56 (1) GwG).
Serious violations may result in a fine amounting up to EUR 1 million; in special cases even up to EUR 5 millions.
On its homepage the Federal Office of Administration ("Bundesverwaltungsamt") has published so-called FAQs which express the legal opinion of the Federal Office of Administration.
Further information is also available on the homepage of the Transparency Register.
The stricter notification obligations and the abolition of the previous fiction of the notification create new notification obligations and thus administrative burdens for companies.
Affected companies should, not least because of the soon expiring transitional periods, quickly clarify whether and, if so, which economic beneficiary and information are to be reported to the Transparency Register.
The author as well as your usual contact persons are at your disposal for any questions!
+49 211 8687 284