With the implementation of the 4th EU Money Laundering Directive (RL [EU] 2015/849) in the German Money Laundering Act (Geldwäschegesetz, “GWG”), a transparency register was established in Germany on 01 October 2017. According to this, legal representatives of legal entities and registered partnerships (together, “legal entities”) are obliged, among other things, to report details of their beneficial owners to the transparency register. The aim of introducing the transparency register is to record the natural persons behind company law structures. According to Sec. 3, subsec. 2, GWG, a beneficial owner is defined as any natural person who directly or indirectly (a) holds more than 25% of the capital shares, (b) controls more than 25% of the voting rights, or (c) exercises control in a comparable manner to a legal entity. The provisions of the GWG were reformed by the Amending Directive (RL [EU] 2018/843), which the German legislator transposed into national law with effect on 01 January 2020. In the following, an overview of some of the major changes with regard to the transparency register are given.06 | March 2020 INTERNAL NEWS 21
SCOPE OF THE REPORTING OBLIGATIONS
With effect on 01 October 2017, Sec. 20, GWG stipulates the obligation for legal entities to obtain, retain, and keep up to date the information on the beneficial owners of these legal entities referred to in Sec. 19, GWG, and to notify the registry administrator without delay for entry in the transparency register (together, “reporting obligations”). Accordingly, in particular German companies in the legal form of a stock corporation (Aktiengesellschaft), limited liability company (Gesellschaft mit beschränkter Haftung), registered association (eingetragener Verein), registered cooperative society (eingetragene Genossenschaft), general partnership (offene Handelsgesellschaft), limited partnership (Kommanditgesellschaft), and partner company (Partnergesellschaft), must report the following information on their beneficial owner: First and last name, Date of birth, Place of residence, and Nature and scope of the economic interest. The scope of the reporting obligations has now been extended, with the consequence that, pursuant to Sec. 19, subsec. 1, no. 5, GWG, the nationality of the beneficial owner is subject to the reporting obligations to the transparency register. In principle, these reporting obligations will also apply from 01 January 2020 to associations domiciled abroad, unless the information has already been submitted to another register of a member state of the European Union. The intervention of this reporting fiction is not dependent on whether the nationality of the beneficial owner can be deduced from the corresponding register of a member state.
NOTIFICATION OBLIGATIONS IN THE EVENT OF CHANGES
Furthermore, in Sec. 20, subsec. 1a, GWG, the obligation for legal entities which are a) obliged to notify the transparency register and b) not registered with the commercial, partnership, cooperative, or association register, has been stated to immediately notify the body keeping the transparency register if their name has changed, if they have merged or dissolved, or if their legal form has changed.
DUTY OF INVESTIGATION
Beneficial owners of legal entities must notify these legal entities without delay of the information required to fulfil their reporting obligations and of any changes to this information pursuant to Sec. 20, subsec. 3, GWG. If the legal entity has not received any information from the beneficial owners for the purpose of fulfilling its reporting obligations or if the information is not otherwise known to it, the legal entity must, in accordance with the newly introduced Sec. 20, subsec. 3a, GWG, demand information from the shareholders known to it, to an appropriate extent, about the beneficial owners of the legal entity. The legal entity must document its request for information as well as the information obtained.
NOTIFICATION OBLIGATIONS OF THE SHAREHOLDERS
In connection with the introduction of Sec. 20, subsec. 3a, GWG, a notification obligation of the shareholders pursuant to Sec. 20, subsec. 3b, GWG, was also established. Accordingly, every shareholder, irrespective of whether the shareholder is the beneficial owner, must inform the legal entity within a reasonable period of time of any change in the beneficial ownership, unless a) this information is already available from the transparency register or b) the shareholder is otherwise aware that the legal entity has knowledge of the new beneficial owner.
REPORTING OF INCONSISTENCIES OF THE PERSON OBLIGED UNDER MONEY LAUNDERING LAW
According to Sec. 23a, GWG, persons obliged under money laundering law within the meaning of Sec. 2, subsec. 1, GWG (e.g., credit and financial services institutions), are obliged to report without delay to the body keeping the transparency register any discrepancies they have identified between the information on beneficial owners published in the transparency register and the information and findings on beneficial owners available to them.
RECOMMENDATION FOR ACTION
Against the background that an intentional or reckless breach of the obligations mentioned above can be punished with a notinconsiderable fine, the management of the respective obligated legal entity is recommended, in order to fulfil its corporate compliance obligations, to carefully check the existence of a reporting obligation or compliance with the obligations incumbent on it at short notice. In particular, those legal entities which neither have all necessary information concerning their beneficial owners nor have already requested this information from the beneficial owners known to them are advised to request this information promptly from the beneficial owners known to them and to document their request for information and any information received in a verifiable manner. In this context, as well as with regard to all other questions concerning the transparency register and the GWG, as well as a possible liability of the management bodies of German legal entities, we are at your disposal.
This article by our partner Dirk Kohlenberg was pubished in GGI Insider No. 106, March 2020, page 20-22.