The Fourth EU Anti-Money Laundering Directive has been implemented in Germany in June 2017, inter alia with a more or less completely revised German Anti-Money Laundering Act (Geldwäschegesetz, “GWG”). The GWG will be effective on June 26, 2017, which is the deadline for the implementation of the Fourth EU Anti-Money Laundering Directive by the member states.

Scope of the new transparency register

The GWG contains provisions on a new transparency register that are supposed to increase the transparency of the ownership of corporations, registered partnerships and other legal entities in Germany by disclosing the economic beneficiaries of such entities. In particular, stock corporations (AG’s), limited liability companies (GmbH’s), general partnerships (KG/OHG) and mixed forms such as the GmbH&Co. KG but also certain trusts (rechtsfähige/nichtrechtsfähige Stiftung) fall within the scope of the transparency obligations of the GWG. Partnerships under civil law (GbR), charitable trusts and trusts without legal capacity with a trustee residing in another country as well as listed stock-corporations do generally not fall within the scope of the GWG.

Economic beneficiary

An economic beneficiary pursuant to the GWG is an individual (not a company) who exercises direct or indirect control over a company by:

• holding more than 25 % of the capital shares or
• controlling more than 25 % of the voting rights or
• exercising control over the respective company in a comparable manner.

With regard to the latter, control is presumed if certain agreements between shareholders (such as trust agreements or agreements on the exercise of voting rights) are in place. Such structures did not have to be disclosed in the past and were for example used by “Mittelstand” companies, in particular in connection with a company succession scenario, but will have to be disclosed under the new transparency obligations of the GWG.

Indirect control means that shares or voting rights are held by one or more companies that are under the indirect or direct control of an individual shareholder. 

If the identification of an economic beneficiary is not possible, the legal representative or the managing partners of the company are deemed to be its economic beneficiary. 

Details on the economic beneficiary to be disclosed 

The first and last name as well as the date of birth, the place of residence and the extent and factual basis (for example: shareholding, trust agreement etc.) of the economic interest have to be disclosed and notified to the transparency register. 

Addressees of the transparency obligations

The entities falling within the scope of the transparency obligations under the GWG, ultimately their managing directors, are obligated to obtain, store, update and notify the required information on the economic beneficiary to the transparency register. The latter is deemed to be fulfilled if the respective information is already available in electronic form in another public register, such as the commercial register. The transparency obligations are compliance obligations which can be delegated within the respective company, provided that a compliance system is in place. 

The respective company is not obligated to conduct investigation procedures on the economic beneficiary beyond its direct shareholders. Shareholders who are economic beneficiaries themselves or who are directly controlled by economic beneficiaries are obligated to provide the required information to the respective company. This is even applicable if the economic beneficiary is a resident of a non EU-country.

Fines; Name and Shame

Violations of the transparency obligations (whether willful or due to gross negligence) will trigger considerable fines. Furthermore, all violations of the transparency obligations and respective fines that cannot be challenged will be published, disclosing the name of the person responsible for the violation of the respective transparency obligation, the respective company and the amount of the fine (“name and shame”).

Access to the transparency register

Certain authorities, for example law enforcement authorities, the federal central tax office, regional tax offices, the central investigation office for financial transactions and supervisory authorities are granted unrestricted access to the transparency register. Other interested individuals and entities (e.g. journalists, NGO’s) may access the register if they have a legitimate interest. The economic beneficiary can under certain conditions limit the access of the latter to the transparency register if such access would expose the economic beneficiary to the risk of becoming a victim of certain criminal offenses. 

Conclusion

Companies falling within the scope of the new transparency obligations under the GWG need to review their (group) structure to identify possible notification obligations under the GWG and assess if their compliance systems are adequate for the new transparency obligations. Such a review is in particular required for complex group structures as there is no “intra-group exemption” with regard to the notification obligations under the GWG. It is not sufficient that the respective parent company issues a notification to the transparency register. Each group company falling within the scope of the GWG has to comply with the notification requirement. 

Felix Wolf, Attorney at Law
Munich