Already since October 2017, companies have been obliged to report certain information regarding the beneficial owner(s) to the transparency register in Germany. On 1 August 2021, the new German Transparency Financial Information Act on Money Laundering (TraFinG Gw) is to come into force, which provides for significant changes to the Money Laundering Act.
The reason for the planned changes is the interconnection of the transparency registers of the EU member states as provided for by European law. The German Federal Government is adhering to the concept of a full transparency register already contained in the draft bill. As a result, all German companies will be obliged to report their beneficial owners to the transparency register, including those that are currently exempt or privileged with regard to reporting their beneficial owners to the transparency register.
The E-TraFinG Gw will therefore particularly affect companies that have so far made use of the notification fiction of Section 20 (2) GwG. There will also be changes for companies listed on an organised market and their subsidiaries, for which the obligation to report their beneficial owners to the transparency register has so far always (in the case of subsidiaries regularly) been considered fulfilled. The explanatory memorandum to the E-TraFinG Gw speaks of approximately 2.3 million affected companies.
Abolition of notification fictions
The core of the government draft is the upgrading of the transparency register from a catch-all to a full register. The abolition of all previously applicable notification fictions of Section 20 (2) GWG and the resulting obligation to notify for the first time for many companies, which also remain obliged to notify on an ongoing basis with regard to any changes, creates a considerable additional burden for many obligated parties. This applies in particular to notifications that have to be published in several registers at the same time, as this results in an obligation to “keep two registers”.
In the event of violations, there is the threat of fines, some of them considerable, which are assessed according to the respective turnover of the companies.
Who are affected by the changes?
Basically, §§ 18 ff. GWG provide for an obligation to enter the beneficial owner(s) in the transparency register. These obligations are incumbent on legal persons and registered partnerships (Section 20 GWG), as well as administrators of trusts with residence or registered office in Germany (Section 21 GWG).
Associations under Section 20 (1) GWG for which the relevant information on the beneficial owner is already available from other registers (namely the commercial, partnership, cooperative, association and company registers), as well as listed companies, were exempt from this notification requirement under Section 20 (2) sentence 2 GWG old version, i.e. in particular:
– German AGs, GmbHs (also gGmbH and UG), KGaAs, registered associations and cooperatives, European companies, civil law foundations, OHGs, KGs (also GmbH & Co. KG), partnership companies (also with limited professional liability), “German” European joint stock companies, and EEIVs.
Pursuant to Section 20 GWG (new version), these companies could no longer rely on the fictitious notifications and would therefore have to make corresponding notifications to the Transparency Register in the future and, in particular, update them on an ongoing basis. The majority of companies that initially benefited from the notification fiction must from now on ensure that they comply with the comprehensive notification obligations in order to guarantee a coherent compliance strategy.
Scope of the information obligations/implementation deadlines
From now on, the information from Section 19 (1) GWG old version, which must be communicated to the register, also includes all nationalities of the respective natural persons in addition to first name and surname, date of birth, place of residence, type and extent of economic interest and nationality.
The government draft provides for the TraFinG to enter into force on 1.8.2021, with the reporting obligations only being fulfilled at a later date. The draft provides for staggered implementation deadlines depending on the legal form of the reporting entity.
According to the current draft, a notification must be submitted by a
– AG, SE or KGaA by 31.3.2022,
– in the case of a GmbH, cooperative, European cooperative or partnership by 30.6.2022;
– and in all other cases (especially partnerships) by 31.12.2022.
However, it is advisable to check which current reporting obligations one’s own company is already exposed to and whether the last reports to the transparency register are still up-to-date. Companies that were exempt from notification due to the previous notification fiction must make the corresponding notifications for the first time in the future and adjust them continuously, especially in the event of changes. If, for example, managing directors of a limited liability company have been reported to the transparency register as beneficial owners and one of them later leaves the company, this must be reported to both the commercial register and the transparency register in the future. However, the notifications to the transparency register can be made without a notary, but by the company itself or also by the advisor with power of attorney.
We will be happy to advise you on the examination and implementation of the new notification requirements.