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The Transparency Register and Financial Information Act (TraFinG) came into force on 1 August 2021 (https://www.meyer-koering.de/meldungen/5045/) and obliges all legal entities under private law (GmbH, AG, foundations, etc.) and all registered partnerships (KG, OHG, GmbH & Co. KG) to obtain information on their beneficial owners, to keep this information, to keep it up to date and to immediately notify the register-keeping office for entry in the transparency register.
Even if the information on the beneficial owner can already be found in the commercial or company register or another electronically retrievable register, this no longer replaces the obligation to notify the transparency register. This is because the notification fiction from Section 20 (2) AMLA old version that existed in these cases ceased to apply with effect from 1 August 2021. The obligation to register the beneficial owner now also applies to listed companies. The previously existing transitional periods for the reporting of the beneficial owner to the transparency register expired on 31 December 2022.
From 1 April 2023, missing or incorrect notifications to the transparency register may then constitute administrative offences and be punishable by a fine. The fine can be up to €100,000 for a reckless violation and up to €150,000 for a deliberate violation. In the case of serious, repeated or systematic violations, the fine increases up to €1 million and in special constellations even up to €5 million. In addition, the Federal Office of Administration can “pillory” transparency register offenders on its homepage for public inspection (so-called naming & shaming).
The transparency register over time: from the catch-all to the full register
The objective of the new regulations on the transparency register by the TraFinG is to transform the German transparency register from a catch-all register into a full register in order to achieve a Europe-wide networking of the transparency registers located in the EU and to enable a cross-border exchange to improve the fight against money laundering, terrorist financing and tax evasion.
Every legal entity under private law (AG, GmbH, KGaA, e.V., foundation with legal capacity, etc.) and every registered partnership (GmbH & Co. KG, etc.) must provide the transparency register with information on its beneficial owners (sections 20 et seq. AMLA). In addition to the full name (first and last name), date of birth, place of residence and all nationalities, information on the type and scope of the beneficial interest of the beneficial owner must also be reported to the Transparency Register (Section 19 (1) AMLA).
Determining the beneficial owner of a reportable entity is governed by Section 3 AMLA (“beneficial owner”) and is not always easy in view of numerous special constellations (e.g. veto rights, usufruct, trusts, multi-level companies). Therefore, you will often need competent legal advice for the determination of beneficial owners.
What are the notification obligations since the end of December 2022?
For the implementation of the obligation to enter the beneficial owners of a reporting company in the transparency register, statutory transitional provisions were established, the staggered implementation deadlines of which already expired in 2022. The following deadlines applied for notifications to the transparency register:
- AG, SE, KGaA: until 31 March 2022
- GmbH, e.G., SCE and PartG: until 30 June 2022
- all other legal forms (KG, OHG, foundation etc.): until 31 December 2022
By the end of 31 December 2022, almost all companies and other legal entities will be obliged to comprehensively report their beneficial owners to the transparency register. This reporting obligation thus affects millions of companies in Germany.
Impending fines from April 2023!
To ensure that the reporting obligations to the transparency register are also effectively implemented and enforced, the AMLA (cf. Section 56 AMLA) considers violations of the reporting obligations as administrative offences subject to a fine. The fine can be up to €100,000 for a reckless violation and up to €150,000 for a deliberate violation. In the case of serious, repeated or systematic violations, the fine increases up to € 1 million and in special constellations even up to € 5 million.
For the companies affected by the new regulations on the transparency register (TraFinG), the provisions on fines were temporarily suspended, so that they have not yet been threatened with punishment for failure to notify their beneficial owners to the transparency register.
However, these transitional periods will also expire in the course of 2023. It should be noted here that the suspension of the fine provisions took place on a legal form-specific basis. The following transitional periods currently exist for the suspension of the imposition of fines:
- AG, SE, KGaA: until 31 March 2023
- GmbH, e.G., SCE and PartG: until 30 June 2023
- all other legal forms (KG, OHG, foundation, etc.): until 31 December 2023
What to do now?
All companies and other legal entities should check at very short notice whether their beneficial owners have already been entered in the transparency register and, if so, whether these entries are also accurate and complete in terms of content.
If an entry in the transparency register has not yet been made, the necessary information on the beneficial owners of the company should be obtained promptly and entered in the transparency register before the expiry of the suspension of the fine provisions in order to exclude the risk of a fine. In the case of companies that have already been registered, it must be checked whether all beneficial owners are represented in the transparency register with their necessary details (first and last name, etc.).
The risk of a fine being imposed for missing or incorrect notification to the transparency register should not be underestimated: Because as of 1 April 2023, those obliged under money laundering law (banks, real estate agents, etc.) must also submit so-called discrepancy reports (Section 23a AMLA) to the Transparency Register if the information provided by the contractual partners on their beneficial owners does not match the information in the Transparency Register or if an entry in the Transparency Register is even missing altogether. It is also to be expected that the Federal Administrative Office, which is responsible for imposing fines, will in future systematically check the companies’ compliance with the notification obligations and punish violations with fines.
