Extended obligation to report to the Transparency Register as of 1 August 2021

On 1 August 2021, the new Transparency Register and Financial Information Act (Transparenzregister- und Finanzinformationsgesetz - "TraFinG") will enter into force. The TraFinG significantly reforms the German Money Laundering Act (Geldwäschegesetz - "GwG") and, in particular, eliminates the notification fiction pursuant to Section 20 (2) GwG.

This means that in future all associations in Germany will have to make notifications to the Transparency Register, regardless of whether the relevant information can be derived from the Commercial Register or other publicly accessible sources. Listed companies and their subsidiaries will also have to make a notification to the Transparency Register in the future.

1. Changes regarding the Transparency Register

1.1 Rationale and purpose of the changes

The TraFinG aims to create the conditions for the European interconnection of transparency registers in accordance with the Fourth and Fifth EU Money Laundering Directives (Directives (EU) 2015/849 and (EU) 2018/843) and to implement the EU Financial Information Directive (Directive (EU) 2019/1153) on the use of financial information for the prevention, detection, investigation or prosecution of certain criminal offences. Thus, the law primarily aims to create transparency about associations and their beneficial owners as well as to enable the exchange of relevant information at national and EU level.

1.2 Abolition of the reporting fiction - from a "catch register" to the "full register"

Currently, the German transparency register, as a "catch register", does not meet the requirements of the EU Directives. Due to the notification fiction of Section 20 (2) GWG, companies in Germany do not have to report information about their beneficial owners to the transparency register if they are listed on a stock exchange or if this information is already available from other public registers, e.g. the Commercial Register. By abolishing the reporting fiction, the Transparency Register will in future become a "full register" containing "a quantitatively comprehensive and high-quality database on the beneficial owners of all entities subject to transparency requirements" (cf. the Federal Government's draft bill of 31 March 2021, BT Drucksache 19/28164, p. 2).

The following transitional periods apply to the reports to the transparency register required under the TranFinG (Section 59 (8) GWG new):

• 31 March 2022 (AG, SE, KGaA),
• 30 June 2022 (GmbH, cooperative, European cooperative, partnerships),
• 31 December 2022 (all others).

During these transitional periods, the provisions on fines and obligations to submit discrepancy reports are suspended. It should be noted, however, that the transitional periods only apply to those companies that were not obliged to report under the previous legal situation due to the exceptions and reporting fictions. Newly established companies or companies that have not reported for other reasons must do so without delay.

1.3 Automated access to the Transparency Register

The TraFinG also establishes automatic access to the Transparency Register for credit institutions, financial services and payment institutions as well as insurance companies and notaries ("privileged obligated parties" pursuant to Section 2 (1) Nos. 1-3 and 7 GwG and Section 23 (3) GwG new). This is intended to enable privileged obligated parties to record data on beneficial owners completely digitally and in direct chronological connection already in the KYC process. Interestingly, lawyers, tax advisors and auditors are not among the privileged obligated parties, which was heavily criticised by the respective professional associations.

2. Practical effects

Due to the abolition of the notification fiction, considerably more legal entities will have to report their beneficial owners to the Transparency Register in the future. Legal entities that have so far been exempt from the reporting obligation must now also make a report to the transparency register within the transitional periods mentioned above. Once again, it should be noted that the transitional periods only apply if no beneficial owner has been declared due to the previously applicable reporting fiction. If this was not done for other reasons, the report must be made immediately.

Since the GWG also contains the obligation to immediately notify the register of changes in the beneficial owner's shareholding as well as changes in the person of the beneficial owner, the amendment to the law should be taken as an opportunity to check whether all information on the beneficial owner(s) is available at the company and whether the notification to the transparency register has been properly made and is up to date.

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