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Transformation of the transparency register – Instead of the presumption of notification (Mitteilungsfiktion) there will now be new obligations backed up by fines

In accordance with the EU anti-money laundering directive, the transparency registers of the EU member states have to be interconnected with each other by 10.3.2021. On 10.2.2021, just shortly before this deadline, the Federal Government published a draft Act on the European Interconnection of Transparency Registers and to Implement the EU Directive (EU) 2019/1153 (Transparency Register and Financial Information Act). Businesses and consultants should expect a considerable amount of additional administrative work.

Changes are required to the way that obligations to notify are fulfilled

According to Section 20(1) of the Anti-Money Laundering Act (Geldwäschegesetz, GwG), companies that are subject to notification obligations are generally required to have the beneficial owner recorded in the transparency register. Up to now, under Section 20(2) GwG, this obligation to notify was in many cases deemed to have been fulfilled if the information on the beneficial owner was already contained in an electronically accessible register (in particular, the commercial register, the register of cooperatives and the register of associations) (the so-called presumption of notification, referred to in German as Mitteilungsfiktion). 

A prerequisite for the forthcoming interconnection of the transparency registers of the individual EU member states is that the respective data records for the beneficial owners have to be available in a standard data format. The Federal Government is therefore planning to amend the Anti-Money Laundering Act (GwG), particularly in relation to the requirements in respect of the transparency register. 

Changes to the rules on the transparency register

Elimination of any presumption of notification

The draft Act provides for the removal of this presumption of notification. As a consequence, all the companies that are subject to the notification obligation, from now on, will be obliged to notify the transparency registry of their ben-eficial owners. Therefore, when the draft Act comes into effect, there will be a sudden increase in the number of companies that are required to record their beneficial owners in the transparency register from, currently, approximately 400,000 to around 2.3m. 

A comprehensive register instead of a ‘backstop’ register

As a result of the removal of the presumption of notification it will no longer be possible to make reference to other registers. In fact, the current format of the transparency register will be transformed from that of a so-called backstop register into a ‘complete’ register (comprehensive register) that contains data records with a standard structure. 

Staggered introduction of notification obligations as well as penalties for breaches

The Act is due to come into force on 1.8.2021. The companies that have hitherto benefited from the presumption of notification will be required to provide information on the beneficial owners – depending on the legal form – during staggered transitional periods: 

  • for an AG [a German public limited company], an SE [a European public limited company], a KGaA [a partnerships limited by shares] by 31.3.2022,
  • for a GmbH [a German limited company], cooperatives and partnerships by 30.6.2022 as well as
  • in all other cases by 31.12.2022.

You should bear in mind that breaches of the obligation to notify, in the form of incomplete, incorrect or late notifications, could lead to the imposition of considerable fines. This threat of fines is expected to lead to a swift transformation of the transparency register into a comprehensive register.

Conclusion: The planned changes will result in a substantial amount of additional work. The companies will be responsible for the completeness and accuracy of the information and it will have to be kept up to date at all times.

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