Transparency register - Need for action on account of new EU-wide standards for reporting obligations
The transparency register is a key instrument for combating money laundering and terrorist financing by disclosing the beneficial owners of companies and organisations. In Germany, it was introduced as a part of the Anti-Money Laundering Act (Geldwäschegesetz, GWG) and has been continuously developed further. The implementation of the EU’s Anti-Money Laundering Package (EU’s AML Package) and Germany’s Act to Combat Financial Crimes (Finanzkriminalitätsbekämpfungsgesetz, FKBG) means that, as of 2025, there will be far-reaching changes that will have a significant impact.
New EU standards for the transparency obligation in relation to beneficial owners
The transparency obligation is targeted at GmbHs [private limited companies], AGs [stock corporations], foundations and some international structures, among others. The aim of the register is to identify the so-called beneficial owners. These are the natural persons behind legal entities and other legal constructions that hold at least 25 per cent of shares or voting rights, or exercise control in another way. If it is not possible to identify a natural person as the beneficial owner then a so-called ‘notional beneficial owner’ would be determined, usually the legal representative or the managing shareholder of the organisation.
The AML Package adopted by the EU is a comprehensive package of measures that obliges all Member States to harmonise their regulations in respect of combating money laundering. The implementation of the changes from the EU’s AML Package will be staggered:
- AMLA Regulation (Regulation 2024/1620) largely entered into force on 1.1.2025.
- Anti-Money Laundering Regulation (Regulation 2024/1624) entered into force on 1.1.2025 and applies from 10.7.2027 at the earliest.
- Anti-Money Laundering Directive (Directive 2024/1640); the EU Member States have to transpose the provisions of the Directive into national law by 10.7.2027.
The FKBG supplements these EU requirements and creates the legal framework for implementing the provisions in Germany.
In terms of applicability in Germany, this means that the provisions will only be binding for the majority of obliged entities from 10.7.2027.
Major changes due to Germany’s Act to Combat Financial Crimes and the EU’s AML Package
The changes due to the EU’s AML Package and the FKBG concern several key aspects of the transparency register and the due diligence requirements of obligated parties:
1. Introduction of the ‘principle of calculating through the ownership chain’
According to the new provisions, the beneficial owners in multi-layered corporate structures will likewise have to be clearly identified. Shareholdings or voting rights on every level of ownership will be calculated in order to determine the person who ultimately exercises control. For companies and their advisers this means that when calculating the size of a shareholding it will no longer be possible to generally assume that there is a ‘controlling influence’, but instead the exact percentages in multi-layered corporate structures will have to be calculated through the ownership chain.
2. Stricter verification of beneficial owners
As of 2025, obliged parties, such as tax consultants and auditors, will have to verify their clients more stringently, in particular by regularly cross-checking the beneficial owners against national and internal sanctions lists. Sanctions lists are official records that are issued by governments or international organisations and that list persons, companies or organisations against whom economic or legal restrictions have been imposed. Such measures are aimed at combating terrorism, money laundering and other illegal activities. The verification obligation also applies to the regular updating of data in the transparency register.
3. Abolition of ‘all-or-nothing principle’ for corrections
Previously, all the information about the beneficial owner had to be reported in its entirety once again if there was just a small discrepancy, such as a typing error or a change of address. This principle has been relaxed through the FKBG; as of 2025, it will be possible to restrict corrections specifically to the data concerned so that solely erroneous information will need to be corrected.
4. Harmonisation of the entitlements to inspect and mandatory automation
The EU’s AML Package provides for specific obliged parties, such as credit institutions and authorities to get automatic and privileged access to the transparency register. In this way, cross-checking against the beneficial owners will be simplified and the processing time reduced. For tax advisers and auditors this means that it will be possible to substantially simplify the inspection processes, in particular where the volume of clients is high.
5. Introduction of an upper limit for cash and stricter reporting obligations
The EU’s AML Package introduces an upper limit for cash payments in the amount of €10,000, which will also be implemented in Germany. In the future, payments that exceed this limit will only be permitted via electronic bank transfers or other traceable modes of payment. The aim of this measure is to prevent large cash transactions being used to conceal illegal activities. Moreover, the obligation to report suspicious cases will become more stringent, in particular, in relation to unusual transactions involving high value goods, such as vehicles, properties or luxury items. Obligated parties will have to ensure that suspicious transactions are reported and documented without delay.
6. Expanded requirements for compliance management
The AML Regulation requires that companies and obligated parties above a certain size must appoint a compliance manager. The latter will be responsible for compliance with all the obligations under anti-money laundering legislation and for providing support to compliance officers in the operational implementation of money laundering prevention. For tax consultancies and auditing companies this means that, as of 2025, new organisational structures will have to be created in order to bolster money laundering prevention. Here, there are no longer any size-dependent exceptions so that all obligated parties will have to consider appointing a compliance manager.
7. Continuous monitoring and updating of client data
The EU’s AML Package will require consultancies to carry out risk-based monitoring of their clients. Customer information has to be regularly updated, although the frequency will vary depending on the risk classification; customers with an elevated risk will need to be checked annually, while all other customers will need to undergo a review every five years.
Outlook
For tax consultancies and other obligated parties, the extensive changes due to the EU’s AML Package and the FKBG will entail a number of challenges, for example, in particular, increased administrative expenses and the need for staff training and development. The use of specialised software can help consultancies in the identification and monitoring of beneficial owners.
