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21. February 2022 | The Transparency Register for Beneficiaries in Germany from 2022

22. February 2022 | Insight into the Transparency Register: Who gets access to which data?

23. February 2022 | Reporting of inconsistencies in the Transparency Register (this article)

24. February 2022 | Transparency register: which fines threaten administrative offences?

In the event of discrepancies detected in the transparency register, so-called obliged persons within the meaning of § 2 GwG and certain authorities who inspect the transparency register in the course of their activities must report an inconsistency. Since the Transparency Register is a public register, inconsistencies can also come from other parties. Furthermore, discrepancies in the transparency register can be present in various ways. Thus, data can be incorrectly entered or completely missing. The notification of discrepancies in the transparency register leads to an examination by the operator of the register (Bundesanzeiger Verlag GmbH). The examination is concluded by correcting the contested data. For this purpose, the operator of the transparency register may request the participation of the legal entity concerned. Information can also be obtained from the inconsistency reporter. If, however, it is impossible for the operator of the register to resolve the inconsistencies in the transparency register, he will forward the examination to the Federal Office of Administration, which is responsible for the specialist supervision, for final clarification.

The Transparency Register is a facility in which companies and other legal entities designated by the legislature must deposit certain data about their beneficial owners. This therefore refers in particular to shareholders of corporations and partnerships. But also boards of associations or cooperatives as well as foundations can be affected. Even the exercise of control over one of the legal entities included here with a vote share of at least 25% can meet the condition for registration in the transparency register. Furthermore, these provisions are also applicable to trusts and trust funds.

But why do you need such a transparency register? The decisive factor for this can be found in the media publication of the Panama Papers. On this occasion, the European Union hastened to step up the fight against money laundering and terrorist financing in all its member states. As part of this, the Federal Republic of Germany adapted its existing Money Laundering Act (MWG) to the current EU requirements in the summer of 2021. This will result in some changes to the transparency register from 2022.

But what if false information is entered in the transparency register? Is there a control mechanism to prevent or even prevent inconsistencies in the transparency register? So the central question we want to address in this contribution is how to deal with inconsistencies in the transparency register.

Money laundering and terrorist financing have many things in common. Two of them are that they use complex structures to disguise the origin and use of funds. Many different details must therefore also take into account the GwG dealing with their fight. Therefore, the regulations on the transparency register are also very extensive in this respect. That is why we are first of all dealing with the legal bases governing the handling of inconsistencies in the transparency register.

First of all, we refer to § 23a GwG. This is the specific legal standard regarding the handling of inconsistencies in the transparency register. Among other things, it lays down the rules on how an inconsistency report should be made. However, this paragraph also refers to several other legal norms in the GwG. This includes in particular § 2 (1) GwG, which determines the circle of so-called obliged persons. We will go into more detail on this later.

In parallel, § 23a GwG mentions another group of institutions that have significance in connection with inconsistencies in the transparency register. They can be found in § 23 (1) sentence 1 letters a and b GwG.

The definition of what must be regarded as inconsistencies in the transparency register can also be found in § 23a (1) sentence 4 GwG. This also includes the data referred to in § 19 (1) GwG. The following sentence, on the other hand, specifies the basis on which the beneficial owners designated for registration in the transparency register are determined. Thus, § 23a (1) sentence 5 GwG refers in this context to § 3 GwG.

In addition to the use of the definitions of certain legal entities and groups of persons given elsewhere (§§ 2, 3, 20, 21 GwG), a connection to § 56 GwG is particularly relevant. This is because inconsistencies in the transparency register can result in a corresponding fine as an administrative offence. And the fine regulations in connection with inconsistencies in the transparency register provides § 56 GwG.

Fortunately, there are easy answers to this. On the one hand, there are inconsistencies in the information missing in the transparency register. Therefore, if a legal entity required to enter data provides only incomplete information, so that the information remains incomplete, this is the case. For example, this is the case if one does not provide complete information about the citizenships of a beneficial owner with multiple citizenships.

Even inconclusive searches for a specific legal entity for which an entry would be required fall under inconsistencies in the transparency register. In such a case, all data subject to registration are missing.

Furthermore, erroneous information is to be regarded as inconsistencies in the transparency register. This applies, for example, if a name is entered there differently than indicated in the official identification document. Even in the case of a different place of residence of a registered beneficial owner, one must speak of inconsistencies in the transparency register. This source of inconsistencies in the transparency register can therefore often be accompanied by a lack of updating of the data entered therein.

In addition, there may be an inconsistency in the Transparency Register if the information entered therein on the nature and extent of the economic justification deviates from reality.

On the other hand, inconsistencies in the Transparency Register are particularly serious if other persons than the actually beneficial owners are registered there. Finally, this is diametrically opposed to the very meaning of the transparency register. Therefore, in such a situation, one can at least suspect that there could be a deception intention. Therefore, such a situation usually has a great influence on the imposition of a fine.

A notification of inconsistencies in the Transparency Register must only be made by certain parties. The legislature restricts this circle on the one hand to the persons and companies designated by it in § 2 (1) GwG. As we said before, they are called obligated.

So anyone from this group of obliged persons inspects the transparency register in order to query data about beneficial owners, for example, of a company, is obliged to report any conspicuous inconsistencies. In certain cases, this also applies if the obligated persons involved in this would actually be obliged to maintain confidentiality within the framework of the attorney’s or tax secret. This is only the case if they know from their mandates that they are using the services they receive to conduct money laundering, terrorist financing or other crimes.

If obligated persons fail to notify a mandatory inconsistency, this itself constitutes an administrative offence. The fines for this can even be very high.

In addition to those obliged, certain authorities must also react to inconsistencies in the transparency register. On the one hand, this is the Central Office for Financial Transaction Investigations and, on the other hand, the Federal Office of Administration. The latter is entrusted with the supervision of Bundesanzeiger Verlag GmbH, which maintains the transparency register as a lent body. If these authorities also detect inconsistencies in the Transparency Register, the data objected to therein shall also be checked upon their notification.

Before the current changes to the Transparency Register, only certain circles received access to the Register. This may have required a legitimate interest for inspection. However, following the current changes that convert the transparency register into a public register, there are no general restrictions on this. Therefore, indications of inconsistencies in the transparency register can now also come from the public. But other authorities can also share their findings. Even authorities working on cross-border cases in another EU Member State are entitled to do so. However, the big difference with the two previously mentioned groups (obligated and certain authorities) is that there is no obligation to report an inconsistency.

If the Federal Office of Administration receives such a notification from the public or another authority, then it investigates the matter by the authority itself submitting an inconsistency report. Finally, it is also obliged to report inconsistencies in the transparency register (see 4.2.).

First of all, we have to look back at the initial situation. If a legal entity makes an entry in the transparency register, then the operator of the transparency register does not carry out a check on the data. Only if ambiguities in the assignment of data can already be detected in this case can the operator of the transparency register request further information from the legal entity for clarification. Therefore, inconsistencies in the transparency register can only be checked on the basis of an inconsistency report.

If one of the legally designated authorities or one of the obliged entities referred to in § 2 (1) GwG finds inconsistencies when viewing the transparency register, then the operator of the transparency register should receive an inconsistency report. For this purpose, the Transparency Register offers the possibility to report inconsistencies by electronic means (§ 23a paragraph 2 GwG).

In such a case, the operator of the transparency register actually investigates the information in order to determine its accuracy. In addition, an obliged entity is subject to the obligation to provide the data available to it and deviating from the register entry to the transparency register operator for further verification. Furthermore, the operator of the transparency register usually also invites the legal entities affected by the audit to participate. This can be done, for example, by submitting documents.

However, the identity of the reporting obliged entity is maintained. At the same time, the inconsistency reporter can view the current status of the check at any time in the “My Data” section of the Transparency Register. There he also receives feedback about the completion of the exam.

During the inspection, the operator of the Transparency Register shall provide the objected register extract with an audit opinion. This thus informs that data could be incorrect here.

If there is an actual finding of an inconsistency in the course of the examination, then the operator of the transparency register asks the affected legal entity for a correction. In parallel, the operator of the transparency register shall transmit to the supervisory authority the records produced during the audit. It also examines the facts of an administrative offence. He then decides on the imposition of an appropriate fine.

As a further consequence of a checked inconsistency, the operator of the transparency register informs the obliged entity that made the report of the result of the check. In addition, a note is made in the transparency register, which indicates that the examination has been completed. Either the finding that there is no discrepancy or the correction of the discrepancy forms the conclusion of the test. The note on the completion of an audit can also be found on access to the transparency register.

However, if during the course of the audit there are still doubts as to the accuracy of the objected data, Bundesanzeiger Verlag GmbH informs the Federal Administrative Office in its function as supervisory authority and submits the further audit to it. Thus, a final examination may only be carried out by the Federal Administration Office. This is relevant insofar as it allows requests for assistance, including those addressed to partner authorities abroad.