In this article, we will look at the TraFinG, the Transparency Register and Financial Information Act. The aim of this law is to create more clarity and transparency regarding the beneficial owners (UBO) of companies. The law entered into force on June 10, 2021. But what exactly is behind the TraFinG and how does it affect us?
Key Points at a Glance
- The TraFinG aims to create transparency regarding the beneficial owners of companies in order to prevent illegal business practices and to combat money laundering and terrorist financing.
- Companies must register their beneficial owners and update them regularly, making the information publicly accessible. Sanctions are provided for to punish violations of transparency requirements, ranging from fines to the dissolution of the company.
- TraFinG applies to all companies in Germany, regardless of their size, and also affects foreign companies with business relationships with German companies.
Table of Contents
The objective of the TraFinG
The main objective of the TraFinG is to ensure that companies make publicly transparent who their beneficial owners are. This is intended to prevent companies from being used for illegal or non-transparent business practices. Transparency and disclosure are crucial factors in combating money laundering, terrorist financing, and other criminal activities.
To achieve this goal, the TraFinG sets out certain requirements for companies. Firstly, companies must register their beneficial owners and update this information regularly. This ensures that the information is always up-to-date and reliable. Secondly, companies must make this information publicly accessible, for example by entering it into a public register.
Furthermore, the TraFinG also provides for sanctions if companies violate these transparency requirements. These sanctions can range from fines to the dissolution of the company. This creates an incentive to take the transparency requirements seriously and ensure that the beneficial owners of a company are always known.
It is important to emphasize that the TraFinG does not only apply to large companies, but to all companies, regardless of their size. This ensures that smaller companies are also involved in the fight against money laundering and terrorist financing. This is of great importance, as criminal activities are often also used by small companies to disguise their illegal business.
Am I affected by the TraFinG?
The answer is likely yes, as the TraFinG affects almost all companies in Germany. Both corporations and partnerships must comply with the regulations of the Transparency Register. This means that companies of all sizes must be taken into account.
Whether you are affected by the TraFinG as an entrepreneur, shareholder, or managing director depends on whether you are defined as a beneficial owner. A beneficial owner is a natural person who ultimately holds more than 25% of the shares in the company or holds a controlling position in another way.
It is important to note that the TraFinG also applies to companies that have no direct beneficial owners. In such cases, companies must still submit a report to the Transparency Register stating that they have no beneficial owners. This report serves to ensure that all companies are transparent and that potential money laundering activities or other illegal activities are prevented.
Furthermore, it is important to know that the TraFinG also applies to companies that are not based in Germany but have business relationships with German companies. For example, if your company has a subsidiary in Germany or regularly does business with German companies, you must also comply with the regulations of the Transparency Register.
How do I determine the beneficial owner?
Identifying the beneficial owner can be a challenge for companies. It is important that you carefully check and document the required information. In most cases, you must research the information on the beneficial owners of your company yourself. In doing so, you should identify the relevant shareholders and possible controlling persons.
The beneficial owner is in any case a natural person. For this, the following conditions must be met:
- more than 25% of the share capital
- more than 25% of the voting rights
- comparable control over the company as in points a. & b.
For further information, please also read our post on this topic:
Beneficial owner according to the GwG: Who counts?
Who is not a beneficial owner and why?
According to the Transparency Register, no beneficial owners are “general proxies,” authorized signatories, managing directors, commercial attorneys-in-fact, or simple representatives.
What information do I have to provide to the Transparency Register?
If you are affected by the TraFinG, you must provide certain information in the Transparency Register. This includes information about the beneficial owners of your company. It is important that you keep this information correct and up-to-date.
The information you must provide includes:
- Surname, first name
- Date of birth
- Residential address
- Nationality
- Nature and extent of the interest
What should be considered for the Transparency Register entry?
When you make the entry in the Transparency Register, you must consider several important points. First, you should ensure that you provide all required information completely and correctly. Incomplete or incorrect information can lead to legal consequences.
Furthermore, it is important to keep the Transparency Register entry up-to-date. If the information about the beneficial owners changes, you must update the corresponding changes in the register immediately. This ensures the accuracy and reliability of the data in the Transparency Register.
Guide for the concrete implementation of the TraFinG
Guide for registration in the Transparency Register:
- Identify your beneficial owners:
- Determine the actual or fictitious beneficial owners of your company.
- Report this information to Bundesanzeiger Verlag for entry in the Transparency Register.
- Check whether already reported data is correct and update it if necessary.
- Consider the complexity of the determination:
- Determining the beneficial owners can be complex.
- Consider seeking the advice of a lawyer if necessary.
- Responsibility for data accuracy:
- Bear the responsibility for the ongoing correctness and timeliness of the data.
- Establish internal company structures for regular reviews of the new reporting obligations.
- Protection of personal data:
- If necessary, submit an application for the protection of personal data.
- Restrict the inspection and transmission of data partially or completely as required.
- Comparison for business relationships:
- Perform identification of business partners for future business relationships.
- Compare existing information with the Transparency Register.
- If discrepancies are found, you are obliged to submit discrepancy reports.
- Observation of current BVA FAQs:
- Always consider the current FAQs of the Federal Administration Office (BVA) for all steps and updates in the Transparency Register.
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