Substantial fines for German limited partnerships (KG/GMBH & CO. KG) – obligation to report to the transparency register
To fight money laundering, Germany has set up a so-called Transparency Register since October 2017, based on the fourth EU Money Laundering Directive. It contains the beneficial owners of corporations and partnerships with their name, date of birth, place of residence and the nature of their economic interests.
So far, it was widely assumed that the mandatory registration of German limited partnerships in the German commercial register is sufficient and that no further information is to be entered in the Transparency Register. The Federal Administrative Office (“Bundesverwaltungsamt”) rejected this view and initiated the first administrative fine proceedings against limited partnerships and their general partners for not disclosing the beneficial owners in the Transparency Register. In the opinion of the authority, the information to be entered in the commercial register is not sufficient to fulfill the transparency disclosure requirements, as it is not clear from the commercial register to what extent the partners of the limited partnership or third parties are the ultimate legal or beneficial owners.
Simple violations of the obligation to disclose beneficial owners may result in fines of up to € 100,000 each. In the event of serious violations, fines of up to € 1,000,000 each are possible. The banking and financial services sectors face fines of up to € 5,000,000 each.
The entry in the transparency register must be made as soon as possible in order to reduce the risk of substantial fines. Future changes to beneficial owners must be reported immediately to the Transparency Register.