Germany: 5th Anti-Money Laundering Directive Adopted: Extension Of Beneficial Ownership Registers

Last Updated: 20 April 2018
Article by Georg Greitemann

Most Popular Article in Germany, April 2018

On April 19, 2018, the European Parliament has adopted the 5th Anti-Money Laundering Directive (5AMLD). This memo provides a first summary of the new law relating to beneficial ownership registers in the Member States and on the EU level, and the roadmap for the transposition of 5AMLD into national law.

Overview of the 5AMLD

A. Objectives

By building upon and amending the provisions of the 4th Anti-Money Laundering Directive adopted in 2015 (4AMLD), the 5AMLD broadens and sharpens EU rules on anti-money laundering. The adopted changes placing a specific focus on widening the scope of the Directive to reflect new financing trends, and increasing transparency regarding the identity of beneficial owners.

B. Form

The 5AMLD, like its predecessor, will take the form of a minimum harmonisation directive. This means that it will set a minimum standard, which national legislation must meet, while allowing Member States to retain or adopt more stringent anti-money laundering measures. To this end, the 5AMLD will contain numerous provisions expressly resting upon the discretion of the Member States.

C. Roadmap

The 5AMLD is expected to be approved by the Council in May or June and will enter into force shortly thereafter. The member states have to transpose 5AMLD into national law by the end of 2019 (18 months after its entry into force)

The 5AMLD provides for specific deadlines regarding the establishment of the following registers:

  • The 'register of beneficial owners of corporate entities': 18 months after the date of the 5AMLD's entry into force
  • The 'register of beneficial owners of trusts': 20 months after the date of the 5AMLD's entry into force;
  • The 'register of holders of bank accounts': 26 months after the 5AMLD's date of entry into force; and
  • The national registers of beneficial owners of corporate entities and trusts shall be interconnected across the EU within 32 months after the 5AMLD's date of entry into force.

Overview of the Main Amendments of the 5AMLD relating to Beneficial Ownership Registers

A. Extending rules on obtaining, holding, and accessing information regarding beneficial owners of corporate entities

One of the key objectives set forth in the 5AMLD is the heightening of the overall transparency requirement of the Directive.

According to the 4AMLD, corporate entities are required to obtain and hold adequate, accurate and current information on their beneficial ownership, including the details of the beneficial interests held. This information must be stored in a central, national register ('the register of beneficial owners of corporate entities', which is in Germany the so called Transparency Register). The 5AMLD builds on these requirements in three ways:

Firstly, by introducing an explicit obligation for beneficial owners themselves to provide obliged entities with such information.

Secondly, by widening the circle of persons who have access to such information. The 4AMLD currently grants access to competent authorities and FIUs (without any restriction), obliged entities (within the framework of customer due diligence), and 'any other person or organisation who can demonstrate a legitimate interest'. The 5AMLD will replace this third category with 'any member of the general public', thereby abolishing the need to establish a legitimate interest. However, this amendment will be mitigated by limiting the information which must be made available to the public to only: the beneficial owner's month and year of birth, country of residence, and nationality, as well as the nature and extent of the beneficial interest held.

Thirdly, the 5AMLD will require the 'register of beneficial owners of corporate entities' to be interconnected on an EU level, facilitating cross-border cooperation and access to information.

B. Extending rules on obtaining, holding, and accessing information regarding beneficial owners of trusts

The amendments made by the 5AMLD regarding information on the identity of beneficial owners of trusts follow a similar pattern as those for beneficial owners of corporate entities, and likewise encourage a higher level of transparency.

The 4AMLD requires that trustees of an express trust hold adequate, accurate and up-to-date information on beneficial ownership regarding the trust, including the identity of the settlor, the trustee, the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate control of the trust. Furthermore, trustees are under an obligation to directly provide obliged entities with relevant information in certain circumstances.  Once again, this information must be stored in a central, national register ('the register of beneficial owners of trusts' which is in Germany included in the Transparency Register). The 5AMLD builds on these requirements in three ways.

Firstly, by expressly widening and clarifying the definition of 'trust' to include 'other types of legal arrangements, such as, inter alia, fiducie, certain types of Treuhand or fideicomiso when having a structure or functions similar to trusts'.

Secondly, by expanding the circle of persons who have access to such information. The 4AMLD currently only grants access to competent authorities and FIUs (without any restriction) and obliged entities (within the framework of customer due diligence). The 5AMLD will introduce two more categories: any person or organisation that can demonstrate a legitimate interest; and any person that files a written request in relation to a trust which holds or owns a controlling interest in a corporate entity incorporated outside of the EU. The information which must be made accessible for these new categories is limited to the beneficial owner's month and year of birth, country of residence, and nationality, as well as the nature and extent of the beneficial interest held.

Thirdly, the 5AMLD will require the 'register of beneficial owners of trusts' to be interconnected on an EU level, facilitating cross-border cooperation and access to information.

Further Information

http://europa.eu/rapid/press-release_STATEMENT-18-3429_en.htm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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