Anti-Money Laundering Compliance | EU Anti-Money Laundering (AML) package

I. Identification of (actual) beneficial owners

1. Current legal situation in Germany

1.1 General principle

Under the current legal situation, the identification of actual beneficial owners of legal entities and registered partnerships (jointly referred to as “Associations”) in the meaning of sec. 20 of the German Anti-Money Laundering Act (“AML-Act”) as well as trusts and other “special legal arrangements” in the meaning of sec. 21 AML-Act is based on the principles as outlined in sec. 21 para. 1, para. 2, 20 para. 1, 19 para. 2 in conjunction with sec. 3 para. 1 - 3 AML-Act, under due consideration of the respectively applicable interpretation guidelines of the German Federal Administrative Office (BVA), the supervisory authority responsible for the German transparency register.

According to the basic rule of sec. 3 para. 1 sent. 1 no. 1 AML-Act, the (actual) beneficial owner is in principle the natural person who ultimately owns or controls the Association or special legal arrangement.

1.2 Legal presumption for legal entities and other (non-listed) companies

For legal entities (except foundations with legal capacity) and other non-listed companies the legal presumption of sec. 3 para. 2 sent. 1 AML-Act applies.

According to this, any natural person who directly or indirectly (i) holds more than 25 % of the capital shares, (ii) controls more than 25 % of the voting rights or (iii) “exercises control in a comparable manner” shall be deemed as beneficial owner.

If, in multi-level participation and control structures, these requirements are not met directly by a natural person, but by a legal entity or other (parent) company, the natural person who can directly or indirectly exercise a “dominant, controlling influence” over this parent company within the meaning of sec. 3 para. 2 sent. 2 - 4 AML-Act in conjunction with sec. 290 para. 2 - 4 of the German Commercial Code is deemed to be the (indirect) beneficial owner.

According to the established administrative practice of the German Federal Administrative Office (BVA), the existence of such ”dominant, controlling influence” can be assumed in particular, if the natural person directly or indirectly (i) holds more than 50 % of the capital shares in the parent entity, (ii) controls more than 50 % of the voting rights or (iii) exercises comparable control, in particular through veto, objection or comparable prevention rights (see most recently: BVA FAQ of 5 May 2023, part 1,, chapter B, before cipher I, ciphers II.3, III.1, III.2 and III.3).

In contrast, under latest AML specific case law, referring to the clear wording of sec. 290 para. 2 no. 1 German Commercial Code the mere holding of more than 50 % of the capital shares shall not be deemed sufficient, but particularly the control of more than 50 % of the voting rights be decisive for the establishment of a relevant dominant, controlling influence (cf. judgment of the Administrative Court of Cologne dated 29 January 2024, case no. 9 K 6020/21, p. 86).

Generally accepted is, however, the requirement that aforementioned (+ 50 %) thresholds must be exceeded on each level of the structure. The same applies for the existence of “comparable control”.

Within the respectively required calculations, direct and indirect shareholdings may be added together, whereas a calculation by multiplying the shares or controlled voting rights from different levels of the structure is not permissible (see also: BVA FAQ of 5 May 2023, part 1, chapter C, cipher 5; part 1., chapter B., cipher I.6., part 2., chapter B., cipher V.).

The above determination of the beneficial owner based on the principle of “dominant, controlling influence” also applies if a foundation with legal capacity, a trust or another “special legal arrangement” is part of the parent entity structure.

The special rules applicable to such parent entities (i.e., foundations with legal capacity, a trust or another “special legal arrangement”) for the determination of their own beneficial owners (see Section I.1.3) are not relevant in this context under the current legal situation, in accordance with the clear wording of sec. 20 para. 1 in conjunction with sec. 3 para 2 AML-Act (see also: BVA FAQ of 5 May 2023, part 1, chapter B, cipher IV.9).

1.3 Special cases: Listed companies, foundations with legal capacity, trusts & other “special legal arrangements”

Excluded from the scope of the legal presumption of sec. 3 para. 2 sent. 1 - 4 AML-Act are (i) companies that are listed on an organized market within the meaning of sec. 2 para. 11 German Securities Trading Act (listed companies), (ii) foundations with legal capacity and (iii) trusts and other “special legal arrangements” within the meaning of sec. 21 AML-Act.

In the case of listed companies, an ownership or control position relevant under German anti-money laundering law must be determined within a comprehensive case-by-case assessment exclusively on the basis of the main rules laid out in sec. 3 para. 1 no. 1 AML-Act (cf. sec. 3 para. 2 sent. 1 AML-Act). If a foundation with legal capacity or a trust or other “special legal arrangement” is subject to transparency requirements, the special provisions of sec. 3 para. 3 AML-Act must be observed (sec. 21 para. 1, para. 2, 20 para. 1, 19 para. 2 sent. 2 AML-Act).

2. Future EU-wide legal situation

2.1 Principle

According to Art. 2 para. 1 no. 28 EU-AMLR, the beneficial owner is the natural person (i) who ultimately owns or (ii) controls a legal entity (in the broader sense of EU law, including partnerships), an express trust (i.e. a trust created intentionally to place assets under the control of a trustee for the benefit of a beneficiary or for a specific purpose) or a similar legal arrangement.

This means that the main principle for the determination of actual beneficial owners that currently exists under German law is also reflected in the future EU regulations.

However, the determination of an ownership or control position relevant under anti-money laundering law will be subject to a new regulatory system, which may lead to an identification of actual beneficial owners that differs from the current German legal situation, especially in the case of multi-level shareholding structures.

2.2 The new system

For the identification of beneficial owners the new EU provisions distinguish, depending on the legal form, between (a) legal entities (in the broad sense) (Art. 51 et seq. EU-AMLR), (b) legal entities similar to express trusts, such as foundations (Art. 57 EU-AMLR) and (c) express trusts and similar legal arrangements (Art. 58 EU-AMLR).

a) Beneficial owners of legal entities (in the broad sense)

According to the main rule of Art. 51 EU-AMLR, beneficial owners of legal entities (in the broad sense) are the natural persons who

(i) have, directly or indirectly, an ownership interest in the corporate entity (Art. 51 subpara. 1 lit. a) in conjunction with Art. 52 EU-AMLR); or

(i) control, directly or indirectly, the corporate or other legal entity, through ownership interest (Alt. 1) or via other means (Alt. 2) (Art. 51 subpara. 1 lit. b) in conjunction with Art. 53 EU-AMLR); the existence of “control via other means” shall be determined independently of and in parallel with the existence of an ownership interest or control through ownership interest (Art. 51 subpara. 2 EU-AMLR).

(i) Beneficial ownership through (direct or indirect) ownership interest

For the purpose of the identification of the beneficial owner of a legal entity (in the broad sense), under the future regulatory framework a relevant ”ownership interest” in the meaning of Art. 51 subpara. 1 lit. a) EU-AMLR requires the direct or indirect ownership of “25 % or more of the shares or voting rights or other ownership interest in the corporate entity, including rights to a share of profits, other internal resources or liquidation balance” (Art. 52 para. 1 subpara. 1 sent. 1 EU-AMLR).

For individual categories of companies that are exposed to higher money laundering and terrorist financing risk, the European Commission may in future, by means of delegated acts, set even lower thresholds for the relevant ownership interest, which generally shall be set at a maximum of 15 % (Art. 52 para. 2, para. 3, Art. 85 EU-AMLR).

In the case of indirect ownership interests, the shares or voting rights or other ownership interests held by the intermediary companies at each level of ownership in the chain of entities must be multiplied, whereby the result of this calculation must be an ownership interest of (in the standard case) 25% or more (Art. 52 para. 1 subpara. 1 sent. 2, subpara. 2 EU-AMLR).

Consequently, the new legal framework will lead to the requirement of a reassessment of notification obligations in cases of multi-level shareholding structures, mainly concerning entities subject to transparency which have notified its legal representatives as “fictitious beneficial owners” in accordance with sec. 3 para. 2 sent. 5 AML-Act (see Section II.1.). This applies particularly to constellations in which, according to the current legal situation, a “dominant, controlling influence” of a natural or legal person pursuant to sec. 3 para. 2 sent. 1 – 4 AML-Act in conjunction with sec. 290 para. 2 - 4 German Commercial Code cannot be determined due to the relevant +50 % threshold not being exceeded at each parent entity level.

(ii) Beneficial ownership through (direct or indirect) control

The (direct or indirect) control over a legal entity (in the broad sense) that will be relevant in future for the identification of beneficial owners in accordance with Art. 51 subpara. 1 lit. b) EU-AMLR may be exercised through ownership interest (Alt. 1) or via other means (Alt. 2) (Art. 53 para. 1 EU-AMLR).

• Relevant "control through ownership interest"

“Control through ownership interest” means "the direct or indirect ownership of 50 % plus one of the shares or voting rights or any other ownership interest” in the company (Art. 53 para. 2 lit. c) EU-AMLR).

In the case of multi-level shareholding and control structures, this threshold must be determined at each level, starting at the first level of the structure; a multiplication respectively addition of ownership interest from different shareholder levels is not feasible (Art. 53 para. 2 lit. b) EU-AMLR).

• Relevant „control via other means“

”Control via other means“ should always be deemed to exist if there is the possibility of “exercising, directly or indirectly, significant influence and impose relevant decisions within the legal entity”, whereby in the case of multi-level participation and control structures indirect control via other means must be established at each level of the structure (Art. 53 para. 2 lit. a) and b) EU-AMLR.

In accordance with the (non-exhaustive) examples of rules as set out in Art. 53 para. 3 EU-AMLR, this includes the ability to exercise the majority of voting rights (lit. a), the right to appoint or remove the majority of the members of the board or the administrative, management or supervisory body or similar officers (lit. b), the ability to exercise certain veto and decision rights (lit. c) or to make decisions regarding the distribution of profit (lit. d).

Such control via other means may arise from shareholder agreements, articles of association or equivalent documents as well as from relationships between family members and fiduciary agreements (“nominee arrangements”) (Art. 53 para. 4 EU-AMLR).

(iii) Combination & attribution of ownership interest and control in multi-layered ownership structures

If a company has a multi-layered ownership structure and one or more chains in this structure contain a coexistence of ownership and control at different levels of the chain, a combination of ownership and control is required for the identification of the beneficial owner, under due consideration of the rules laid out in Art. 54 EU-AMLR.

(iv) Special regime concerning ownership structures involving legal arrangements or similar legal entities (e.g. foundations)

If, as part of a shareholding and control structure of a legal entity (in the broad sense), a relevant position of ownership or control is held or exercised at the highest level by legal entities similar to express trusts, such as foundations (Art. 57 EU-AMLR) or by an express trust or a similar legal arrangement (Art. 58 EU-AMLR), the special provision of Art. 55 EU-AMLR must be observed with regard to the identification of beneficial owners.

In these cases, the natural persons who are to be identified in accordance with the relevant regulations for the identification of beneficial owners of the respective parent entity, i.e. according to the rules set out in Art. 57, Art. 58 EU-AMLR for legal entities similar to express trusts (such as foundations) or for express trusts and similar legal arrangements, shall also be deemed the beneficial owners of the legal entity (in the broad sense) subject to notification obligations.

Consequently, the respective members of the management body and the beneficiaries of the foundation or the trustees and beneficiaries of the trust must also be notified as (actual) beneficial owners for the respective subsidiary subject to the notification obligation, as far as applicable.

Taking into account the deviations to the current German legal situation, it is foreseeable that for multi-level shareholding structures with parent companies in the legal form of a foundation or trust structures the aforementioned special regulations will lead to the requirement of a comprehensive reassessment of notification obligations of the concerned legal entities (in the broad sense).

b) Beneficial owners of legal entities similar to express trusts

For legal entities that are similar to express trusts (such as foundations), special rules for the identification of beneficial owners exist (Art. 57, Art. 59 EU-AMLR).

According to the (non-exhaustive) examples of rules laid out in Art. 57 para. 1 EU-AMLR, as beneficial owners of such legal entities shall be considered, in particular, the founders (lit. a), the members of the management body in its management function (lit. b), the members of the management body in its supervisory function (lit. c), the respective beneficiaries (lit. d) and any other natural person who directly or indirectly controls the legal entity (lit. e).

c) Beneficial owners of express trusts and similar legal arrangements

For express trusts and similar legal arrangements special rules for the determination of beneficial owners exist (Art. 58 et seq., Art. 64 para. 6, para. 7 lit. b), Art. 2 para. 1 no. 29, no. 32 EU-AMLR).

According to the (non-exhaustive) examples of rules laid out in Art. 58 para. 1 EU-AMLR, particularly the settlors (lit. a), the trustees (lit. b), the protectors, if any (lit. c) and the respective beneficiaries (lit. d) may be considered as beneficial owners of an express trust. The beneficial owners of other legal arrangements similar to express trusts shall be the natural persons holding equivalent or similar positions (Art. 58 para. 2 EU-AMLR)

II. Extension of the scope of persons to be notified as “fictitious beneficial owners”

1. Current legal situation in Germany

If, following a comprehensive review, no actual beneficial owner can be identified for an Association (i.e., a legal entity or registered partnership) subject to notification obligations, the “legal representative, the managing shareholder or partner” of the Association is deemed to be its so-called ”fictitious beneficial owner” according to sec. 3 para. 2 sent. 5 AML-Act and must be notified as such to the transparency register for entry (sec. 20 para. 1 sent. 1, sent. 2, 19 para. 2 sent. 1 AML-Act); according to the prevailing opinion, this also applies to listed companies.

In the context of the determination and notification of beneficial owners of certain legal structures within the meaning of sec. 21 AML-Act and foundations with legal capacity, a recourse to the provision of sec. 3 para. 2 sent. 5 AML-Act is excluded.

2. Future EU-wide legal situation

In case an actual beneficial owner cannot be identified for a legal entity (in the broad sense), the legal concept of the current German legal situation remains in place also under the new ruleset introduced by the EU-AMLR.

However, the scope of natural persons to be notified in future as “fictitious beneficial owners” will be considerably expanded within the framework of a more informal approach. The existence of statutory representation powers or - particularly relevant in the area of partnerships – a corporate position as a (managing) shareholder or partner will no longer be strictly necessary.

According to future EU-wide legislation, if no natural person can be identified as the actual beneficial owner of a legal entity (in the broad sense), having exhausted all possible means of identification, all natural persons “who hold the position of senior managing officials in the legal entity” must be notified to the respective member state transparency register (Art. 63 para. 3, para. 4 subpara. 1 lit. b) EU-AMLR).

According to the broad wording, this includes all “natural persons who are the executive members of the management body, as well as the natural persons who exercise executive functions within a legal entity and are responsible, and accountable to the management body, for the day-to-day management of the entity” (Art. 63 para. 4 subpara. 2 in conjunction with Art. 2 para. 1 no. 37 EU-AMLR).

Special rules apply to the newly introduced possibility to notify fictitious beneficial owners for legal arrangements subject to transparency requirements whose parties are (exclusively) legal entities (Art. 64 para. 6, para. 7 lit. a) in conjunction with Art. 2 para. 1 no. 40 EU-AMLR).

III. Recommendation & Outlook

The new system for the determination respectively identification of beneficial owners will require a complete reassessment of the ownership and control structures of all companies subject to transparency requirements.

Particularly in constellations of multi-level participation structures in which under the current legal situation actual beneficial owners cannot be identified because the 50 % threshold - regularly relevant for determining a "dominant, controlling influence" from the 2nd shareholder level onwards - is not exceeded on each separate level of the structure, a significant need for correction of the current transparency register entries is expected in light of the new calculation system foreseen by the future ruleset (e.g., required multiplication & addition of shares/voting rights existing on different levels).

Such significant need for corrections can also be deemed highly likely for all group structures containing foundations or trusts (respectively comparable fiduciary structures) on a parent entity level.

To the extent that companies are required to notify “fictitious beneficial owners” on the basis of the new regulations, it should (also) be reliably clarified at an early stage which group of persons can be regarded in future as “member[s] of the management level” subject to reporting requirements.

For more information, we refer you to our recommendations and outlook from Part I of our series of articles.

 

Authors: Jens Hoffmann | Anna-Lena Kringel | Natalia Vost

Published: March 2025