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A German bill to combat money laundering, tax avoidance and evasion, faces wide opposition from tax professionals and business over proposals to provide general public access to a registry of all company owners, known as the beneficial ownership registry.
This would provide access to ownership details to just about anyone, over and above selected individuals with a legitimate interest.
Part of the government’s plans to implement the EU’s Fourth Anti-Money Laundering Directive, the bill has serious shortcomings that undermine the directive’s overall goals of fostering financial transparency, representatives of industry, tax attorneys and financial analysts told Parliament April 24. They added that it would also create undue hurdles for business.
At a hearing on the bill—the Law Implementing the Fourth EU Anti-Money Laundering Directive, held by the Finance Committee of the lower-house of Germany’s parliament, the Bundestag—concerned parties said they welcomed the legislation’s proposed beneficial ownership registry for those individuals that control German companies.
But many still believe the bill in its current form—a transparency measure mandated by the directive to prevent overseas money laundering currently being considered by parliament—only loosely implements the directive’s requirements for the registry.
“It allows that in the future only the senior manager can be named and identified instead of a beneficial owner,” Markus Meinzer, a senior analyst with the UK-based Tax Justice Network, who testified at the hearing, told Bloomberg BNA April 24.
“This would substantially weaken the beneficial ownership definition and the entire Anti-Money Laundering Law, as well as the transparency registry’s effectiveness.”
The Fourth EU Anti-Money Laundering Directive, adopted by the European Parliament and Council in May 2015, mandates stricter guidelines for member states to surveil and take action against high-risk companies and suspicious lenders.
German legislation to implement the directive, adopted by the German Cabinet Feb. 22, would restructure Germany’s Financial Intelligence Unit (FIU), bolstering its staff and placing its duties under the umbrella of the Ministry of Finance. It would also establish the electronic transparency registry of all company owners and operators, known as the beneficial ownership registry.
Both components would provide authorities with the ability to hone their resources in a more targeted manner in order to better minimize the risk of money laundering to terror organizations, the Ministry of Finance said in a Feb. 22 statement.
“We need effective instruments in the fight against money laundering and terrorist financing,” Minister of Finance Wolfgang Schäuble said in the statement. “These new regulations put us in a much better position to accomplish this.”
However, in order to do that, the Bundesrat, the upper-house of the parliament, suggested March 31 providing general access to the beneficial ownership registry, as opposed to only making it available to select individuals with a legitimate interest.
“Only in this way could money laundering and terrorism be effectively combated,” the Bundesrat wrote in a March 31 statement.
According to the stipulations of the directive, both houses of the German Parliament must pass the bill before June 26.
Regarding the beneficial ownership registry, representatives of German industry warned that extending the scope of transparency measures to all businesses could create undue hassle for small and medium-sized business, effectively stymying the ministry’s goals.
“Additional bureaucratic efforts on time, personnel and other related costs for all other businesses must be avoided by all means,” said Jürgen Krais, a representative for the Federation of German Industries (BDI), at the April 24 hearing.
Others added that the Bundesrat’s suggestions that the beneficial ownership registry be made available to everyone could open up small and medium-sized businesses to persecution by wrongdoers.
It could also constitute a privacy issue in direct violation of Germany’s constitution known as the Basic Law, said Gregor Kirchhof, a professor of finance and tax law at the University of Augsburg, in southern Germany, at the hearing.
“Once you put that data out into the world, you can’t get it back,” said Kirchhof.
Many business leaders, however, have still signed petitions to make the transparency registry open to the public, according to information provided to Bloomberg BNA from Tax Justice Network and the ONE Campaign, a global non-profit charity that focuses on poverty alleviation, as well as business transparency and accountability.
Anna-Maija Mertens with Transparency International, who also testified at the hearing, said she welcomed this embrace by some in industry.
“Every citizen should have the right to know who’s in these companies,” said Mertens, adding that access to the beneficial ownership registry shouldn’t be constrained whatsoever.
Still, Sebastian Fiedler, deputy chairman of the Federation of German Criminal Investigators, suggested at the hearing that such a move could open up authorities to more work than they can handle.
Even with proposals to bolster staff, authorities are already so overwhelmed with money laundering cases that the situation is on the brink of “obstructing justice,” he said.
To contact the reporter on this story: Jabeen Bhatti in Berlin at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
The latest version of the bill to implement the Fourth EU Anti-Money Laundering Directive, in German: http://dip21.bundestag.de/dip21/btd/18/115/1811555.pdf
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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