Berlin When the family council is re-elected, David Klett knows what follows: two weeks of paperwork. The board member of the Klett Group, a fourth-generation education company, feels patronized. “Whenever personally liable partners of the Klett Group are re-determined, we have to report this immediately to the transparency register,” explains the 45-year-old.
With around 50 corporations that depend on the family limited partnership in Germany, something is changing almost constantly. “That means endless clicking in a poorly made portal,” says Klett. “Our legal counsel and her team are then busy with nothing else for a very long time.”
The background is the EU directive on combating money laundering and terrorist financing. It stipulates that the EU states should keep transparency registers that provide information about who actually owns a company. This should help public prosecutors or tax investigators to quickly see through corporate networks and the economic interests of individuals.
Investigators and anti-corruption organizations praise the collection of data as an important source for tracking down criminals. However, the economy complains about the bureaucratic implementation – especially in Germany.
A new study commissioned by the Foundation for Family Businesses shows that the bureaucratic burden of implementing the transparency register in Germany is already particularly high. And threatens to become an even bigger problem.
Because from March 31st, the last transitional period for stock corporations (AG), European companies (SE) and limited partnership (KG) will fall on shares. According to this, the Federal Office of Administration can impose fines if companies carry out reports incorrectly or not at all. In addition, the reporting requirements increase again.
“We are the ones who suffer”
The Klett Group, headquartered in Stuttgart, operates dozens of educational companies in 18 European countries. Board member David Klett says: “In itself, transparency is an honorable and correct goal.” But when it comes to bureaucracy, companies like his suffer.
Specifically, companies must report their “beneficial owners” to the transparency register. This refers to owners who directly or indirectly hold more than 25 percent of the capital shares, control more than 25 percent of the voting rights or exercise control in a comparable way. If there are no corresponding natural persons, the members of the management level are considered beneficial owners.
For about a year, all companies have had to report their owners separately. On behalf of the Foundation for Family Businesses, the Center for European Policy Network (CEP) and Prognos AG measured the administrative burden on companies in four EU countries as a result of the requirements of the transparency register.
Abandoned by management
Above all, the type of data transmission leads to very different levels of stress. A one-off automatic registration process (once-only principle) is therefore important.
The study states: “While most businesses in Austria did not have to spend any time doing this, companies in Germany took up to 45 minutes for the initial registration, compared to 20 minutes in France and 32 minutes for the approximately 20 percent Austrian companies that do not participate in automatic registration.”
In Austria, for example, there is an automatic exchange of data between the “company register”, the local commercial register and the transparency register. According to the analysis, however, there is “a significantly higher burden” in Germany.
The time pressure also varies: In France and Italy, changes must be submitted within 30 days, in Austria within four weeks. In Germany, updates must be made “immediately”, in Austria there is an annual review obligation.
The researchers recommend a unified European transparency register, but concede that it is a “long-term task”. That is why they advocate setting up at least one automatic data exchange in the countries in order to reduce the administrative burden.
More about bureaucracy in Germany:
The board of directors of the Family Business Foundation, Rainer Kirchdörfer, reports that family businesses are “very reluctant” to fill out the transparency register with their personal data. Behind this are their “legitimate needs” for security and data protection. Kirchdörfer says: “It’s particularly annoying that it also gives them considerable and permanent bureaucratic burdens.”
The German Chamber of Industry and Commerce (DIHK) also criticizes the fact that new information obligations are constantly being imposed on business instead of the state using existing data multiple times.
Corruption fighters such as Transparency Germany, on the other hand, see the republic as a “money laundering paradise” and continue to complain about the lack of disclosure of actual ownership structures.
“This can also open the door for possible illegal asset transfers such as money laundering,” said Transparency finance expert Stephan Klaus Ohme. Ownership is only superficially recorded and data is often not verified. The non-governmental organization therefore demands that the authorities independently check the reported owner data.
With regard to personal data, the European Court of Justice ruled at the end of November 2022 that the easily accessible electronic data retrieval for everyone in the national transparency registers was contrary to European law. The EU must now revise its money laundering directive and better protect the privacy of company owners.
Annoying discrepancy messages
Entrepreneur Klett also suffers from another circumstance: he regularly receives mail from the Federal Gazette, which is responsible for operating the transparency register in Germany. Then another “inconsistency message” was received. Klett reports: “We then receive very lengthy instructions on how to correct entries.”
Behind these bureaucratic burdens is that, according to the Money Laundering Act, financial and credit institutions, insurance companies, real estate agents or art brokers, for example, have to check the information provided by their respective business partners. If you think you see any discrepancies, you must report them to the transparency register, which is mandatory from April. The result: Entries have to be checked, changed and changed again and again until there are no longer any “inconsistencies”.
“We are also asked to send copies of valid identification documents of the beneficial owners to the transparency register,” says Klett. He sees this not only as a time killer, but also as a security risk.
Here the Federal Gazette reports: “After updates and new appointments, it is unfortunately no longer possible to upload documents to the platform of the transparency register.” That is why ID cards or passports have to be scanned and sent in an e-mail – or as a paper copy by post.
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