On 20 January 2021, the Federal Ministry of Finance (BMF) published amendments to the Application Decree for the Fiscal Code (AEAO). These also included a change regarding Section 154, which will have a significant impact on many institutes. This is due to the fact that they are no longer required to identify beneficial owners pursuant to Section 13 (1) of the Money Laundering Act (GwG); instead, the application of Section 11 (5) GwG for beneficial owners remains in effect. In an article on PayTechLaw on the amendment of Section 154 German Fiscal Code (AO), I had pointed out the detrimental effects of this amendment in practice and expressed the hope that the BMF would correct the effects with an amendment to the AEAO on Section 154. Fortunately, after one year, the time has come.
Starting point: Amendment of section 154 AO due to the implementation of the 5th Money Laundering Directive
At the beginning of 2020, the legislator amended Section 154 AO in such a way that it referred to Section 13 (1) GwG in relation to the identification of beneficial owners. In practice, this meant that every beneficial owner had to be identified by presenting an identity document on site or by video identification. Anyone who can imagine who beneficial owners could be, such as for example, the partners of a global fund, who then must appear in person or identify themselves by video to open an account for one of their investments, knows that this is hardly feasible in practice.
This change in law was made even more incomprehensible by the fact that the legislative notes stated that it was intended to have the same rules apply AML law and tax law. However, the AML law does not refer to Section 13 (1) GwG in relation to the identification of beneficial owners but provides its own legal provision in Section 11 (5) GwG. And this is what shall be applied according to the new amendment to the AEAO re Section 154.
New paragraph at number 11.2 AEAO re section 154
The BMF has inserted the following paragraph at the end of No. 11.2 of AEAO re section 154:
An identity check in accordance with section 13 (1) GwG may be waived for beneficial owners for the time being, unless an exception already applies in accordance with paragraph 1. It is sufficient to identify the beneficial owner in accordance with section 11 (5) GwG and to collect and record the information required in accordance with section 154 (2a) AO and number 7.3 of the AEAO re section 154.
In concrete terms, this means that although the wording of the law says otherwise, Section 13 (1) GwG does not have to be applied regarding the identification of beneficial owners but Section Section 11 (5) GwG is to be applied. Full circle.
What does that mean in practice?
Whoever maintains an account within the meaning of section 154 AO must collect the following data for the beneficial owners of the contracting party:
- (at least one) first name and the last name
- the address, which may also be a business address if the beneficial owner can be reached at that address in the ordinary course of business
- the tax identification number within the meaning of section 139b AO
- the business identification number within the meaning of section 139c AO, if assigned (this is only theory so far, because the business identification number has not yet been introduced in practice)
Section 11 (6) GwG provides that the contracting party shall make this data available to the institute.
Pursuant to Section 11 (5) GwG, the institute must check the accuracy of this data to an extent commensurate with the AML risk, but this does not mean that it is compulsory to inspect identification documents with beneficial owners being present.
It should be noted, however, that an institute should also obtain more data on the beneficial owner if this appears appropriate in the individual case for reasons of preventing money laundering and terrorist financing. Date of birth, place of birth and address may (but need not) be collected independently of the risk assessment, though. This means that an institute may be obliged under AML laws to collect more data than it is under the tax law pursuant to section 154 AO.
Number 11.2 AEOO re section 154 contains exemptions from the collection of data regarding the beneficial owner for certain cases, such as beneficial owners who are also authorised signatories, but whose identification can be waived due to an exemption in number 11.1 AEAO re section 154 AO or for apartment owners and the accounts of the homeowner association.
Summary
With the amendment of the AEAO re Section 154, the BMF has re-established a parallelism between section 154 AO and the AML law. Institutes do not have to identify beneficials owners by face to face identification only but may collect the required data from the contracting part and check it to a reasonable extent.
