Money Laundering Act: extensive background knowledge on the latest regulations. The new Money Laundering Act (GwG) has been in force in Germany since June 2017. It was drafted on the basis of the EU Money Laundering Directive of 2015.
Basically, the Money Laundering Act aims to ensure effective criminal prosecution of those who engage in money laundering. For this to succeed, both companies and certain individuals must comply with reporting, due diligence and documentation obligations.
In the following article, we inform you about the most important changes of the new Money Laundering Act. In addition, you will find out what you must observe in order not to violate the Money Laundering Act.
Money Laundering Act – basic information
Money laundering is a criminal offence designed to protect illegally obtained assets. According to Section 261 of the Criminal Code, anyone who conceals, uses or conceals unlawfully acquired assets is liable to prosecution.
Who is the Money Laundering Act aimed at?
The Money Laundering Act prescribes the measures to be taken to prevent money laundering and to detect criminal offences. As soon as violations are punished, there is the threat of severe fines. The Money Laundering Act is aimed in particular at:
- Gambling and art brokers
- Credit institutions and financial companies
- Lawyers and notaries
- Real estate agents
All listed groups must be vigilant and focus on whether there are indications of money laundering among business partners.
What applies to lawyers and notaries?
As soon as lawyers and notaries maintain business relationships relevant to money laundering, they must comply with the obligations prescribed in the Money Laundering Act. According to the AMLA, this is the case if they:
- Manage assets,
- Offer advice on tax matters
- Establish, finance or manage companies
- and are involved in the purchase or sale of real estate.
If lawyers notice that mandate relationships are being used for the financing of terrorism or money laundering, they must report this to the Federal Criminal Police Office (BKA). Because in this case, the lawyer’s duty of confidentiality does not apply.
Whether you are an entrepreneur, an institution or a private person: In principle, you should inform the BKA even if you have the slightest suspicion. This is the case, for example, if you know that a person has a particularly large number of bank accounts, frequently transfers small amounts of money or makes conspicuously large cash deposits.
When is a money laundering officer necessary?
Whether in credit institutions, casinos or financial companies: In all of the above-mentioned areas, it is obligatory to appoint a money laundering officer. His or her main task is to check whether the regulations laid down in the AMLA are being complied with and whether measures are being implemented appropriately.
Be aware that the supervisory authority can appoint a money laundering officer at any time and across all sectors.
Money Laundering Act: how to meet your due diligence obligations
The third section of the AMLA states that due diligence obligations towards business partners must not be neglected. Therefore, obligated persons must identify their customers, for example, if transactions exceed a monetary amount of €15,000.
If the payment is made in cash, they must comply with the duty of identification already from € 10,000. For the identification of legal persons, obligated parties require information on:
- the registered office,
- the legal form of the company,
- the names of the legal representatives
- and the registration number.
If you identify natural persons, make a note of their:
- Residential address,
- First and last names,
- Date and place of birth
- and nationality.
In the case of legal persons, either a founding document or an extract from the register is sufficient. Natural persons, on the other hand, prove their identity with an identity card. For all documents presented, either make copies or digitise them for storage purposes.
This applies not only to identification, but also to bank transfers, for example. This is because before you destroy all data, you must keep it for five years.
Money Laundering Act – 6 changes at a glance
For a better overview, we will now inform you about the six changes that have come into force as a result of the new Money Laundering Act.
- In the case of transactions, it is necessary to identify the recipient and the principal.
- The new law aims to combat not only money laundering but also the financing of terrorism.
- The maximum possible fine has been increased from €100,000 to up to €5 million.
- Financial service providers are obliged to check money transfers of € 1,000 or more.
- Cash payments of €10,000 or more must in principle be subject to verification by all companies, persons and institutions. In the case of money transfers that are made without cash, an audit is only required for amounts of €15,000 or more.
- A transparency register ensures clarity, as it lists all beneficial owners. Foreign nationals who wish to purchase real estate in Germany must also be entered in the transparency register since 2020.
Keep in mind, however, that you cannot rely solely on the data contained in the transparency register. You must check all data separately before each transaction.
Internal risk management in the company
In principle, it is necessary for obliged entities to establish an appropriate risk management system (Section 4 (1) AMLA). In this section we will explain which two steps companies must take.
1. Conduct a risk analysis
First, carry out a risk analysis. This will help you to find out whether and to what extent company-relevant transactions could be affected by terrorist financing or money laundering. To better assess how high the risks are, take a look at Annexes 1 and 2 of the Money Laundering Act.
The factors listed there provide information on when, for example, a higher or rather a lower risk exists.
Make sure to regularly update, document and review the risk analysis. Keep in mind that the supervisory authority may ask to see the current version of the risk analysis at any time.
2. Initiate measures
The previously prepared risk analysis is the basis for the successful implementation of so-called internal safeguards. These aim to effectively reduce the risks of terrorist financing and money laundering. For this to succeed, for example:
- Business partners identified,
- a money laundering officer is appointed,
- Prepare data for the authorities
- and educate employees about certain money laundering methods.
Are you planning to have a risk analysis carried out in your company and need support? Then contact the lawyers of the Herfurtner law firm. They will treat your concerns confidentially and advise you.