Money laundering prevention

Active money laundering prevention makes it possible to detect and prevent the concealment of illegally acquired funds and their infiltration into the regular economic cycle.

From an economic point of view, many obligated parties under the German Money Laundering Act (GwG) do not see the prevention of money laundering as their original task, but they are nevertheless obligated by law to prevent money laundering. The reason for this is that it is becoming increasingly difficult to trace laundered money once it has entered the legal economic cycle.

While the international community is guided by the guidelines of organisations such as the Financial Action Taskforce (FATF), compliance with money laundering guidelines in Germany is regulated, among other things, by the GwG, which was first passed in 1993 and has undergone numerous amendments to date. The "Act on the Tracing of Profits from Serious Crimes" defines various measures and obligations that must be implemented by the so-called "obligated persons". These measures form the concept of money laundering prevention, which is essentially based on three pillars: Risk management, due diligence obligations and suspicious activity reporting.

Who is included among the obligated parties according to the German Money Laundering Act (GwG) is regulated in § 2 para. 1 GwG. This includes, among others:

• Credit institutions (§ 2 Para. 1 No. 1 GwG)
• Financial services institutions (Section 2 (1) No. 2 AMLA)
• Payment institutions and electronic money institutions (Section 2 (1) No. 3 AMLA)
• (self-employed) financial agents (section 2 (1) no. 4 AMLA)
• Insurance companies (Section 2 (1) No. 7 AMLA)
• Insurance intermediaries (section 2 (1) no. 8 AMLA)
• Capital management companies (section 2 (1) no. 9 AMLA)
• Lawyers, patent lawyers and notaries (section 2 (1) no. 10 AMLA)
• Legal advisers (section 2 (1) no. 11 AMLA)
• Auditors, tax consultants (section 2 (1) no. 12 AMLA)
• Fiduciary dealers (section 2 (1) no. 13 AMLA)
• Real estate agents (Section 2 (1) No. 14 AMLA)
• Organisers and brokers of games of chance (Section 2 (1) No. 15 AMLA)
• Dealers in goods, art brokers and art stockists (Section 2 (1) No. 16 AMLA)

The obligations to be complied with differ depending on the sector.

In Germany, fines of up to five million euros are due for violations of the Money Laundering Act. However, only a record fine of 145,600 euros has been imposed so far. Nevertheless, an infringement does not only have financial consequences for the obligated party. Unappealable penalty notices are also partially disclosed ("naming" and "shaming") according to Section 57 AMLA.

The text of the law states: "In the notice, the nature and character of the offence and the natural persons and legal persons or associations of persons responsible for the offence must be named. This can mean a high loss of reputation for those affected.

The Money Laundering Act (AMLA) is flanked, among other things, by so-called interpretation and application notes (AuAs for short), which are typically prepared by the supervisory authorities.

The AuAs are specific statements on the interpretation and application of the Money Laundering Act. Although the Money Laundering Act partly contains clear provisions on the practical application, some specifications remain unclear. The reason for this is that there are different sector-specific factors that must be taken into account, for example, when preparing risk analyses. In order to provide obligated parties with clearer specifications, these are developed on the basis of the Money Laundering Act in so-called "AuAs".

The Scientific Service of the Bundestag stated in 2019: There is no definition of the non-financial sector. The Money Laundering Act lists all obligated parties without subdivision. Nevertheless, in order to make a subdivision, the Budget and Finance Department is also guided by a classification by the Financial Intelligence Unit (FIU) - the money laundering special unit of customs.

Accordingly, the following obligated parties belong to the non-financial sector:

• Financial companies,
• insurance intermediaries,
• Lawyers, chamber counsel, patent attorneys and notaries,
• legal advisors,
• auditors, certified public accountants, tax advisors and tax agents,
• service providers for trust companies, trustees,
• real estate agents,
• organizers and brokers of games of chance and
• dealers in goods.

According to § 1 Abs. 9 GwG, dealers in goods are anyone who sell commercial goods "regardless of in whose name or on whose account." This includes, among others, motor vehicle dealers, dealers in jewelry or precious metals, galleries, and even dealers in rare stamps. According to § 1 Abs. 10 GwG, high-value goods are those that, due to their value, nature or intended use, stand out from everyday objects or do not represent an everyday purchase.