Stilisiertes Warndreieck auf Dialograhmen

Information for obliged entities with regard to COVID-19

Over the past few months, the Federal Republic of Germany and the State of Berlin have disbursed grants and loans on a large scale, to those whose existence is threatened by the COVID-19 pandemic and the related restrictions. These grants and loans were paid as quickly as possible, to allow for effective support. Some applicants have abused this unbureaucratic process. Private companies (GbR or BGB companies) or companies with limited liability (UG) were established for the very purpose of receiving grants and withdrawing the transferred funds as quickly as possible, to deposit them into other accounts and/or channel them into the economic cycle.

We urgently recommend that you check your customers particularly carefully, in particular if the actual source of money is unclear, and if it cannot be ruled out that the funds in question might be associated with money laundering or terrorism financing.

On its website, the Central Office for Financial Transaction Investigations – FIU lists specific examples of fraudulent and money laundering activities in relation to COVID-19.

In addition to this, the FATF also provides an English language typology document.

Titelseite FIU

Annual report by the Financial Intelligence Unit for 2019

On 18 August 2020, the Financial Intelligence Unit (FIU), which is the central authority for reporting suspicions according to the Money Laundering Act, published its annual report for 2019.
The report covers issues such as the further development of the risk-based approach pursued by the FIU, the number of entries from the individual groups of obliged entities, as well as case studies, current typologies and trends in the areas of money laundering, terrorism financing and proliferation.

stilisierte Lupe und Ausweisdokument auf Dialograhmen

Berlin: politically exposed persons

Berlin as the federal capital stands out by being home to 159 embassies.1 Ambassadors are considered politically exposed persons (PeP), as they hold high-level public posts at an international level (§ 1 subsection 12 no. 7 GwG). This is why it is more likely in Berlin than in other places that a customer is a PeP, a family member of a PeP or a person that is known to have close links to a PeP. It was found on the European level that politically exposed persons have an increased risk of becoming the target of attempted corruption. To counteract the risk of corruption, obliged entities according to the GwG must fulfil stricter due diligence requirements when dealing with PeP.

It must always be checked, if a natural person has the status of a PeP. This must be clarified before establishing a business relationship or carrying out a transaction.

How can I identify if a customer has PeP status?

There are a range of different measures for identifying PeP status:

  1. If a low or moderate risk is to be assumed, you can seek confirmation that your customer does not perform a political function and is not close to a PeP, simply by asking them. The enquiry must be documented in your paperwork.
  2. Another option is to use a PeP database. This is appropriate in the case of a moderate to high risk.

If the customer actively tells you that they are not a PeP, you are still required as an obliged entity to take adequate measures, if you have any information to the contrary. This could be the case if you have identified the customer as a PeP or if you suspect them to have close links to a PeP.

If it turns out that your customer is actually a PeP, a family member of a PeP or a person that is known to have close links to a PeP, the enhanced due diligence requirements (§ 15 subsection 3 no. 1 GwG) apply, in addition to the general due diligence requirements provided for in the GwG.

What exactly does this mean in practice?

At least the following enhanced due diligence requirements must be fulfilled:

  • Approval from a member of the management (provided that there is a management level) is required to establish or continue a business relationship.
  • Adequate measures must be taken to determine the origin of the assets that may be used in the context of the business relationship or the transaction.
  • The business relationship must be monitored more carefully and on an ongoing basis. This is necessary to rule out that any corrupt or criminal activities are the source of the funds used.

Documents such as certificates, diplomats’ identity cards or accreditation cards for the country of residence can be used in the context of such measures and must be monitored regularly and continuously. Documents such as VAT or income tax returns, salary statements, independent media reports etc. can provide an insight into the source of funds. In addition to gathering general data, the reputation of the customer, current and past business activities, as well as family members and business partners should be taken into account.

Further information is available on our dedicated page about due diligence requirements.

1 Regional offices of embassies in Bonn and Madagascar’s embassy in Falkensee are not taken into account.

Stilisiertes Warndreieck auf Dialograhmen

Fraudulent requests for payment in relation to the transparency register

Caution: Since lunchtime today, we have been receiving information from other national authorities about third parties who have been abusing the duty to report to the transparency register in a fraudulent manner, and have been sending out unauthorised requests for payment.

Please note: The transparency register is kept solely by the Bundesanzeiger Verlag GmbH as the competent body for keeping this register.
Signs of unauthorised payment requests

  1. The transparency register is available via the following official and secure address: Any addresses other than the one indicated above are not operated by the competent registration body.
  2. The registration body is not a registered association (e.V.) or similar. The transparency register is kept solely by the Bundesanzeiger Verlag GmbH.
    The Federal Office of Administration is the competent supervisory authority. Further information is provided on the following dedicated page: Transparency register.
Strategie der Bundesregierung gegen Geldwäsche und Terrorismusfinanzierung

Federal Ministry of Finance publishes its strategy to fight money laundering and terrorism financing

The Federal Government’s strategy to fight money laundering and terrorism financing was published today, along with a press talk held at the Federal Ministry of Finance in Berlin.

The interdepartmental action plan was drawn up in cooperation between various federal and state ministries and authorities. The strategy that shall be developed further, forms the working basis for all competent authorities. Objectives include operational improvements, as well as further organisational development and improved cooperation and coordination among authorities.

This applies in particular to the non-financial sector, where risk-based supervision is intensified. Cooperation between the federal and state administrations shall also be intensified to provide greater support for obliged entities in the future.

Sterne und Paragraphensymbol auf Dialograhmen

Changes to the Money Laundering Act have come into effect

The currently valid version of the GwG came into effect on 1 January 2020.
On 12 December 2019, the Money Laundering Act from 23 June 2017 was amended by an amending law.
The purpose of this amendment is to implement the provisions of the amending directive of the 4th EU Money Laundering Directive (Directive (EU) 2018/843). It gives rise to important changes for obliged entities, information about which is available on our website. The publications in our download area are going to be revised in coordination with the other federal states and new national versions will be published shortly.

Logo Nationale Risikoanalyse

Federal Ministry of Finance publishes national risk analysis

In December 2017, Germany launched its first national risk analysis with regard to ‘fighting money laundering and terrorism financing’. Under leadership of the Federal Ministry of Finance, 35 federal and state authorities were involved in performing the national risk analysis.

The purpose of the analysis is to detect and reduce existing and future risks related to fighting money laundering and terrorism financing in Germany. The goal is to increase risk awareness among all players in the public and private sector and to intensify an exchange of information.

The greatest risk areas with regard to money laundering and terrorism financing were assessed in the national risk analysis: opportunities for anonymous transactions, the real estate industry, the banking industry (in particular in the context of correspondent banking and international money laundering), cross-border activities and the area of money remittance due to the prominent role of cash.

According to § 5 subsection 1 sentence 2 GwG, obliged entities must take the results of this national risk analysis into account when drawing up their own risk analyses in the future. The results are also taken into account in legislation.

Sirene auf Dialograhmen

Successful on-site checks with jewellers

In the context of a joint operation with the tax investigation office, the trade supervisory office and the constabulary, on-site checks were performed at six jewellers’ on 27 March 2019. As goods traders according to § 2 subsection 1 no. 16 Money Laundering Act, they must fulfil obligations under money laundering law. Compliance with these provisions was verified in the course of the inspections. However, the duties provided for in the GwG only apply, if jewellers accept cash amounts of EUR 10,000 or more or at least do not rule out acceptance of such amounts.

The jewellers were interviewed about their knowledge of the Money Laundering Act, they were educated about their duties and provided with information materials. The colleagues from the tax investigation office inspected the cash registers – where they existed – and they detected some shortcomings in the accounts. The colleagues from the trade supervisory office also found some shortcomings, in particular in connection with the Price Indication Ordinance.

The jewellers were requested to present a risk analysis in line with the GwG. In order to verify statements regarding the cash amounts accepted, documents are requested from the individual tax advisors for review.

EU-DSGVO vs GwG auf Dialograhmen

General Data Protection Regulation vs. Money Laundering Act - a contradiction?

The Money Laundering Act requires obliged entities to identify their customers. Pursuant to § 8 GwG, obliged entities are entitled and obliged to prepare full photocopies of identification documents or certificates or to digitally record full optical records of them.

Is this duty consistent with the General Data Protection Regulation? Am I really allowed to keep the copies for five years as is stipulated in § 8 subsection 4 GwG? As an estate agent, can I still do this if no contract was concluded in the end?

Yes. You can and you must. This is the result of years of discussions regarding the competitive relationship between recording duties according to the GwG and data protection guidelines. This very question has been resolved in the amendment of the GwG from 2017.

The General Data Protection Regulation provides for exceptions to cater for legal obligations to collect data: According to article 6 section 1 c) GDPR data can be legally collected and processed, if this is necessary to fulfil legal duties to which the data controller is subject. The GwG provides for this type of legal duty. It is therefore not sufficient to merely transcribe the data: the documents must be photocopied or registered digitally.

The same rule applies for the retention periods. The GDPR provides for exceptions to the data subject’s right to have their data erased: According to article 17 section 3 b) GDPR, the right to have one’s data erased does not apply if processing and retention of the data is necessary to comply with legal duties or to fulfil a task that is in the public interest. The legal obligation is provided for in § 8 subsection 4 GwG, that prescribes that data must be retained for five years. The data may only be erased after this period has expired.