Money Laundering Compliance in Germany

Among other things, extensive identity verification, monitoring and reporting obligations have been introduced. These obligations are mainly regulated by the German Money Laundering Act (Geldwäschegesetz, GwG), which is also being tightened up on a regular basis. Most recently, the European legislator again increased the requirements for credit institutions and companies with its fourth and fifth money laundering directive.

Companies with an effective anti-money laundering management help making it more difficult for organized crime to disguise illegal cash flows. This also reduces the risk of being caught in the public prosecutor's crosshairs. Furthermore, companies that disregard AML guidelines are threatened with high fines.

With the fourth and fifth money laundering directives, the EU is placing a focus on internal corporate risk management. According to these directives, companies are required to first determine the specific money laundering risks existing in their company (risk analysis). This risk analysis must be documented in an auditable manner and updated regularly.

Based on this individual risk analysis, appropriate security measures must then be taken in a second stage. In the case of corporations and groups of companies, the parent company must perform the risk analysis for the entire group. Internal prevention measures must be uniform throughout the group. However, firms that are not directly obligated under the German Money Laundering Act should also take appropriate internal (security) measures to prevent possible violations of money laundering obligations that might also be relevant under criminal law. 

An anti-money laundering audit can help verify if a company has a proper and working AML program in place.

The requirements of the law on money laundering are not only difficult to understand due to their complexity, but also entail considerable liability and criminal law risks in the event of non-compliance. First of all, the German Money Laundering Act contains its own provisions on fines, which punish

• an omitted or incorrectly assessed risk analysis,
• failure to document or review the results of the risk analysis,
• omission of internal security measures,
• failure to implement internal security measures throughout the group

with a fine of up to 150,000 Euros in case of intent, otherwise with a fine of up to one hundred thousand Euros.

There is also the threat of a corporate fine under the Administrative Offences Act (Section 30 OWiG). In the most extreme case, criminal proceedings may be instituted against the persons involved and the managing director or the Executive Board may be held personally liable.

Over the past few years, various journalistic investigations have uncovered the fact that money laundering and tax evasion still occur despite comprehensive tightening of laws regarding AML compliance. We are observing that the authorities are taking increasingly harsher action and are reacting with ever lower thresholds to suspicious reports.