Germany – Know Your Customer (KYC) Rules

 

 

While not an offshore financial center, Germany is one of the largest financial centers in Europe. Although not a major drug producing country, Germany continues to be a consumer and a major transit hub for narcotics. Organized criminal groups involved in drug trafficking and other illegal activities are an additional source of laundered funds in Germany.

Trends in money laundering include electronic payment systems; financial agents, i.e., persons who are solicited to make their private accounts available for money laundering transactions; and trade in CO2 emission certificates. Free Zones of control type I exist in Bremerhaven, Cuxhaven, and Hamburg, i.e., freeports. Deggendorf and Duisburg are control type II Free Zones (unfenced inland ports).

 

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: NO

Germany – KYC covered entities

 

The following is a list of Know Your Customer entities covered by German Law:

    • Credit institutions
    • Financial services institutions
    • Payment institutions and e-money institutions as well as their agents
    • Financial enterprises
    • Insurance companies and intermediaries
    • Investment companies
    • Lawyers
    • Legal advisers
    • Auditors
    • Chartered accountants
    • Tax advisers and tax agents
    • Trust or company service providers
    • Real estate agents
    • Casinos
    • Persons trading in goods

Germany – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 11,042 in 2010

The following is a list of STR covered entities covered by German Law:

    • Credit institutions
    • Financial services institutions
    • Payment institutions and e-money institutions as well as their agents
    • Financial enterprises
    • Insurance companies and intermediaries
    • Investment companies
    • Lawyers
    • Legal advisers
    • Auditors
    • Chartered accountants
    • Tax advisers and tax agents
    • Trust or company service providers
    • Real estate agents
    • Casinos
    • Persons trading in goods

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 684 in 2010
Convictions: 606 in 2010

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Germany strengthened its AML/CFT regime in 2011, including by: amending AML/CFT provisions governing the financial sector through the Act to Implement the Second E-Money Directive which entered into force at the end of April 2011; extending the list of predicate offenses to include market manipulation, product piracy and insider trading through the Act to Improve the Combating of Money Laundering and Tax Evasion, effective May 3, 2011; clarifying the powers – such as the right to obtain information and enter premises – of the supervisory authorities responsible for non-financial institutions; and submitting the draft Act to Optimize the Prevention of Money Laundering to the German parliament, with adoption envisaged before the end of 2011. While Germany has no automatic CTR requirement, large currency transactions frequently trigger a STR.

Tipping off is a criminal offense only if it is committed with the intent to support money laundering or obstruct justice, and applies only to previously-filed STRs. Otherwise, it is an administrative offense that carries a fine of up to € 50,000 (approximately $68,000) under the Money Laundering Act; draft legislation would increase the fine up to € 100,000 (approximately $133,000). Legal persons are only covered by the Administrative Offenses Act, and are not criminally liable under the Criminal Code.

The numbers of prosecutions and convictions included in this report only reflect cases in which the money laundering violation carried the highest penalty of all the crimes of which the offender was convicted.

Notably, on March 10, 2011, a German-Lebanese criminal group was sentenced for laundering money from narcotics sales throughout Europe by transporting it to Lebanon. Assets amounting to € 9.2 million (approximately $12.271 million) were forfeited. Germany has no federal statistics on the amount of assets forfeited in criminal money laundering cases. Assets can be forfeited as part of a criminal trial or through administrative procedures such as claiming back taxes.

Germany should become a party to the UN Convention against Corruption.