The new regulations on money laundering
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On February 11, 2021, the German Bundestag adopted the government bill to improve the criminal law fight against money laundering (19/24180) as amended by the legal affairs committee (19/26602). The core of the draft is a fundamental reform of the criminal offense of money laundering regulated in Section 261 of the German Criminal Code.
The legislative initiative is intended to take into account the EU Directive of the European Parliament and of the Council on the fight against money laundering through criminal law of October 23, 2018 (2018/1673, “EU Directive“), which entered into force on December 2, 2018. As the EU Directive should already have been transposed into national law by December 3, 2020, the legislative process is expected to be completed quickly.
The most important change under the new law is the deletion of the conclusively defined catalogue of predicate offenses (Section 261 (1) sentence 2, nos. 1-5, sentence 2 German Criminal Code). Henceforth, the objects of money laundering can be objects, regardless of the criminal offense from which they originate, even if only negligently. By deleting the catalogue of predicate offenses, the German legislature hopes to combat organized crime more effectively.
- On February 11, 2021, the German Bundestag adopted the government’s bill to improve the criminal law fight against money laundering as amended by the legal affairs committee.
- The adopted draft essentially regulates a new version of the offense under Section 261 of the German Criminal Code. The most important change is an “all-crimes approach” by deleting the previously applicable catalogue of predicate offenses. The existing provision on the punishability of reckless money laundering is to remain in place – in deviation from the draft bill.
- Since the initiative is based on the EU Directive that should have been transposed into national law by December 3, 2020, the legislative process is expected to be completed quickly.
Not only recent events, such as the Wirecard scandal or the search at the Financial Intelligence Unit (“FIU“) in July 2020, impressively illustrate why Germany is often referred to as a “money laundering paradise”. The proposal recently published by the Bündnis 90/Die Grünen parliamentary group to tighten existing regulations, for example by prohibiting cash transfers in connection with real estate transactions that require notarization and registration in the land register, also indicates that the risk of money laundering in Germany remains high.
Although Germany managed to “move up” from seventh to 14th place in the Financial Secrecy Index published annually by the Tax Justice Network last year, it is still one of the worst performers in the index, which covers more than 133 countries. According to current estimates, up to 109 billion Euros are “laundered” annually in Germany. Although the introduction of the transparency register in 2017 was seen by the Tax Justice Network as a significant improvement, the weak enforcement of the Anti-Money Laundering Act continued to be criticized.
The recently adopted government draft is intended to counteract this. The following provides an overview of the most important regulations:
“All-crimes approach” and foreign offenses”
By deleting without replacement, the catalogue of predicate offenses (“all-crimes approach”) currently provided in Section 261 (1) sentence 2, nos. 1-5, sentence 2 of the German Criminal Code, the German legislature has gone far beyond the requirements of the EU Directive. The latter only provided for the recording as predicate offenses of property derived from criminal offenses with a minimum sentence of six months. With the deletion of the predicate offense catalogue, however, it will be sufficient in the future for an object to originate from any criminal offense – such as shoplifting or an act committed through negligence, as may be the case with criminal offenses under product law. Even if money launderers must have at least conditional intent with regard to the criminally relevant origin of the object of the crime, it is no longer necessary to assign the relevant object to a specific crime.
With regard to offences committed abroad, money laundering will continue to be punishable in relation to objects derived from offences committed abroad that are punishable under both, the law of the place of the offence and German criminal law. In the future, however, it will no longer be relevant whether certain groups of offenses mentioned in European Conventions and Framework Decisions are punishable at the place of the offense.
Criminal liability for reckless money laundering remains
While the draft bill submitted by the Federal Ministry of Justice and Consumer Protection in August 2020 still provided for the deletion of the punishability of reckless money laundering, this offense was reintroduced as a new paragraph 6 in the government bill as it has now been adopted by the German Bundestag. This was preceded by controversial discussions, not least in a hearing of experts in the legal affairs committee on December 9, 2020. In the end, however, the practical interest in retaining the criminal liability of reckless money laundering to avoid gaps in criminal liability prevailed.
Qualification status for obligated parties under money laundering law
With a newly regulated paragraph 4, the draft law provides for an increase in punishment to a minimum term of imprisonment of three months for anyone who commits an offense under Section 261 of the German Criminal Code as an obligated party under the Anti-Money Laundering Act. This provision implements a requirement of the EU Directive. Accordingly, the increased penalty affects obligated parties under Section 2 of the AMLA, such as goods traders, who commit an offense under Section 261 of the German Criminal Code in the course of their professional activities – for example, by (recklessly) booking payments by business partners that originate from incriminated offenses.
Conclusion and consequences for money laundering compliance management
Following the amendment of the Anti-Money Laundering Act by implementing the amending directive to the 4th EU Money Laundering Directive, which led to significant tightening in the preventive testing area of customer due diligence (we reported on this in our article of January 17, 2020), the latest legislative initiative takes a further step towards more effective anti-money laundering.
The deletion of the predicate offense catalogue will certainly lead to an increase in offenses relevant under money laundering law. This has a direct impact on the requirements and obligations of companies under the Anti-Money Laundering Act: the comprehensive implementation of customer due diligence with regard to the origin of any business-relevant (assets) continues to gain in importance. The introduction of the qualification requirement for obligated parties makes it even clearer: companies must rely on effective compliance management in order to identify and avoid issues relating to potential money laundering.
This makes a comprehensive risk analysis that records the money laundering risk in the company, the establishment of reliable processes for the implementation of customer due diligence obligations, as well as an understanding of the necessity and requirements for the submission of suspicious activity reports in accordance with Section 43 of the Anti-Money Laundering Act increasingly indispensable – even for privileged goods traders. This also because a further increase in the number of suspicious activity reports submitted to the already heavily burdened FIU is considered likely.
We are happy to advise and support you in the implementation of compliance measures in order to adequately integrate this further step in the fight against money laundering into your internal processes.