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AML/CTF compliance in Germany


Money laundering and terrorism financing laws in Germany?

In Germany, money laundering and terrorism financing are serious offences and are governed by the Money Laundering Act (Geldwäschegesetz - GwG) and the Terrorism Financing Act (Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten - GwG).


Key obligations reporting entities have under German laws?

The key obligations under the AML/CTF laws in Germany include:

  • Customer Due Diligence (CDD) - covered entities, including banks, financial institutions, insurance companies, auditors, lawyers, notaries, dealers in high-value goods, and other obligated entities, are required to establish and implement risk-based CDD measures. This includes verifying the identity of customers, obtaining beneficial ownership information, and assessing the risk associated with each customer.
  • Enhanced Due Diligence (EDD) - in cases where there is a higher risk of money laundering or terrorism financing, covered entities are required to apply enhanced due diligence measures. This may include obtaining additional information, conducting enhanced monitoring, and obtaining senior management approval for high-risk relationships.
  • Reporting Suspicious Transactions - covered entities must report any knowledge, suspicion, or reasonable grounds for knowledge or suspicion of money laundering or terrorism financing to the Financial Intelligence Unit (FIU). The reports should be made promptly when suspicion arises.
  • Record-Keeping - covered entities must maintain records of transactions, customer identification information, and supporting documentation for at least five years from the date of the last transaction. These records should be readily available for examination by regulatory authorities.
  • Compliance Programs - covered entities are expected to establish and maintain effective AML/CFT compliance programs. This includes implementing internal policies, procedures, and controls to detect, prevent, and report money laundering and terrorism financing activities. Staff training and regular independent audits are also important components of these programs.


ML/TF regulators in Germany and what functions do they perform?

In Germany, the regulators responsible for overseeing and enforcing anti-money laundering (AML) and counter-terrorism financing (CTF) measures are primarily:

  • Financial Intelligence Unit (FIU) - the FIU in Germany is known as the Financial Intelligence Unit Deutschland (FIU-Deutschland). It operates under the Federal Criminal Police Office (Bundeskriminalamt) and is responsible for receiving, analysing, and disseminating reports of suspicious transactions to relevant law enforcement and judicial authorities.
  • Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)BaFin is the Federal Financial Supervisory Authority in Germany. It is responsible for supervising and regulating banks, financial institutions, insurance companies, and securities trading to ensure compliance with AML/CTF regulations.
  • Deutsche Bundesbank - the Deutsche Bundesbank is the central bank of Germany. It collaborates with other regulatory authorities and plays a role in monitoring AML/CTF compliance in the financial sector.
  • Zentralstelle für Finanztransaktionsuntersuchungen (ZFI) - ZFI is a specialised unit within the public prosecutor's office that investigates financial transactions related to money laundering and terrorism financing. It collaborates with other authorities, including the FIU.

Germany actively cooperates with international counterparts in combating money laundering and terrorism financing. This involves exchanging information, cooperating on investigations, and providing assistance to other jurisdictions when requested.


Industry sectors subject to ML/TF regulations?

The regulated industry sectors in Germany subject to AML and CTF regulations include, but are not limited to:

Banks and Financial Institutions

Including banks, credit unions, fintechs, leasing companies, financial planners and other non-bank FIs.

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Insurance companies

Including various types of insurance companies.

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Payment service providers

Including payment processing service providers.

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Investment firms and asset managers

Including wealth, asset, fund and hedge fund managers.

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Securities and capital markets

Including stockbrokers, trading houses and securities dealers.

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Money service businesses

Including foreign exchange traders, bureau de change and money services businesses (with and without agency networks).

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Legal professionals and law firms

Including legal professionals such as lawyers, barristers and small, medium-sized and large law firms.

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Accountants and auditing firms

Including accounting professionals such as accountants, bookkeepers and auditors working in small, medium-sized and large accounting firms.

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Real estate agents and property developers

Including commercial and residential real estate agents, property financiers and property developers working in small, medium-sized and large real estate firms.

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Gambling operators and casinos

Including casinos, hotels, pubs and clubs, racetracks, online gaming and on/off-course bookmakers.

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Precious metals and stones dealers

Including gold, silver and other precious metals and stone dealers.

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Penalties for non-compliance with AML/CTF laws?

The penalties for non-compliance with money laundering and terrorism financing laws in Germany can include the following:

  • Administrative Penalties - the regulatory authorities, such as the Financial Intelligence Unit (FIU) or the Federal Financial Supervisory Authority (BaFin), have the power to impose administrative fines for breaches of AML/CTF requirements. These fines can vary depending on the nature and severity of the violation. The maximum administrative fine that can be imposed is €5 million or up to twice the amount of the economic benefit derived from the offence for legal entities. For individuals, the maximum administrative fine is €100,000.
  • Criminal Offences - individuals or entities convicted of money laundering or terrorism financing offences can face fines imposed by the courts. The fines can be substantial and are typically based on the value of the illicit funds involved in the offence.
  • Imprisonment -convictions for money laundering or terrorism financing offences can result in imprisonment for individuals involved in such activities. The length of imprisonment can vary depending on the offence.
  • Forfeiture of Funds and Assets - Authorities have the power to seize and confiscate funds and assets that are determined to be involved in or derived from money laundering or terrorism financing activities. This includes freezing bank accounts, seizing properties, or confiscating other assets.

In addition to the above penalties, individuals and entities may also face reputational damage, loss of business licences, and other regulatory sanctions for non-compliance with AML/CTF obligations.


Largest fines for non-compliance with AML/CTF laws?

German regulators have shown they are willing to take action for non-compliance with AML/CTF laws and have used their powers extensively, below is an example of some of the largest fines for non-compliance with anti-money laundering laws:

  • Bank of America - In 2022, BaFin imposed an administrative fine of €5,100,000.
  • JP Morgan Chase - In 2021, BaFin imposed an administrative fine of €1,800,000.
  • N26 Bank GmbH - In 2021, BaFin imposed an administrative fine of €4,250,000 on the bank due to the delayed submission of a high number of suspicious transaction reports.  It also ordered them to take measures to restrict growth, ensure the institution has in place a proper business organisation and to mitigate risks to the institution's operational resilience and appointed a special commissioner to monitor the bank.
  • Wirecard - In 2019, BaFin imposed an administrative fine of €1,520,000. In 2021, BaFin filed a criminal case against Directors of Wirecard for insider trading. In 2021, the head of BaFin was forced out due to the Wirecard scandal and in 2022, four civil suits brought by Wirecard investors against BaFin for regulatory oversight failures were dismissed in the courts. In 2023, Wirecard's auditor, EY, was banned from auditing Public Interest companies in Germany and also faced civil cases brought by investors.   This case has been well documented in the book Money Men, by Dan McCrum.
  • Deutsche Bank -  In 2019, Deutsche Bank was fined €15 million by the German Financial Supervisory Authority (BaFin) for deficiencies in its anti-money laundering controls. The fine was imposed due to failures in customer due diligence processes and internal controls.
  • Commerzbank - In 2015, Commerzbank was fined €41 million by BaFin for AML and sanctions violations. The fine was related to shortcomings in customer due diligence, transaction monitoring, and internal controls. It was also fined USD$46m by the FCA and USD$79m by the U.S. Department of Justice (DoJ).
  • DZ Bank -  In 2013, DZ Bank, one of Germany's largest cooperative banks, was fined €7.2 million by BaFin for AML control weaknesses. The fine was imposed for deficiencies in customer due diligence processes and suspicious transaction reporting.

BaFin provides a full list of administrative penalties it has imposed on its website.