The reporting obligation exists regardless of the size of the transaction.
The Money Laundering Act (GwG) serves to combat money laundering, terrorist financing, and tax evasion. Accordingly, the GwG also includes enhanced due diligence and reporting obligations when there is a suspicion of money laundering. If there is a suspicion that money or assets originate from a criminal act, obligated companies must immediately report this suspicion to the Central Office for Financial Transaction Investigations “Financial Intelligence Unit” (FIU) in accordance with § 43 (1) GwG. Failure to report, or late reporting, can result in a fine for those responsible. This is also evidenced by a judgment from the Higher Regional Court of Frankfurt a. M. dated April 10, 2018 (Case No.: 2 Ss-OWi 1059/17).
The obligated companies, which are affected by the enhanced due diligence obligations, include banks and financial service providers, commercial traders of goods, real estate agents, insurers, art brokers, lawyers and notaries, auditors, and tax advisors, as well as organizers of gambling. They are required to file a suspicion of money laundering report, according to lawyer Michael Rainer, a contact for economic criminal law at the commercial law firm MTR Legal Attorneys.
Increase in Suspicious Money Laundering Reports
Originally, money laundering typically involved funds or assets related to serious crimes such as robbery, murder, commercial fraud, handling stolen goods, drug trafficking, or tax evasion. However, after a reform of the GwG in 2021, it is no longer required that the money or asset comes from a serious crime. It is sufficient that a crime has preceded, regardless of the severity of the offense. This and the reporting obligation of banks and other companies led to a significant increase in suspicious money laundering reports.
It is important that the reporting obligation exists regardless of the amount of the transaction. For goods traders, brokers, and art dealers, this applies even below the threshold of 10,000 euros; for precious metal traders and bookmakers, even below the threshold of 2,000 euros. The reporting obligation also exists regardless of whether the payments are made in cash or non-cash.
Transactions must not be executed after submission of the suspicious activity report
According to § 45 GwG, the suspicious activity report to the Central Office for Financial Transaction Investigations must be made electronically in principle. Only in the event of a disruption of electronic data transmission or upon request can the suspicious activity report also be submitted by mail.
After submitting the suspicious activity report, the transaction may not be executed anymore. According to § 46 GwG, it is only permissible again if the Central Office for Financial Transaction Investigations or the public prosecutor’s office has given the green light for the transaction. Also, if the authorities have not prohibited the execution within three working days after the submission of the suspicious report, it may be executed. In addition, the contractual partners or other third parties must not be informed about the report, as this could hinder or complicate the investigation of the matter.
Indicators of Suspicion of Money Laundering
For the obligated companies, it is not always easy to determine whether a suspicious activity report must be made. The following indicators provide guidance. A suspicious activity report to the Central Office for Financial Transaction Investigations should be made if the asset could originate from a criminal act or could have an illegal origin. Another point is if the transaction or the asset could serve or be related to terrorist financing. It is also suspicious if the contracting party does not disclose whether he acts for an economically beneficial owner.
However, no detailed investigations need to be conducted to determine whether a crime according to § 261 Criminal Code (StGB) has occurred. This norm regulates the offense of money laundering. Instead, action should be taken if, based on general experience, an unusual or suspicious behavior of the business partner arises that suggests the suspicion of money laundering or terrorist financing.
The accusation of money laundering should be taken seriously by the suspects. Hearings and searches can be the result. Therefore, it is advisable to consult a lawyer experienced in economic criminal law, as money laundering can result in fines or imprisonment for up to five years, or in severe cases up to ten years.
MTR Legal Attorneys advise on suspicion of money laundering and other questions of economic criminal law.
Please feel free to contact us.
