Definition and Legal Framework of the Term “Specially Obligated Parties”
The term “Specially Obligated Parties” refers under German law to natural or legal persons who, on the basis of specific statutory provisions, are required to fulfil special due diligence, reporting, as well as conduct or reporting obligations. Specially Obligated Parties play a central role, particularly in the area of anti-money laundering, data protection, compliance requirements, as well as in connection with the transparency register and certain supervisory authorities.
Statutory Foundations
The legal requirements for Specially Obligated Parties are codified primarily in the Money Laundering Act (GwG), as well as in other special laws such as the Banking Act (KWG), Insurance Supervision Act (VAG), Securities Trading Act (WpHG), Federal Data Protection Act (BDSG), and the Transparency Register Act (TraFinG Gw). The respective regulations specify who qualifies as a Specially Obligated Party, which due diligence obligations need to be observed, and what legal consequences may arise in the event of violations.
Specially Obligated Parties under the Money Laundering Act (GwG)
Definition and Scope of Application
In the context of the Money Laundering Act, those persons and companies are designated as Specially Obligated Parties who, due to their business activities, face increased risks relating to money laundering or terrorist financing. Section 2 of the GwG lists these obligated parties in detail. These include in particular:
- Credit institutions and financial services institutions
- Insurance companies
- Legal professions (Notaries, Rechtsanwälte, auditors, tax advisors)
- Real estate agents and administrators
- Dealers in goods above certain thresholds for cash payments
- Gambling operators
Due Diligence Obligations under the GwG
Specially Obligated Parties under the GwG are required in particular to fulfil the following obligations:
General due diligence obligations (Sections 10 et seq. GwG)
- Identification of the contracting party and, if applicable, the person acting on behalf of them
- Clarification and verification of the beneficial owner
- Collection and assessment of the business relationship and transactions with regard to money laundering risks
- Documentation and record-keeping obligations for all relevant documents
- Implementation of a risk-based management system to prevent money laundering and terrorist financing
Enhanced due diligence obligations (Section 15 GwG)
- Application of increased measures in the event of heightened risk, particularly in the case of politically exposed persons or the occurrence of unusual transactions
Reporting obligations (Section 43 GwG)
- Immediate reporting of suspicious cases to the Financial Intelligence Unit (FIU)
Internal Safeguarding Measures (Section 6 GwG)
- Appointment of a money laundering officer
- Staff training
- Introduction of internal control mechanisms and monitoring of compliance with legal obligations
Sanctions and Supervisory Measures
Regulations on Fines
Violations of the obligations as a Specially Obligated Party entail significant consequences. Sections 56 et seq. of the GwG provide for extensive administrative offences. The amount of the fines may, depending on the income or turnover of the obligated person, reach into the millions or even billions.
Supervision and Monitoring
Compliance with the obligations is monitored by the competent supervisory authorities such as the Federal Financial Supervisory Authority (BaFin), the chambers of commerce and industry, as well as other specialized authorities. These authorities are authorized to ensure the proper enforcement of obligations through audits, inspections or orders.
Specially Obligated Parties in the Context of Data Protection and Transparency
Data Protection Due Diligence Requirements
In data protection law, particularly under the General Data Protection Regulation (GDPR) and the Federal Data Protection Act (BDSG), “controllers” and “processors” are, for example, defined as specially obligated parties. These are required to implement technical and organizational measures to ensure the protection of personal data.
Registration Obligations in the Transparency Register
The law implementing the Fourth EU Anti-Money Laundering Directive obliges Specially Obligated Parties such as legal entities and registered partnerships to notify and continually update information on the actual beneficial owners in the transparency register. This measure increases transparency within corporate structures and serves to combat money laundering and terrorist financing.
Other Areas of Application for Specially Obligated Parties
Financial Services Supervision
Institutions under the Banking Act, i.e., banks and financial service providers, are among the classic Specially Obligated Parties. They are subject to more extensive auditing, reporting, and documentation obligations within the framework of financial supervision.
Real Estate Sector
In addition to the above-mentioned regulations, particularly in the real estate sector strict requirements apply. Real estate agents and property managers must, before and during the business relationship, verify the origin of assets, carry out risk assessments, and independently report any suspicious activity.
Comparable National and European Regulations
Similar obligations also arise from European directives, especially the EU Anti-Money Laundering Directive. These must regularly be transposed into national law and create a Europe-wide framework for the circle of Specially Obligated Parties.
Practical Implications and Summary
The status as a Specially Obligated Party under German law is accompanied by comprehensive legal due diligence, reporting, and organizational responsibilities. The affected groups and companies must keep themselves continuously informed about statutory amendments and adapt their internal processes accordingly to minimise liability and fine risks. The role of Specially Obligated Parties is fundamental in the fight against economic crime, money laundering, terrorist financing, in promoting transparency in economic life, as well as in providing comprehensive protection of personal data.
Literature and Legal Sources
- Money Laundering Act (GwG)
- Banking Act (KWG)
- General Data Protection Regulation (GDPR)
- Federal Data Protection Act (BDSG)
- Transparency Register and Financial Information Act (TraFinG)
- EU Directives on Anti-Money Laundering
Sound knowledge and implementation of the obligations for Specially Obligated Parties are central prerequisites for compliant business operations in numerous sectors of the economy.
Frequently Asked Questions
What legal reporting obligations exist for Specially Obligated Parties under the Money Laundering Act?
Specially Obligated Parties are subject to various reporting obligations under the Money Laundering Act (GwG). This primarily includes the obligation to promptly report any suspicion of money laundering or terrorist financing to the Financial Intelligence Unit (FIU). The reporting obligation applies regardless of the amount involved and covers both completed and attempted transactions. Failure to submit a suspicious activity report constitutes an administrative offence and can result in significant fines. In addition, the GwG also obliges Specially Obligated Parties to report discrepancies in the transparency register and to submit certain information when communicating with other obligated parties, for example, regarding the identity of the beneficial owner.
What due diligence obligations do Specially Obligated Parties have in their business activities?
Specially Obligated Parties must comply with extensive due diligence obligations as part of their business activities. These include identifying and verifying the identity of the contracting party and, if applicable, the person acting on their behalf, as well as the beneficial owner. This includes obtaining and reviewing the relevant documents and data – such as identification papers, commercial register extracts, or transparent ownership structures. Ongoing monitoring of the business relationship is also required, including risk-based checks and the observation and analysis of transactions for any anomalies. Should new risks arise or changes in the relationship occur, the due diligence requirements must be reapplied on an ad hoc basis.
What documentation requirements must Specially Obligated Parties observe?
Within the framework of anti-money laundering regulations, Specially Obligated Parties are required to comprehensively document all information and documents collected as part of their due diligence and monitoring obligations and retain them for a period of at least five years. These records must withstand review by the competent supervisory authorities at any time. The documentation particularly includes proof of identity, beneficial owner declarations, correspondence regarding suspicious transactions, risk analyses carried out, and measures for risk management. Internal policies, staff training records, and, where applicable, audit results must also be fully documented.
What sanctions are threatened for breaches of anti-money laundering obligations?
Violations of obligations under the Money Laundering Act are subject to sometimes significant sanctions. These range from warnings and fines to multi-year prison sentences, particularly where reporting and due diligence obligations are breached intentionally or repeatedly or where there is participation in money laundering offences. The administrative authorities, in particular BaFin or the competent state supervisory authorities, may also order the publication of sanctions (“naming and shaming”). Company directors may also be held personally liable. In addition to criminal and administrative offences, professional sanctions such as revocation of licence or expulsion from professional associations may also apply.
To what extent do sector-specific requirements apply to Specially Obligated Parties?
Sector-specific legal requirements exist for Specially Obligated Parties, depending on the sector, which go beyond the general obligations of the GwG. Banks and financial service providers are regularly subject to stricter requirements, for example, in transaction monitoring or in the context of international business relationships. Real estate agents, for instance, must record and report specific minimum data when conducting property transactions. Notaries and Rechtsanwälte, on the other hand, have a special status regarding the duty of client confidentiality, which is why they may be subject to specifically designed reporting obligations and exemptions. However, a risk-based approach must always be pursued across all sectors, with an analysis and appropriate consideration of the specific risk situation.
How is the protection of personal data to be ensured when fulfilling anti-money laundering obligations?
Specially Obligated Parties are legally required, when handling personal data – for example, in the context of identification or reporting – to comply with the provisions of the General Data Protection Regulation (GDPR) as well as special data protection laws. Processing is only permitted to fulfil anti-money laundering obligations. The data must be protected against unauthorised access and may only be stored for as long as provided for under the GwG. After the statutory retention period expires, the data must be deleted or anonymised in accordance with data protection law. Violations of data protection are sanctioned not only under anti-money laundering law, but also under data protection law.
