New German Anti-Money Laundering LawApr 14, 2017
Money laundering and terrorism are the two main areas that are becoming a challenge for German government which is why, on 22nd February 2017, the German Federal Government Cabinet and Terrorism Financing has approved a draft that will combat the issues related to money laundering and terrorism financing. With this draft, the EU-Directive 2015/849 related to money laundering and terrorism financing (4th EU AML-Directive) will be added to the German law. This addition will be done by June 2017. The first legislative hearing will be done at the end of March. However, the draft has got some substantial changes as compared to the one that was published in December 2016. The key elements include in the cabinet are:
High and low-risk factors:
According to the new draft that is presented to the government about 4th EU AML-Directive, the obliged parties should deal with AML and CTF with different techniques. First of all, the obliged party needs to follow the findings that are analyzed by the EU-commission. Moreover, according to the draft, the obliged parties must give proper consideration to the high and low-risk factors that can be gathered through a catalog attached with the draft.
Customer due diligence:
According to the 4th EU AML-Directive, the definition of politically exposed persons (PEP) is extended to include domestic PEPs i.e. the people who have prominent political functions in the country or the ones that are the members of the political parties. The time duration for the PEP risk monitoring is extended to over 12 months after the person no longer has PEP status. He will then continue until the specific risks from PEP continue.
There are certainly obliged finance sectors that should establish a group-wide AML system. The draft also extends this obligation to the other entities and their branches in different countries. If the risks are not properly combated, the company needs to stop their business in other countries.
National register of beneficial owners:
For beneficial owners, the draft has included some electronic register. Every legal person including registered partners or other people with legal arrangements must collect, report and submit to their beneficial owners through these registers. The authorities will have the access to the information of these registers and the parties will be provided with the access only when they need information for the purpose of AML specific customer due diligence (KYC). The early plans for providing the access to information in the registers to the general public that has no legitimate interest in the issues is being canceled. The information is now only accessed by the specified authorities.
The draft extended the number of acts that will be considered as sanctionable offenses. This extension is extended to 70 individual situations with a raise of the fines by max 1 million Euros. It can also be twice the amount of benefits that is gained from the breech. The supervisory authorities have to publish the decisions based on the analysis conducted on the breeches.