Financial Crime World

Anti-Money Laundering (AML) Compliance in Germany

As a business operating in Germany, it is essential to understand and comply with anti-money laundering (AML) regulations. The following guide outlines the key aspects of AML compliance in Germany, including suspicious transaction reporting, reporting requirements for financial institutions, recording and retention requirements, penalties for non-compliance, and useful resources.

Suspicious Transaction Reporting (STR)

Importance of STR

Reporting suspicious activities or transactions is a critical aspect of AML compliance. Businesses are required to submit Suspicious Transaction Reports (STRs) electronically through the “goAML” system.

  • Indicating Suspicious Activity: Businesses must indicate that they have detected something suspicious and explain why they think it is abnormal.
  • Electronic Submission: STRs must be submitted electronically through the “goAML” system.

Reporting Requirements for Financial Institutions

Mandatory Reports

Financial institutions are required to submit various reports to BaFin, including:

  • Annual Reports: An annual report outlining their AML compliance efforts and results.
  • External Audit Reports: An external audit report that verifies the accuracy of financial statements and AML compliance.
  • Balance Sheets: A balance sheet that provides a snapshot of the institution’s assets, liabilities, and equity.
  • Major Changes Reports: A report outlining any significant changes to the institution’s operations or management.
  • Exposures and Loans Over €1 Million: A report detailing all exposures and loans exceeding €1 million.

Additional Reporting Requirements

Some entities, such as investment service companies, must report all on-exchange and off-exchange dealings in financial instruments.

Recording and Retention Requirements

Businesses are required to record and store data for at least five years but no longer than ten years. This includes:

  • Due Diligence Checks: Information collected through due diligence checks.
  • STRs: Suspicious transaction reports submitted to BaFin’s Financial Intelligence Unit (FIU).
  • Reports: Various reports submitted to BaFin, including annual and external audit reports.
  • Virtual IBANs: Virtual IBANs that credit institutions issue to payment service providers.

Penalties for Non-Compliance

Failing to comply with BaFin’s AML requirements can result in:

  • Fines: Administrative fines ranging from €1 million (or twice the economic benefit derived from the breach) up to €5 million.
  • License Termination: Revocation of licenses or permits.
  • Seizure of Assets: Seizure of assets and property.
  • Criminal Liability: Criminal prosecution for non-compliance.

Useful Resources

For further information and insights into AML compliance requirements, consult the following resources:

  • BaFin’s Official Website: The official website of the German Federal Financial Supervisory Authority (BaFin).
  • Interpretation and Application Guidance: BaFin’s guidance on interpreting and applying AML regulations.
  • FATF Recommendations on AML/CFT: The Financial Action Task Force (FATF) recommendations on anti-money laundering and combating the financing of terrorism.