Financial Crime World

Germany Tightens Grip on Compliance with Anti-Money Laundering Regulations

BERLIN - In a bid to strengthen its financial system and prevent money laundering, Germany has introduced stricter anti-money laundering (AML) regulations for financial institutions operating in the country. The measures come as the European Union steps up efforts to combat financial crime across the continent.

Implementation of AML/CFT Recommendations

The Federal Financial Supervisory Authority (BaFin), Germany’s financial regulator, has been working closely with the government to implement AML/CFT recommendations issued by the Financial Action Task Force (FATF). As a member of both the EU and FATF, Germany is required to transpose these recommendations into domestic legislation.

Key Changes

  • Financial institutions in Germany are mandated to develop and implement risk-based AML/CFT programs.
  • Customer due diligence (CDD) processes must be implemented, including screening customer transactions for suspicious activity.
  • Reporting of such activity to Germany’s Financial Intelligence Unit (FIU) is now required.

Extension of Criminal Liability

The regulations also extend criminal liability for money laundering to legal persons, including companies and partnerships, as well as their senior management employees. Minimum four-year prison sentences have been introduced for individuals convicted of money laundering.

Strengthened AML Measures

  • The Banking Act has been updated to introduce more stringent AML/CFT measures than required by the Sixth Anti-Money Laundering Directive (6AMLD).
  • The definition of money laundering has been broadened to include aiding and abetting.
  • Businesses are now required to justify their business procedures to the FIU.

Compliance Requirements

To achieve compliance with these regulations, financial institutions in Germany must:

Implement Suitable KYC Procedures

  • Identity verification
  • Transaction screening
  • Sanctions screening

Additional Components

  • Environmental, social, and governance (ESG) factors
  • Adverse media monitoring

Support for Businesses

In a move to support businesses in meeting these requirements, the country has introduced:

Guidance on Sustainability Risks

  • Legislation requiring firms to extend humanitarian and environmental due diligence obligations to their supply chains.

Next-Generation AML Technology

To stay ahead of these regulations, financial institutions in Germany are advised to integrate next-generation AML technology that can analyze vast amounts of customer data and minimize false positives.