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German Banks and Financial Institutions Face New Anti-Money Laundering Requirements
Berlin, Germany - In a move to crack down on money laundering and terrorist financing, German banks and financial institutions are now subject to new anti-money laundering (AML) requirements. Effective January 1, 2020, crypto custody business has been anchored as a new financial service in the KWG, requiring all financial service providers offering this service to adhere to AML regulations.
New Requirements for Crypto Custody Business
According to the new rules, obligated parties must implement procedures that ensure due diligence, reporting, and recordkeeping obligations are met. These procedures must include:
- An efficient risk-management system
- Regular monitoring
- The filing of Suspicious Activity Reports (SARs)
Reporting Requirements for Large Currency Transactions
German financial institutions must retain records regarding large and complex transactions as part of their customer due diligence obligation. These records must demonstrate that the obligation was complied with, regardless of the client’s risk qualification.
In addition, there are reporting requirements for large currency transactions exceeding:
- EUR 15,000 or more (electronic filing to the Federal Bank of Germany within a certain deadline)
Cross-Border Transactions Reporting Requirements
For cross-border transactions, German financial institutions are required to report payments exceeding:
- EUR 12,500 (electronic filing to the Bundesbank within a certain deadline)
The Federal Bank may issue exemptions to these obligations on a case-by-case basis. Payments received or made for exported or imported goods, payments and repayments of loans and deposits with an original maturity of up to 12 months, and payments made by financial institutions within long-term credit transactions are exempt from this requirement.
Thresholds and Exceptions
In Germany, the thresholds for reporting large currency transactions vary depending on the type of business or activity. For example:
- Gambling companies must report cash transactions exceeding EUR 2,000
- Insurance agents must report cash transactions exceeding EUR 15,000 within a year
The reporting obligation does not specify the value of a transaction as a triggering factor. Instead, it refers to circumstances that appear suspicious.
Conclusion
The new AML requirements in Germany aim to prevent money laundering and terrorist financing by requiring financial institutions to implement robust procedures for due diligence, reporting, and recordkeeping. The extension of these requirements to NFTs and cross-border transactions demonstrates the country’s commitment to combating financial crime.
In this article, we have outlined the new AML requirements in Germany, including:
- Types of cryptocurrency-related businesses and activities subject to those requirements
- Reporting requirements for large currency transactions
- Cross-border transactions reporting requirements
- Thresholds and exceptions that apply in each case
By understanding these regulations, financial institutions can ensure compliance with AML requirements and protect themselves against the risks of money laundering and terrorist financing.