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Financial Institutions Face Scrutiny Over Organisational Duties
A number of German financial institutions are facing criticism for violating their organisational duties, including the duty to implement risk-management processes and procedures. The failures have led to penalties and fines from regulatory authorities.
Under German law, administrative offences can be punished with fines or even imprisonment. However, the process for assessing and collecting sanctions is complex and involves several stages. Initially, a public authority will issue a notice specifying the sanction, which can then be challenged in court. If the challenge is admissible, court proceedings will commence, and the court will decide on the lawfulness of the notice.
Anti-Money Laundering Requirements for Financial Institutions
Germany’s anti-money laundering requirements apply to a wide range of financial institutions and non-financial businesses and professions, including:
- Credit institutions
- Insurance companies
- Lawyers
- Notaries
- Auditors
The requirements are designed to prevent the use of financial systems for illegal activities such as money laundering and terrorist financing.
Recordkeeping and Reporting Requirements
Financial institutions are required to maintain records of large currency transactions, including:
- Cash transactions that exceed €1,000
- All other transactions that exceed €15,000
They must also file reports with the Federal Bank of Germany (Bundesbank) if they receive or make payments exceeding €12,500 from a non-German resident.
In addition to these requirements, financial institutions are required to report suspicious activity to the authorities. This includes reporting any transactions that appear to be linked to money laundering or terrorist financing.
Consequences for Non-Compliance
Financial institutions that fail to comply with anti-money laundering and recordkeeping requirements can face serious consequences, including:
- Fines and penalties
- Criminal charges
- Imprisonment
The recent enforcement actions against German financial institutions demonstrate the importance of complying with these requirements. Financial institutions must ensure that they have adequate procedures in place to prevent money laundering and terrorist financing, and that they report suspicious activity promptly to the authorities.
Conclusion
The recent scrutiny of German financial institutions highlights the importance of compliance with anti-money laundering and recordkeeping requirements. Financial institutions must ensure that they have adequate procedures in place to prevent money laundering and terrorist financing, and that they report suspicious activity promptly to the authorities. Failure to comply with these requirements can result in serious consequences, including fines and penalties.