Financial Crime World

German Authorities Clamp Down on Cryptocurrency and Cash Transactions

New Regulations for Curbing Money Laundering and Terrorist Financing

In an effort to combat money laundering and terrorist financing, German authorities have introduced new regulations for cryptocurrency-related businesses and cash transactions exceeding EUR 10,000. As of January 1, 2020, crypto custody businesses are now subject to anti-money laundering (AML) requirements under the German Banking Act (KWG).

AML Requirements for Crypto Custody Businesses

  • Crypto assets with an equivalent value of at least EUR 1,000 or more are considered subject to AML regulations
  • Obligated parties must implement procedures that ensure due diligence, reporting, and recordkeeping obligations are met
  • Maintaining an efficient risk-management system and filing Suspicious Activity Reports (SARs) as necessary

Classification of Non-Fungible Tokens (NFTs)

  • NFTs can be classified as crypto assets, making them subject to AML regulations
  • Primary purpose of acquiring NFTs is to increase their value upon resale on a cryptocurrency platform or peer-to-peer via a blockchain

Cash Transactions Thresholds

  • EUR 1,000 for triggering general due diligence obligations
  • EUR 10,000 or more for companies commercially trading goods
  • No routine reporting requirements for transactions other than large cash transactions

Reporting Obligations for Large and Complex Transactions

  • Financial institutions must retain records regarding large and complex transactions as part of their customer due diligence obligations
  • Cross-border transactions are subject to reporting obligations under the Foreign Trade and Payments Act (AWG) in conjunction with the Foreign Trade and Payments Ordinance (AWV)

Electronic Reporting Requirements

  • Payments exceeding EUR 12,500 must be reported electronically to the Federal Bank of Germany (Bundesbank), subject to certain deadlines
  • The Federal Bank may issue exemptions on a case-by-case basis

Summary

German authorities have introduced new regulations for cryptocurrency-related businesses and cash transactions exceeding EUR 10,000 in an effort to curb money laundering and terrorist financing. These regulations apply to obligated parties, including crypto custody businesses and companies commercially trading goods, as well as financial institutions and individuals engaging in cross-border transactions.