Germany Introduces Stricter Anti-Money Laundering Regulations

In a move to combat money laundering and terrorist financing, Germany has introduced stricter regulations on large transactions. Effective January 1, 2020, crypto custody businesses are now explicitly regulated by law, and anti-money laundering requirements apply to all financial service providers offering such services.

Crypto Transactions Worth EUR 1,000 or More

• Crypto-related businesses and activities, including transfers of cryptocurrency assets worth at least EUR 1,000, are subject to anti-money laundering requirements.
• Crypto custody businesses must implement efficient risk-management systems to ensure due diligence, reporting, and recordkeeping obligations are met.

Non-Fungible Tokens (NFTs) Under Scrutiny

• Germany’s definition of crypto assets under the KWG includes NFTs, which can be considered as such if their primary purpose is for investment.
• As a result, money laundering regulations may apply to NFT transactions in Germany.

Compliance Programs Required

• All obliged entities must implement procedures that include:
  • An efficient risk-management system
  • Regular monitoring
  • Reporting of suspicious activities (SARs)
  • Due diligence, reporting, and recordkeeping obligations

Large Currency Transactions: Reporting Requirements

• For large currency transactions exceeding EUR 1,000 or more for cash transactions, or EUR 15,000 for all other transactions, general due diligence obligations are triggered.
• However, the reporting obligation under Section 43 GWG is triggered by suspicious circumstances rather than transaction value.

Recordkeeping and Reporting Thresholds

• Financial institutions must retain records of large and complex transactions as part of their customer due diligence obligations, regardless of client risk qualification.
• The threshold for reporting large cash transactions varies depending on the type of business or activity.

Cross-Border Transactions: Reporting Requirements

• For cross-border transactions exceeding EUR 12,500, German residents, including companies, must report payments to the Federal Bank of Germany (Bundesbank) electronically.
• Exemptions may be granted by the Bundesbank on a case-by-case basis.

These new regulations aim to strengthen Germany’s anti-money laundering framework and prevent illicit financial activities. Financial institutions and businesses operating in Germany are advised to comply with these requirements to avoid penalties and reputational damage.