Financial Crime World

Germany’s Financial Sector Under Scrutiny: Compliance with Anti-Money Laundering Regulations

As part of its efforts to prevent money laundering and terrorist financing, Germany’s financial regulator, BaFin, has been working closely with institutions in the financial sector to ensure compliance with anti-money laundering regulations. According to experts, all companies in the financial sector are expected to have formal business policies in place to prevent transactions with a criminal background and detect suspicious activities.

Preventing Money Laundering and Terrorist Financing

BaFin’s primary goal is to prevent the misuse of the financial system for money laundering, terrorist financing, and other criminal offenses, which can threaten the integrity and stability of the entire financial market. The regulator has bundled its responsibilities related to these tasks under the Department for the Prevention of Money Laundering, which conducts supervision of all institutions, companies, and persons subject to anti-money laundering regulations.

Implementing Statutory Obligations

To achieve this goal, BaFin ensures that companies under its supervision implement statutory obligations adopted for preventing money laundering and terrorist financing. These obligations are derived from various laws, including:

  • Money Laundering Act
  • Banking Act
  • Insurance Supervision Act
  • Payment Services Supervision Act
  • Investment Code

Ensuring Transparency in Business Relationships and Financial Transactions

The main aim is to ensure transparency in business relationships and financial transactions by using specific precautions on a risk-oriented basis. Obliged parties must have a risk management system that includes:

  • Risk analysis
  • Internal risk measures
  • Customer due diligence duties

They are also required to identify the customer, any person acting on their behalf, and any beneficial owner or beneficiary.

Monitoring Transactions and Updating Relevant Documents

In addition, obliged parties must:

  • Obtain and evaluate information on the purpose and type of business relationship
  • Continuously monitor transactions processed
  • Ensure that relevant documents, data, or information are updated within an appropriate timeframe taking into account the relevant risk

Simplified and Enhanced Due Diligence Measures

Obliged parties can apply simplified due diligence measures if they determine that there is only a low risk of money laundering or terrorist financing in certain areas. However, they may be required to comply with enhanced due diligence measures if they determine that there is a higher risk of such activities.

International Cooperation and Representation

BaFin’s Department for the Prevention of Money Laundering is also responsible for:

  • Automated account information access
  • Representing the regulator in various international and European bodies, including:
    • Financial Action Task Force on Money Laundering
    • Sub-Committee on Anti-Money Laundering