Germany Cracks Down on Money Laundering: Thousands of Companies Brace for New Obligations

Since the implementation of the revised Money Laundering Act (AMLA) in 2017 following the 4th EU Money Laundering Directive, Germany has been focusing on money laundering prevention with heightened scrutiny on goods traders and other obliged entities.

Obligations under AMLA for Goods Traders

Even though they are exempt from reporting cash transactions worth €10,000 or more, traders in goods are not entirely exempt from the AMLA’s requirements. They are considered obliged parties under the AMLA and must adhere to exemption regulations.

Shift Towards a Risk-based Approach

As the focus of money laundering prevention shifts towards a risk-based approach, obliged entities must establish a robust money laundering risk management system to identify, assess, and manage risks.

Components of a Money Laundering Risk Management System

1. Thorough Risk Analysis: Documented, updated regularly, and available to regulatory authorities.
2. Internal Security Measures: Consistent across the company or group.

Risk-based Responsibilities for Goods Traders (January 2020)

With the entry into force of the 5th EU Money Laundering Directive, goods traders and real estate agents have faced more stringent responsibilities for money laundering-related risk management.

Other Financial Risks: Sanctions and Embargoes

Money laundering is not the only financial crime of concern. Sanctions and embargoes are also closely linked to these criminal activities. Companies with an international market for purchasing and/or selling goods face significant legal risks if they fail to correctly apply and comply with these regulations.

Penalties for Noncompliance

potential penalties for noncompliance include:

1. Significant fines - up to €1 million or twice the economic benefit derived from the violation.
2. Reputational damage.

Effective Governance Systems

Given the constantly changing nature of global politics and the corresponding regulations, effective governance systems are essential for managing and monitoring these financial risks.

• Develop and implement policies, procedures, and controls for managing risks, KYC obligations, employee training, whistleblowing, record keeping, and security measures.
• Ensure internal security measures are consistent across the company (or group).
• Stay informed about changing regulations and global politics.