Reporting Suspicious Transactions in Germany: Avoiding Consequences
Germany has a crucial obligation to report suspicious transactions as part of its efforts to prevent money laundering and terrorist financing. The German Anti-Money Laundering Act requires obliged entities to report any circumstances that indicate a suspicion of money laundering or terrorist financing.
What is Considered Sufficient Grounds for Reporting?
According to the Fourth Anti-Money-Laundering Directive (4. AMLD), obliged entities must inform the Financial Intelligence Unit (FIU) immediately if they know, suspect, or have reasonable grounds to suspect that funds are the proceeds of criminal activity or are related to terrorist financing.
The German law defines sufficient grounds to indicate a suspicion of money laundering and terrorist financing as any facts that suggest property is derived from a criminal offense or is related to terrorist financing. This includes circumstances such as:
- The contracting party not disclosing its beneficial owner
- Other suspicious transactions or patterns
Consequences of Failing to Report Suspicious Transactions
Failure to report suspicious transactions can result in severe consequences, including:
- Fines: Up to €1 million or 20 times the amount gained through the violation
- Criminal Charges and Imprisonment: Individuals who fail to report suspicious transactions may face criminal charges and imprisonment for up to two years if they are found guilty of gross negligence
The Higher Regional Court (OLG) of Frankfurt a.M. has emphasized the importance of reporting suspicious transactions immediately upon discovery, ruling that sufficient grounds to indicate a suspicion of money laundering or terrorist financing do not need to be as high as those required for criminal proceedings.
The Importance of Voluntary Reporting
It is essential to note that the report must be made voluntarily and does not preclude the possibility of being prosecuted for other offenses. As a result, obliged entities are now more likely to face prosecution for minor offenses such as tax evasion or fraud if they fail to report suspicious transactions.
What Can You Do?
To avoid these consequences, it is essential for obliged entities in Germany to understand their reporting obligations under the German Anti-Money Laundering Act and to report any suspicious transactions immediately upon discovery.