Financial Crime World

Implementing Article 15 of the 4th Anti-Money Laundering Directive (AMLD) in Germany: A Guide to Simplified Due Diligence

Introduction

The 4th Anti-Money Laundering Directive (AMLD) introduced the concept of Simplified Due Diligence (SDD), which allows obliged entities to apply reduced due diligence measures in lower-risk situations. In this article, we will discuss the implementation of Article 15 of the 4th AMLD in Germany and provide guidance on how to apply SDD in practice.

Key Concepts

Risk-Based Approach

A risk-based approach is a method of applying regulations based on the risk assessment of individual situations. In the context of SDD, this means that obliged entities must conduct a prior risk assessment to determine whether certain areas present a low risk of money laundering or terrorist financing.

Simplified Due Diligence (SDD)

SDD is a reduced set of due diligence measures that can be applied in lower-risk situations. It does not exempt entities from fulfilling customer due diligence (CDD) obligations, but the extent of these obligations can be reduced appropriately in lower-risk situations.

Customer Due Diligence (CDD)

Obliged entities must still fulfill CDD obligations, but the extent can be reduced appropriately in lower-risk situations. CDD involves verifying the identity of customers and assessing their risk profile.

Implementing SDD in Germany

In Germany, the implementation of SDD is governed by the German Anti-Money Laundering Act (GwG) and the BaFin-Interpretation and Application Guidance on the German Money Laundering Act. Here are some key points to consider:

Documentation Requirement

A prior risk assessment must be documented in writing, and the adequacy of the SDD measures applied must be demonstrable.

Flexibility in Application

The application of SDD is not limited to specific cases; obliged entities can apply it based on their own risk assessment.

Alternative Methods for Identity Verification

Identity verification under SDD can be conducted using different types of documents, data, or information from credible and independent sources.

References

  • Directive (EU) 2015/849: The 4th AMLD, which introduced the concept of SDD.
  • Directive (EU) 2018/843: The 5th AMLD, which updated the AML/CFT framework and clarified the application of SDD.
  • German Anti-Money Laundering Act (GwG): The German law implementing the EU AML/CFT framework.
  • BaFin-Interpretation and Application Guidance on the German Money Laundering Act: A guidance document provided by BaFin, which clarifies how to apply SDD in Germany.