The German parliament (Bundestag) has passed a new version of the money laundering offence, which has far-reaching implications for the fulfillment of obligations under the Money Laundering Act.
On February 11, 2021, the Bundestag passed the Act to Improve Criminal Law Combating Money Laundering. The Act serves to implement Directive (EU) 2018/1673 of the European Parliament and of the Council of 23 October 2018 on combating money laundering through criminal law (also referred to by some as the Sixth Anti-Money Laundering Directive (AMLD6)). Although the Act primarily amends the Criminal Code (Strafgesetzbuch, StGB) and makes only one change to a reference to the StGB in the Money Laundering Act (Geldwäschegesetz, GwG), the Act still has a massive impact on obliged entities under the Money Laundering Act.
In adopting an "all-crimes approach", the focus is now on the abandonment of the enumeration principle for the determination of suitable money laundering predicate offences.
The amendment revolves around Section 261 of the Criminal Code: the money laundering offence. According to this provision, anyone who conceals an object resulting from certain unlawful acts (predicate offence), conceals its origin, or frustrates or endangers the determination of its origin, its location, its confiscation, or the seizure of such an object, was liable to prosecution. The predicate offences were all felonies (i.e., offenses punishable by a minimum term of imprisonment of one year or more) and some misdemeanors (i.e., offenses punishable by a minimum term of imprisonment of less than one year or a fine), such as theft, embezzlement, extortion, fraud, pimping, forgery, bribery, and other offenses.
The money laundering offence has now been reformulated - via the entry into force of the amended Act: a person who conceals, exchanges or transfers the proceeds of a crime, the product of a crime or any other property that has replaced it, with the intention of preventing its discovery, confiscation or determination of its origin, or who procures or keeps it for themself or a third party, or uses it for themself or a third party, if they knew its origin at the time they obtained it, shall be liable to prosecution. It is now irrelevant from which criminal act the proceeds of the crime, the product of the crime or the other asset that has taken its place originates. The concept of "other asset" is very broad and includes assets of all kinds, regardless of whether they are corporeal or incorporeal, movable or immovable, tangible or intangible.
In addition, it also includes legal titles or deeds in any form (including electronic or digital) evidencing title or rights to such assets. There will no longer be a restriction to certain predicate offenses as under the previous legal situation. All felonies and misdemeanors are thus suitable predicate offenses for money laundering.
The changes may be understandable and desirable from a criminal/criminal law perspective. However, it leads to complications in the fulfillment of obligations under money laundering law.
The Money Laundering Act imposes special (due diligence) obligations on various so-called obliged entities in their business activities. The list of obliged entities under money laundering law is long, and the focus is often on the financial sector. This includes: credit institutions, financial services institutions, payment institutions and e-money institutions.
In addition, there is the very broad and non- specific term "financial company", which covers financial investment intermediaries as well as companies whose main activity consists of acquiring, holding or selling investments. The list of obligated parties also includes: real estate agents, dealers in goods, art brokers and art warehouse keepers, (insofar as the warehousing takes place in duty-free zones).
These obliged entities are now subject to various obligations when it comes to money laundering, for example, an obliged entity must file a report with the Central Financial Transaction Investigation Unit (FIU) if evidence exists that indicate that an asset related to a business relationship originates from a criminal act that could constitute a predicate offense to money laundering. Since all criminal acts (felonies and misdemeanors) can now be predicate offenses to money laundering, the reporting obligation has now been significantly expanded. The obligation to report exists irrespective of the value of the asset (i.e. in the case of low-value items where the offense is prosecuted only upon request).
In practice, the consequences will not be limited to criminal prosecution. Obliged entities will have to adapt their internal security measures to better detect even minor offenses - the explanatory memorandum to the bill assumes that the amendment will not result in any compliance costs for the business community.
This is primarily justified by the fact that the compliance costs arise from the unadjusted reporting requirements of the Money Laundering Act, but these are not part of the compliance costs of the amendment. In addition, the explanatory memorandum does not see any increased compliance costs, as the obliged entities do not have to check whether there is an initial suspicion under criminal law. It would only be a question of whether there were actual indications that the asset originated from a predicate offence (now all criminal offences).
However, we will assume that the compliance burden for business will increase and not only will the money laundering guidelines of the obliged entities have to be adapted, the amendment is also likely to result in significantly more reports, which will therefore also lead to further expense. It remains to be seen whether the Central Financial Transaction Investigation Unit (FIU) is prepared for this.