What is the Money Laundering Act?
The Money Laundering Act, generally abbreviated as AMLD ist (Anti Money Laundering Directive), regulates how financial flows are controlled. At the same time, this legislation makes money laundering a criminal offence. The legislator wants to prevent the introduction of illegally obtained money and other illegally acquired assets into the legal economic cycle. The term "money laundering" probably dates back to the time when the mafia boss Al Capone founded laundries in the USA to "launder" money from illegal transactions.
What is meant by money laundering?
Money laundering is the conversion of money of illegal origin, especially from robbery, extortion, drug, arms and women trafficking, into officially registered means of payment. Money laundering thus conceals the origin of money in order to make it impossible for the authorities to trace how the money came into circulation.
When did the Money Laundering Act come into force?
The basis for the Money Laundering Act in force today was provided by the "Act to Combat Illegal Drug Trafficking and Other Forms of Organised Crime (OrgKG)" of 1992. Since then, money laundering has been a criminal offence. Since 1992 the law has been amended several times and new versions have been adopted.
In the European Union, a separate directive to combat money laundering was first issued in 1991. Six years later, the European Council finally adopted common measures to combat and investigate money laundering. These include, for example, the freezing or confiscation of current accounts used to legalise funds from criminal transactions.
To ensure the effectiveness of the fight against money laundering and terrorist financing and to close any loopholes, the EU Money Laundering Directive has been revised several times:
1991: 1st EU Money Laundering Directive
2001: 2nd EU Money Laundering Directive
2005: 3rd EU Money Laundering Directive
2015: 4th EU Money Laundering Directive
2018: 5th EU Money Laundering Directive
Among other things, the 4th EU Money Laundering Directive introduced the central transparency register, which contains personal information on natural persons who are behind a company and who are its beneficial owners. The transparency obligations affect almost all companies in Germany. The obligated parties include, for example:
Financial services institutions
Since the adoption of the 5th and 6th EU Money Laundering Directive in 2018, even stricter rules have been in place. Under the directive, obligated parties must examine each individual transaction or individual business relationship for possible money laundering or terrorist financing. This individual examination is intended to prevent controls from being automated and therefore inaccurate. The risk analysis must therefore be even more precise than before for all operational measures.
What is regulated by the Money Laundering Act?
The Money Laundering Act regulates the personal responsibility of companies and the financial industry through monitoring and reporting obligations. All obligated parties must set up a risk management system and, if necessary, register in the so-called transparency register. In addition, there are certain due diligence obligations that must be fulfilled. These due diligence obligations include, for example, the secure identification of a contractual partner or customer. If the contractual partner acts on behalf of another, the obligation also applies to the beneficial owner on whose initiative the transaction is carried out. In addition, information must be obtained about the purpose of the business relationship and whether the contracting parties are politically exposed persons. Even during the business relationship, obligated companies must always monitor all transactions in order to comply with the due diligence obligations.
The role of the transparency register under the Money Laundering Act
Companies and their respective beneficial owners are entered in the transparency register. This prevents nested company structures from concealing who the beneficial owner is within the meaning of the Money Laundering Act. If the company is already listed in the Commercial Register or a public, electronically accessible register and the beneficial owner is named there, the obligation to report to the Transparency Register does not apply.
Who has a reporting obligation under the Money Laundering Act?
The Money Laundering Act is intended to ensure greater transparency in financial transactions. In addition to the duties of due diligence mentioned above, there is also a so-called duty to report, for example for cash expenses. The duties of banks, insurance companies, notaries and auditors include reporting any anomalies to their customers. There are different obligations under the MLA:
Lawyers: They are appointed, for example, for legal transactions in which funds are transferred between persons or companies. If large sums of cash flow without reliable data on the origin of the funds, this would be an anomaly that must be reported.
Notaries: Like lawyers, they authenticate and legalise transactions and the ownership of real estate through their signature. If real estate is paid for in cash, the origin of the money must be clarified. This also applies to the authentication of foundations or the establishment of companies.
Car dealers: Especially in the luxury segment, it is common for criminals to pay cash for expensive vehicles. Such expenses are conspicuous under the Money Laundering Act, and the car dealer must fulfil his obligations and report them.
Jewellers: The investment of money in jewellery is also frequently used by money launderers. Jewellers are therefore obliged to report large cash purchases.
Banks: The central offices when it comes to money laundering and terrorist financing. Cash deposits of 10,000 euros or more are subject to special conditions and must be reported.
Insurance companies: High or conspicuous cash deposits, for example in life insurance policies, must also be reported by insurers.
Real estate brokers: Similar to notaries, real estate brokers also have a control function for conspicuous cash transactions when buying real estate.
Casinos: In casinos cash can be exchanged for chips. It is also possible to exchange it back, which brings the illegal money into legal circulation. Therefore, casinos are also subject to the obligations of the MLA.
What must be reported under the Money Laundering Act?
In principle, every trader has a duty of care. If he accepts cash amounts of more than EUR 10,000, the customer must identify himself with his identity card. If several individual amounts of cash together amount to more than EUR 10,000, a check and possible report is also required. Conspicuous features that could indicate money laundering are
a large number of different bank accounts
above average cash deposits on accounts
the transport of large amounts of money
the storage of large amounts of cash
the acceptance of poor conditions for the investment of money
In principle, there is always a conflict between the Money Laundering Act and data protection. Personal data may therefore only be used by the obligated parties under the MLA to prevent money laundering and the financing of terrorism. This purpose is regulated in Article 5 of the Basic Data Protection Regulation.