Last updated: 06/07/2010
CENTRAL AUTHORITY FOR REPORTING
The fight against money laundering and the adherence to the Money Laundering Act is the responsibility, primarily, of the Federal Department of the Interior.
Other competent authorities are the Federal Department of Justice, the Federal Ministry for Finance, the Financial Supervisory Authority or the Bundesanstalt für Finanzdienstleistungsaufsicht and the police forces of the federal states (specifically the “money laundering clearing houses” and other financial investigation units) and the customs authorities (criminal investigation departments).
Also, section 5 of the amended Money Laundering Act (GwG), a Financial Intelligence Unit (FIU) has been established together with the Federal Criminal Police Office (Bundeskriminalamt).
ANTI-MONEY LAUNDERING REGULATOR(S)
The Bundeskriminalamt - the Financial Intelligence Unit - is responsible for enforcing anti-money laundering rules.
The Bundesrechtsanwaltskammer has been nominated as the body to which reports on possible money laundering cases may be addressed by German lawyers. The Bundesrechtsanwaltskammer is obliged to transmit the information including its own comments to the public prosecutor and to a special money laundering office of the German Federal Police (Bundeskriminalamt).
HAS THE THIRD EU MONEY LAUNDERING DIRECTIVE BEEN IMPLEMENTED? IF NOT, WHEN IS IT EXPECTED TO BE IMPLEMENTED?
Germany successfully implemented the Third EU Money Laundering Directive on 13 August 2008 through the Gesetz zur Ergänzung der Bekämpfung der Geldwäsche und der Terrorismusfinanzierung (Geldwäschebekämpfungsergänzungsgesetz – GwBekErgG). The Act came into force on 21 August 2008.
This was reported in the BGBI I Nr. 37 (20 August 2008).
LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.
The main legislation on money laundering is the Money Laundering Act, more specifically, Gesetz zur Ergänzung der Bekämpfung der Geldwäsche und der Terrorismusfinanzierung (Geldwäschebekämpfungsergänzungsgesetz – GwBekErgG). The Act came into force on 21 August 2008. This Act was published in the BGBI I Nr. 37 (20 August 2008). A copy can be found by clicking here
The Act has been enacted specifically to transpose the EU Money Laundering Directives (including the Third one) into national law.
ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?
Current law does not give a precise answer to the question how far visiting lawyers are subject to local anti-money laundering legislation.
Certainly, visiting lawyers are subject to the law (Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten (Geldwäschegesetz – GwG) which is part of the Gesetz zur Ergänzung der Bekämpfung der Geldwäsche und der Terrorismusfinanzierung (Geldwäschebekämpfungsergänzungsgesetz – GwBekErgG), if they are member of the local bar association. This has been the case in the old version of the GwG (entered into force on 25 October 1993, reported in the BGBl I, 1770, last time altered on 15 December 2003, BGBl I, 2676, 2733). It is not cognisable that the situation has changed under the new law.
If the visiting lawyer is not member of the bar association the legal situation is not clear. As the GwBekErgG is the implementation of EU Law, parts of the literature advocate that at least lawyers admitted to the bar in other EU Countries practicing in Germany are subject to the law. It is also possible that visiting lawyers from outside the EU are subject to the law.
LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.
By the amended Money Laundering Act (section 5), a Financial Intelligence Unit (FIU) has been established together with the Federal Criminal Police Office (Bundeskriminalamt).
The FIU created a working group together with the Federal Lawyer’s Chamber, notaries, tax advisers and public accountants. The main objective of this group is to define “indications of possible money laundering activities” in connection with the work of the professions represented in this group. Furthermore, the Federal Chamber is in the process of establishing special Guidelines for its members, particularly in the interpretation of the Money Laundering Act.
The new regulations on professional conduct issued by Federal Lawyers’ Chamber were established on 1 September 1999. The only provision inter alia relating to money laundering is Section 4(2), which provides that lawyers are required to open separate fiduciary accounts for long-term clients. Deposits amounting to more than € 15,000 must not be maintained for more than one month on such account.
IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?
The local Bar Associations (Rechtsanwaltskammern) are responsible for the supervision of compliance with anti-money laundering regulations in relation to lawyers. They can also enforce compliance by appropriate measures. Supervision and enforcement is restricted to the scope of the GwG. For details see section 16 section (1) and (2) No 4 GwG.
DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.
People professionally dealing with money must identify any person from whom they receive cash amounting to € 15,000 or more. This provision is applicable to lawyers, patent attorneys, public notaries, accountants, tax advisers & members of similar professions.
Lawyers must disclose the identity of their clients when opening fiduciary accounts.
Affected Professional Groups:
Lawyers or legal advisers who are members of a bar association and notaries, if they are actively involved on behalf of their clients in the following transactions:
Buying and selling real estate and business enterprises;
Administration of money, securities, stocks and shares or other assets;
Founding, running or administrating business enterprises;
Founding, running or administrating trust companies, companies or similar structures;
Conducting financial or real state transactions in the name of an account for a client.
Duty of identification:
In the context of the above mentioned business enterprises, members of the above listed professional groups are required to establish the name, date of birth, place of birth, nationality and address of the client as stated in that person’s national identity card or passport, to the extent that these details are contained in the identity card or passport. Furthermore, the typo of identity documentation, number and issuing authority must be established. All obligations to identify the client are regulated in Sections 2 and 3 of the Money Laundering Act (GWG). The duty is defined in Section 1, subparagraph 4.
DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?
If identification is not possible, no services may be provided.
ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?
There are enhanced due diligence measures for two types of clients: Politically exposed persons and persons who do not appear in person for means of identification (see section 6 (2) GwG).
ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?
There are simplified due diligence measures for the following types of clients:
Credit institutions, financial service companies, finance companies, insurance companies, insurance intermediaries and investment stock corporations. However, all of them must meet certain criteria of special laws (see section 5 (2) Nr. 1 and section 2 (1) Nr. 1-6 GwG);
Listed companies that meet certain criteria (section 5 (2) Nr. 2 GwG);
Public authorities that meet certain criteria (section 5 (2) Nr. 4 GwG).
ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.
Lawyers are permitted to rely on third party due diligence (see section 7 GwG).
The reliance on third parties is primarily restricted to the duty of identification and does not encompass the duty of supervising continuing business relations.
The responsibility for compliance stays with the lawyer. The lawyer can also rely on a third party upon a contractual basis.
WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?
If a lawyer suspects that a client is engaged in money laundering activities, there is no obligation to report that information under the following conditions:
The information of the client or about the client must be obtained either in the context of judicial proceedings or in the course of ascertaining the legal position for this client (legal professional privilege). Contrary to this general provision in Section 11 Money Laundering Act, the lawyer has an obligation to inform in so far as the legal requirements are not fulfilled, for example, if he offers only financial services to his client without any legal advice. There is another case that forces the lawyer to comply with an obligation to inform: When the lawyer positively knows that his client is seeking legal advice for money laundering purposes.
Problems for lawyers arise not only with the rules of the Money Laundering Act. Separate from this new law, the legislation has created a criminal offence of money laundering described in Section 261 of the traditional German Penal Code. The new penal regulation was put in force in 1992 and has been greatly debated ever since. The statutory definition of this offence is extremely wide. It includes many activities of persons who assist in the business of money laundering without knowing the exact facts. If anybody has contact with “infected money”, he runs the risk of committing a crime (refer to reported prosecutions of lawyers – see later). Money laundering is a possible result not only of drug trafficking, but also of many other offences, even fiscal fraud.
There is no exemption for any profession. Every lawyer runs the risk of being punished if he comes into contact with a client’s money, if that client is already under suspicion for money laundering. The highest criminal court in Germany (Bundesgerichtshof) sentenced two lawyers for a violation of Section 261 Criminal Code. The lawyers had accepted “infected” money as fees for defending their clients in a criminal case. The German Constitutional Court (Bundesverfassungsgericht) will soon pronounce a judgement on this pilot case.
If money laundering is suspected, even if the amount is less than € 15.000, the circumstances must be reported to the relevant authorities and the Federal Bureau of Criminal Investigation (BKA).
Legal Advisors must comply with this by reporting the matter to the professional association to which they belong. The association can then make a recommendation on the matter, and they must also forward the report to the above-mentioned authorities.
It is illegal to inform the client that a report has been made or that criminal investigations have been initiated as a result (Tipping-off – see later).
Following the report of such suspicions, the relevant financial transaction may not initially be conducted. This may only happen if the legal advisor receives appropriate authority from the public prosecutor to do so, or if authorisation on conducting the relevant transaction has not been received, after the second working day following the submission of the report.
DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?
There is no duty to report if the suspicion of money laundering is based on information which the legal adviser received from the client in the context of giving legal advice or representing a client in a court case (client privilege/duty of confidentiality).
The terms “court representation” and “legal advice” are not clearly defined by the law. However, the Federal Government’s aim is for them to be understood in a wider sense in order to protect the client-lawyer relationship. Thus, court representation also covers information gained before and after a court case as well as advice given in connection with conducting or avoiding such court proceedings.
A duty to report does, however, exist if the legal adviser realises that the client is deliberately making use of his legal advice for the purposes of money laundering. In this case, added danger exists in which the legal advisor could make himself culpable under the terms of Articles 216, 27, and 261 of the German Penal Code respectively if he fails to act accordingly.
Since the amendment of the Money Laundering Act (as of 15 August 2002), lawyers have several obligations in this respect. For further information see the Money Laundering Act, especially sections 3 (section 3 subsection 1 N° 1), 6, 8, 9, 11 and 14.
DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?
A lawyer who reports a suspicious transaction can not be held responsible unless he reports an untrue suspicious transaction with intention or gross negligence (section 13 (1) GwG).
ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?
Once a suspicious transaction report has been filed, the transaction may be at the earliest carried out when consent of the prosecution is obtained or if two days without any interdiction have been passed since the report of the suspicious transaction. If the transaction cannot be avoided it may be carried out (see section 11 (1) GwG).
IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.
Lawyers shall not disclose to the clients concerned, or to other third persons, the fact that information relating to suspected money laundering activities has been transmitted to the authorities in accordance with Section 11 (5) Money Laundering Act or that a money laundering investigation is being carried out. It is not forbidden to give general legal advice including the regulations of Section 11.
DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.
Other special restrictions than mentioned in the German “GWG” are not known. It’s normal that a Lawyer can’t accept a client if his advice can be used as assistance to commit a crime.
ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.
Section 7 of the Money Laundering Act states an exception from the obligation to identify “…if the person whose identity has to be established is personally known to the enterprise, institution or person obliged to identify him, and if the person has given proof of his/her identity on a former occasion”.
DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.
It seems that sometimes lawyers report suspicious transactions of other lawyers to get rid of competitors. Real money laundering cases in which lawyers are involved are rare in Germany.
HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?
The highest criminal court in Germany, the Bundesgerichtshof, decided that two lawyers had violated Section 261 Criminal Code by accepting “infected” money as a fee for defending their clients in a criminal case.
The federal Constitutional Court - Bundesverfassungsgericht - will soon announce its judgment on this case.
Before the money laundering directive was extended to cover also liberal professions the Ministry of Interior was “forced” to conduct a study on how many liberal professions - Freie Berufe - were actually involved in money laundering actions, but there are still no clear results.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
Germany is a member of the Financial Action Task Force (FATF). Its evaluation was conducted by the International Monetary Fund (IMF) and was adopted as a third mutual evaluation by its Plenary on 19 February 2010.
The AML Act imposes AML/CFT requirements, among others, on lawyers, patent attorneys, notaries, and legal advisers. The requirements are essentially identical to those imposed on financial institutions. Supervisory arrangements have been established for most of these businesses and professions. The legal professions are generally familiar with their obligations, but there is a lack awareness of their ML and CTF vulnerabilities.
They are also subject to strict professional secrecy obligations which contribute to a low level of reporting of suspicious transactions and complicate cooperation with investigative authorities. Overall, the effectiveness of implementation in the designated non-financial businesses and professions (DNFBPs) sector in general and legal profession in particular is difficult to ascertain - Paragraph 27 of the Executive Summary of Mutual Evaluation Report (MER).
According to FATF MER, a large majority of the essential criteria are not being met as required under recommendations 5, 6, 8 – 11, 13 – 15 and 21.
- No requirements for procedures to identify politically exposed persons (PEPs), or to consider filing a suspicious transactions report (STR) in cases where Client Due Diligence (CDD) cannot be completed, or to establish beneficial ownership in all cases.
- Registered legal advisers are not subject to professional secrecy, they should not be included in the carve-out for legal and professional privilege.
- Professional secrecy provisions are interpreted broadly by the liberal professions, and pose a significant impediment to their ability to provide records as evidence for prosecution of a crime (as called for under c 10.1.1) or keep findings available for competent authorities (as called for under c. 11.3).
- Inadequate awareness of potential ML vulnerabilities contributing to underreporting.
- Inadequate risk assessment procedures among professions, leading to inadequate monitoring and underreporting.
- Broad carve-out for legal and professional privilege combined with strict professional secrecy requirements place significant impediments to STR reporting.
As for DNFBPs’ (including lawyers and notaries) regulation, supervision and monitoring, the Chambers of Lawyers, Chamber of Patent Attorneys, and Chambers of Tax Advisors has no authority to conduct routine compliance monitoring of members;
Risk assessments have not been developed by the competent authorities responsible for monitoring and ensuring compliance with AML/CFT requirements;
There is partial compliance with the guidelines and feedback requirements. Guidelines for lawyers have not been updated.
Information provided by:
German Bar Association,
- Section 261 of the Criminal Code has been incorporated into the Criminal Code by virtue of Article 1 No. 19 of the Act on Suppression of Illegal Drug Trafficking and other Manifestations of Organized Crime dated 15 July 1992. The Act was published on 22 July 1992 (Federal Law Gazette [BGBl] Part 1 p. 1302) and enacted on 22 September 1992. One of the main aims of the Act was to improve the legal means for siphoning off the proceeds of criminal offences. One such measure was the new criminal provision against money laundering (section 261 of the Criminal Code), as well as the new legal consequences constituted by extended forfeiture (section 73 d of the Criminal Code). Since its enactment, section 261 of the Criminal Code has been amended by the following Acts:
- Article 1 of the Act dated 2 August 1993 to implement the 1988 Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Federal Law Gazette Part I p. 1407), which was enacted on 28 February 1994;
- Section 35 of the Precursors Control Act (Grundstoffüberwachungsgesetz) dated 7 October 1994 (Federal Law Gazette Part I p. 2835), which was enacted on 1 March 1995;
- Article 1 No. 17 of the Act on the Suppression of Crime (Verbrechensbekämpfungs¬gesetz) dated 29 Octo¬ber 1994 (Federal Law Gazette Part I p. 3186), which was enacted on 1 December 1994;
- Article 1 of the Act to Improve the Fight against Organized Crime (Gesetz zur Verbesserung der Bekämpfung der Organisierten Kriminalität) dated 4 May 1998 (Federal Law Gazette Part I p. 845), which was enacted on 9 May 1998;
- Article 4 of the Act to Suppress Tax Reduction dated 19 December 2001 (Federal Law Gazette Part I p. 3922), which was enacted on 28 December 2001;
- Article 8 of the Fifth Act to Amend the Tax Officials Training Act and to Amend Tax Legislation dated 23 July 2002 (Federal Law Gazette Part I p. 2715), which was enacted on 27 July 2002;
- Article 1 (7) of the Thirty-fourth Criminal Law Amendment Act –Section 129b Criminal Code (34th Criminal Law Amendment Act) dated 22 August 2002 (Federal Law Gazette Part I p. 3390), which was enacted on 30 August 2002.