Ecovis Global > Money Laundering in Germany: Stringent New Rules for Companies
Money Laundering in Germany: Stringent New Rules for Companies
18. June 2021
Germany is seen as a money laundering paradise. As a result, on 18 March 2021, the German government introduced the new section 261 of the Criminal Code (StGB) – the offence of money laundering. At the same time, it has implemented an EU directive into national law – more stringently than required by the EU.
With the new law, the German government wants to prevent criminals from smuggling their money, for example from tax evasion, into legal businesses. Also, even reckless subsidy fraud is a predicate offence to money laundering. The aim is to make it easier for authorities and prosecutors to track down assets of criminal origin.
Until now, they have only prosecuted money laundering if the assets in question originated from very specific criminal offences. For this there was a catalogue of predicate offences in which certain crimes and offences were listed. In terms of tax evasion, for example, these were only intentional offences committed on a professional basis or by members of a gang. This is now to be abolished.
Do you want to know when transactions are reportable? Contact us and we will support you. Alexander Littich, lawyer, specialist lawyer for tax law and criminal law, Ecovis in Landshut, Germany
How the New German Law Affects Foreign Companies
In principle, German criminal law only applies to offences committed in Germany. However, foreign companies can also be liable to prosecution if: they are active in Germany themselves or, for example, through a subsidiary, and must therefore be aware of and comply with German law, or they commit criminal acts abroad which count as predicate offences for money laundering in Germany and lead to their own criminal liability here.
When Offences Abroad are Punishable in Germany
The legislator has included some regulations in the law in terms of when foreign offences related to the EU are in any case also punishable in Germany. The foreign offence must be punishable either in the country where it was committed or in Germany. The transfer, procurement or use of objects resulting from such acts is then also punishable for money laundering. Or the offence is not necessarily punishable abroad but is punishable in Germany and is one of the priority offences defined by the EU. These include organised crime, corruption, financing terrorism, human trafficking/smuggling, drug trafficking and the sexual abuse and exploitation of children. The transfer, procurement or use of objects resulting from such offences is thus punishable.
With the new regulation, it is no longer important that the perpetrator evades taxes abroad on a professional or gang basis. A single, simple act of tax evasion is sufficient. For example: An entrepreneur in England evades taxes and wants to buy a property in Berlin in Germany with the wrongly received tax refund. This act is punishable in Germany, say the lawyers at Ecovis.
The Consequences for Entrepreneurs
The obligations to report possible violations of money laundering laws are much more comprehensive. In addition to the typically known cash transactions, less commonplace business transactions now also come under scrutiny. If proceedings are initiated, entrepreneurs must justify their business procedures.
Businesses subject to reporting requirements should in future check even more intensively which transactions they have to report. Companies subject to reporting requirements include, for example, banks, real estate agents, insurance companies, tax advisors, lawyers, auditors, or trustees. If an investigation is initiated, entrepreneurs must justify their business practices.
If there is a suspicious activity report for a business transaction, the company is not allowed to continue with that business. This is only possible if the Financial Intelligence Unit (FIU) or the public prosecutor’s office agrees or has prohibited the transaction three days after the suspicious activity report. For companies, the new money laundering act means more bureaucratic effort and even more precise documentation, explain the Ecovis experts.