The law on money laundering is changing. In the future, the existing legal regulations will be more strictly controlled and additional obligations will be imposed on companies.
What exactly needs to be done and by whom is not known to many. However, most companies are not opposed to implementing these measures. On the contrary, they are keen to ensure that no one abuses their company for money laundering or terrorist financing.
The question is: “Who has to do what and when?” The answer to this is actually quite simple and yet difficult.
Who is affected?
In principle, § 2 of the Money Laundering Act (GwG) defines who is an obligated party. In addition to banks and insurance companies, these include, for example, real estate agents, tax advisors, auditors, lawyers and notaries (under certain conditions), casinos and persons who trade in goods (!). This last category applies to almost all commercial enterprises.
What needs to be done?
What needs to be done and when is regulated by §§ 3, 5 and 6 GwG. First of all, a risk analysis must be carried out to determine the risk of money laundering in the specific company and whether the company then has to take simplified, general or increased due diligence measures. For example, the general due diligence requirements are specified in § 3 paragraph 2 GwG. These are essentially:
- the identification of the contractual partner
- obtaining information about the purpose and intended nature of the business relationship
- clarifying whether the contractual partner is acting for a beneficial owner
- continuous monitoring of the business relationship and updating of customer data
If, for example, you as a company are subject to an increased duty of care, you also have to clarify the PEP status, for example. A PEP is a politically exposed person, e.g. a foreign head of state, but also their wife, daughter, etc.
In what situation?
This refers not so much to the pure time factor as to the occasion. The general due diligence requirements in accordance with § 3 paragraph 2 GwG must be observed under the following circumstances:
– when establishing a new business relationship
– when carrying out a transaction outside of an existing business relationship that amounts to €15,000 or more
– if there is sufficient suspicion that a transaction is serving a criminal offense according to §http://dejure.org/gesetze/StGB/261.html 261 of the German Criminal Code (money laundering) or the financing of terrorism
– if there is doubt as to whether the information provided regarding the identity of the contracting party or the beneficial owner is accurate.
If the business partner is unable or unwilling to fulfill these obligations, the entrepreneur is obliged not to establish the business relationship or to terminate existing business relationships.
Ultimately, the company that has reliable information about possible money laundering is obliged to file a so-called suspicious activity report. It is advisable to do so because it allows the company to free itself from the threat of being an accessory to money laundering.
The above is only a rough outline of the regular obligations and requirements. In addition, there are a number of other regulations that make it difficult in practice for companies to fully comply with the law without jeopardizing their own business activities.
In order to solve these problems for companies, the IHK Berlin recently invited to a seminar at which, in addition to representatives of the Berlin State Criminal Police Office and the Senate Administration, the law firm Dr. Schulte and his team were invited as legal speakers.
However, since it was again shown in this context that there is still a great deal of ignorance and uncertainty among companies, the law firm of Dr. Schulte and his team will continue to offer lectures on this topic in the future and advise individual companies on how to prevent money laundering.
Reports of suspected money laundering: protection or risk?
A recent ruling by the Higher Regional Court of Frankfurt (case reference: 3 U 192/23) reveals the serious consequences of a report of suspected money laundering for bank customers. Those who are wrongly targeted have little chance of compensation. The reason for this is the privileged liability of banks under Section 48 of the German Money Laundering Act (GwG). Banks are only liable if it can be proven that they acted with gross negligence or intent.
Particularly problematic: a suspicious activity report can be enough to trigger account freezes, financial losses, and significant reputational damage. A 2021 study by the Max Planck Institute for Foreign and International Criminal Law found that thousands of such reports are filed each year, a significant number of which remain unfounded. As a result, even innocent citizens face serious consequences.
But there is support: Dr. Thomas Schulte, a lawyer, consistently advocates for the rights of those who have been wrongly suspected. “A false suspicion can destroy livelihoods. I fight to ensure that bank customers are not left unprotected,” he emphasizes. He believes that a reform of the reporting requirements is urgently needed.
The fate of one individual with far-reaching consequences
Example: the case of Markus L. from Frankfurt is a striking example of how quickly a report of suspicion can turn the life of an innocent citizen upside down. His bank filed a report of suspected money laundering in accordance with Section 43 of the GwG, whereupon his account was immediately frozen. The consequences: massive financial losses, significant reputational damage and psychological stress.
Markus L. sued for damages for legal fees and for the release. But the Higher Regional Court of Frankfurt hesitated. “Banks enjoy extensive protection under the law. Even if a report is unfounded, it remains difficult to claim damages,” explains Dr. Thomas Schulte. The burden of proof is crucial: the customer must prove that the bank acted intentionally or with gross negligence. An almost impossible undertaking.
What to do if your account is frozen due to money laundering suspicions – Valentin Schulte
Banks between reporting requirements and customer rights
Banks are under enormous pressure. On the one hand, the legislator requires that suspicious transactions be reported. On the other hand, this must not be to the detriment of innocent customers. However, the threshold for a suspicious activity report is alarmingly low – even a “slight suspicion” is enough.
According to a study by the University of Mannheim (2023), banks are increasingly reporting suspicious transactions to cover themselves. This has two consequences:
- On the one hand, the burden on the investigating authorities increases because they have to work their way through a large number of unfounded reports.
- On the other hand, customers get into trouble without good reason.
“Banks tend to file reports rather too often than too rarely. This protects them from consequences, but not the customers,” criticizes Dr. Schulte. A more careful examination of the reports is urgently needed.
How those affected can defend themselves
Anyone affected by a report of suspected money laundering should react quickly and decisively. Dr. Thomas Schulte advises the following measures:
- Request access to records – Often, customers only find out about a report of suspicion at a late stage. A request for access to records can provide clarity.
- Take action against account blocking – According to § 46 GwG, banks may block transactions for a maximum of three working days if no official order has been issued.
- Check compensation – If gross negligence or intent can be proven, there are legal options for a lawsuit.
A survey by the Federal Ministry of Justice (2022) shows that many bank customers are unaware of their legal options. Dr. Schulte has successfully represented numerous clients. “It’s about giving a voice to those wrongfully affected. Everyone has the right to defend themselves,” he emphasizes.
Dr. Thomas Schulte is an experienced lawyer who has already been recommended by the magazine Capital (2008) for his extensive litigation experience. “The boss asks him, says the Handelsblatt 2011.” He knows that international authorities, thanks to better cooperation and modern methods of tracking payment flows, are increasingly restricting the scope of criminal groups. Money laundering law is an important building block. Unfortunately, the wrong people are repeatedly suspected. As a leading trusted lawyer at ABOWI Law and the Association of European Attorneys, he pursues clear, objective strategies to establish legal certainty.
Relevant legal regulations on money laundering law
- § 43 GwG – Reporting requirement in case of suspicion of money laundering
- Banks must report transactions if there is even a vague suspicion of money laundering.
- § 48 GwG – Protection for banks
- A bank is only liable if it can be proven that a false report was made intentionally or through gross negligence.
- § 46 GwG – Duration of an account block
- After a suspicious activity report has been filed, a transaction may only be blocked for a maximum of three business days, unless the authorities order otherwise.
Experts are calling for an amendment to the law to counteract unjustified suspicious activity reports. A 2023 study by the Institute for Financial Law at the University of Cologne shows that the current legal situation primarily favors banks, while customers are often left without effective legal recourse.
The Higher Regional Court ruling is a clear signal: bank customers need legal counsel to defend themselves against unfounded reports of suspicion. In many cases, those affected face an almost insurmountable obstacle. But with an experienced specialist lawyer like Dr. Thomas Schulte at their side, their chances improve considerably.
“Only those who know their rights can effectively defend themselves. Don’t be discouraged – there are solutions!” appeals Dr. Schulte. Those affected should not hesitate to seek sound legal advice.
Money Laundering Act: BaFin updates interpretation and application notes
Tips and tricks
- Communication with payment service providers is important. The verification obligations arise from the Money Laundering Act together with the application guidelines of the Federal Financial Supervisory Authority (BAFIN). https://www.bafin.de/SharedDocs/Downloads/DE/Auslegungsentscheidung/dl_ae_auas_gw.html;jsessionid=510903C557F75E1C3CA56A617759DAF0.internet012?nn=19659504
- It’s easier for existing customers. In addition, larger payment transactions should be announced in advance.
- If things go wrong, the only things that help are transparency and clever communication, along with a capable lawyer.