Money Laundering Act 2017 – changes at a Glance – German MLA

Money Laundering Act 2017 – changes at a Glance – German MLA – 15 points check for your practice as money laundering officer – Top informed: Here you can also go directly to the current BaFin design notes March 2018.

The most important changes and tightening at a Glance – Money Laundering Act 2017 – changes at a Glance – German MLA

• Appointing a member at the management level
• No disadvantage in employment relationship and connection to the management level
• Requirements for risk Management ISV § 4 MLA with risk analysis and internal security measures
• Risk analysis According to § 5 MLA – New tightening requires fundamental revision
• New Identity verification requirements
• Person – what is to be considered in the sales process?
• Redefinitions of goods dealers real estate agents and organizers of gambling
• Introduction of a transparency register with reporting obligations
• Fictitious beneficial owner requires review of customer inventory
• An economic claimant is always to be determined!
• New rules on correspondence relations
• Recast of the PEP term
• New responsibilities for suspicious messages
• 3 days-regulation for the so-called deadline-case
• Extension of recording duties to a 5-year period
• New transparency Register – compliance obligations for reporting
• Significantly tightened provisions governing fines

The draft of the BaFin designations March 2018 can be found here directly for download. Detailed information about the BaFin administration practice can be obtained directly in our information blog BaFin-Interpretative notes March 2018.

Appointing a member at the management Level – Money Laundering Act 2017 – changes at a Glance – German MLA

The obligated parties must designate a member of the management level responsible for risk management and compliance with the gelwäsche legal provisions; The risk analysis and the internal security measures require the approval of this member.
The order and decommitment of the money laundering officer and his deputy shall be notified to BaFin in advance.

In accordance with paragraph 1, the obliges referred to therein shall appoint a money laundering officer and a substitute. In accordance with article 8 (4) (a) of the fourth Money Laundering directive, the appointment of a money laundering officer shall be considered as internal safeguards for the strategies, controls and procedures to be established by the undertaking referred to in paragraph 1. § 7 in conjunction with § 6, this transposes and also regulates in paragraphs 1 and 5 the tasks, the position and the requirements for the function and person of the money laundering officer. In addition to the organisational and reporting direct link to the management level, it is particularly important to note the finding in paragraph 5, according to which the money laundering officer in respect of intended messages pursuant to § 43 or the reply to a request for information.

The central Office for financial transaction investigations is not subject to the management law. In order to avoid conflicts of interest, the money laundering officer cannot at the same time be the member of the management level to be appointed in accordance with § 4. Exceptions can be made for very small companies.
Further information about the obligated and the new requirements for due diligence can be obtained directly here.

No discrimination in Employment – Money Laundering Act 2017 – changes at a Glance – German MLA

In accordance with article 38 and recital 41 of the Fourth Money Laundering directive, the Money laundering officer or his deputy may not be discriminated against in the employment relationship in accordance with paragraph 7. With the chosen formulation, the money laundering officer is equated in terms of labour law with the data Protection Supervisor, who has already enjoyed an identical protection for a long time. The purpose of this regulation is to guarantee the full exercise of the activities of the Money laundering officer in his function, without prejudice to him as a result of the activity he has carried out.

Risk analysis According to § 5 MLA – Money Laundering Act 2017 – changes at a Glance – German MLA

In the risk analysis, the individual risk situation of the Institute is documented and the Institute-specific measures to be taken are determined. In particular, the undertakers have taken into account the exemplary list of potential risk factors to be found in annexes 1 and 2 to the MLA. The final catalogue of case groups in the MLA or KWG, where there is a low risk, has been abandoned to strengthen the risk-based approach. The obligated parties have to determine their individual risk situation with regard to the contracting partner, the offered products and transactions, taking into account the non-concluding potential factors which are laid down in Annexes 1 and 2 to the MLA.

New Identity verification requirements

It is to be checked whether the person who personally appears to the company to the Contracting Party is entitled to do so.
In terms of identification, the new Money Laundering Act no longer distinguishes between present and non-present persons, the absence is merely a risk factor to be taken into account in accordance with appendix 2.
There is a uniform catalogue of permissible means of identification and procedures.
The video identification process can be used by companies. The requirements in accordance with BaFin circular 3-2017 have to be observed
Companies are entitled and obligated to make full copies of the documents and documentation submitted or used to verify the identity. Alternatively, the documents and documentation can be recorded visually digitized (scan).

New definition of goods dealers – Money Laundering Act 2017 – changes at a Glance – German MLA

The new MLA contains for the first time a definition of goods dealers in the scope of the Money Laundering Act. The definition implements article 2 (1) (3) (d) of the fourth Money Laundering directive. First, a large group of people is registered. For example, any person engaged in trade in goods shall be goods traders in accordance with paragraph 9. Goods are all movable and non-movable objects, irrespective of their aggregate state, which have an economic value and can therefore be the subject of a transaction. It is also clarified that a goods trader can carry out the transaction in his own or foreign name and on his own or other account. In addition to proprietary trading (a person sells his own goods in his own name), commission transactions (in his own name on a third-party account) and intermediary transactions (in a foreign name on a foreign account) as trading forms of the Money Laundering goods trader Conceivable.
In particular, auctioneers who offer foreign goods for a Commission and act in their own name but on a foreign account are also recorded.

Introduction of the fictitious beneficial owner – Money Laundering Act 2017 – changes at a Glance – German MLA

Identification of the fictitious beneficial owner: if, after a comprehensive examination, no beneficial owner can be identified or if there are doubts that the person identified is actually the beneficial owner and there are no facts that would trigger a reporting obligation, the legal representative, the managing partner or the partners of the contractual partner shall be deemed to be the beneficial holder (so-called fictitious beneficial owner).
Furthermore, the definition is adapted to the requirements set out in article 3 (6) of the Fourth Money Laundering directive, which in turn follows the FATF guidelines: After that, comprehensive checks are necessary to determine whether a natural person owns a Legal person or in any other way exercise control over them.

Only if thereafter no natural person can be identified as a beneficial owner (either because no such exists or the structure does not allow it to identify one), there are no suspicions or if there are doubts about The fact that a person identified as  benefeficial owner actually one of these is the legal representative, the managing partner or the partners as the beneficial holder of the fiction. In this case, the legal representatives, managing partners or partner of the Contracting Party, not also the underlying companies, are to be recorded, both for the fulfilment of the customer Due Diligence obligations as well as for the file for automated retrieval of account information. For existing customers, the registration has to be carried out only as part of the update under § 10 MLA.

Innovation to Pep – Money Laundering Act 2017 – changes at a Glance – German MLA

The increased due diligence obligations must be applied to both domestic and foreign PEPs.
Public offices below the national level are only eligible if their political importance is comparable to the importance of public offices at international, European or national levels. Communal functions are not covered in principle. Regional functions can only become relevant for federal structures. As important public offices, which establish a status as a politically exposed person in Germany, only functions at the federal level (including the state prime or provincial minister, if necessary state secretaries as members of the Federal Council) are considered. Compared to the implementing directive for the third Money laundering directive, there is a slight adjustment to the extent that party officials and top officials of international and European organisations such as UN or IMF officials, for example, are now covered by the term (number 3 and 10). It covers only intergovernmental international organisations and European organisations, not non-governmental organisations.

Clearly tightened provisions regarding Fines – Money Laundering Act 2017 – changes at a Glance – German MLA

The fine catalogue for infringements was significantly aggravated by § 56 MLA. Now, maximum fines of at least two times the amount of profits achieved as a result of the infringement or of a minimum of EUR 1 million shall apply. In the case of credit or financial institutions: maximum fines of at least EUR 5 million or 10% of the total annual turnover.
Countries are also required to improve their oversight of non-financial institutions: the fight against money laundering can only succeed if there is sufficient awareness on the part of the committed parties that the supervisory authority is more effective in its prevention and prosecution by the investigating and prosecuting authorities.