FinCEN-Files - The pressure on German companies and law firms to combat money laundering is increasing

The initial information from the leak of the FinCEN files only shows the tip of the iceberg. The information that has emerged makes it clear how little German companies have so far complied with the necessary legal precautions to prevent money laundering and terrorist financing.

It is not only major international banks that have long been the focus of attention. Regionally active real estate agents, lawyers, tax consultants, notaries, auditors, jewellers, art dealers and other goods traders can also be misused for money laundering activities and are therefore also legally obliged to protect themselves against this.

What are the requirements under the Money Laundering Act?

According to the Money Laundering Act, companies must fulfil various requirements. Comprehensive risk management must be implemented. Employees must be trained, customers or clients must be identified and information must be comprehensively checked. Everything must be documented. If there is any suspicion of money laundering or terrorist financing, this must be reported immediately to the Financial Intelligence Unit ("FIU"), a special unit at customs.

Hardly any suspicious activity reports in the non-financial sector

According to the FIU's latest annual report, almost all suspicious activity reports continue to come from the financial sector. As the authority responsible for SARs, the FIU publishes the latest figures every year. While the financial sector reports a total of 112,439 SARs according to the FIU's analysis, only 1,512 SARs were submitted in all other areas not related to the financial sector. This means that only 2 % come from companies in the non-financial sector. Lawyers, for example, only submitted 21 SARs and notaries only 17 in the whole of 2019.

Practical implementation problems

The low number from the non-financial sector is mainly due to a lack of awareness of the very complex legal requirements. The obligated companies often do not know what precautions they have to take under the Money Laundering Act. The expert Wende says: "When players from the non-financial sector follow the legal requirements, the sometimes difficult-to-understand rules lead to practical implementation problems." The dangers for companies from the non-financial sector should not be underestimated. "Criminals not only launder money through bank accounts, but also buy cars, property, jewellery and watches. They also utilise the services of lawyers and tax advisors."

What will change in the future?

The supervisory authorities will tighten controls. "Among other things, the regional bar associations have obtained comprehensive information from many lawyers this year about their anti-money laundering measures," says expert Wende. Companies and law firms face high fines of up to 1 million euros for violations. In the financial sector, the fines are even higher. The "naming-and-shaming" sanction mechanism is also particularly severe. Under this mechanism, the company and the persons responsible are to be named on the websites of the supervisory authorities. This can often threaten the existence of those affected.