What do lawyers have to consider under the Money Laundering Act?

The legal professions are of particular importance for the prevention of money laundering. According to the Federal Ministry of Finance, the money laundering risk for lawyers is categorised as "high".

The Money Laundering Act serves to prevent and combat money laundering and terrorist financing. It is based on international guidelines from the Financial Action Task Force (FATF) and European directives. At the beginning of 2020, the law implementing the 5th EU Money Laundering Directive came into force and amended the Money Laundering Act. Lawyers were also affected by the changes.

When do lawyers fall under the Money Laundering Act?

Lawyers are only obliged under the Money Laundering Act if they carry out certain catalogue transactions. Among other things, this applies to advisory services in the area of company law (e.g. formation, operation or management of trusts, companies or similar structures), advisory services in the area of financial law (e.g. procurement of the funds required for the formation, operation or management of companies) and advisory services in the area of the purchase or sale of real estate.

Every lawyer should check whether a relevant catalogue transaction under the Money Laundering Act is being carried out before accepting a mandate.

Expansion of catalogue business due to the amendment in 2020

Since 1 January 2020, the law implementing the 5th EU Money Laundering Directive has included further catalogue transactions. These include activities of the lawyer, insofar as they

- advise clients on their capital structure, industrial strategy or related issues; or

- provide advice or services in connection with mergers or acquisitions.

According to the legislator, this is intended to cover activities in the area of "mergers & acquisitions" in particular. Business-related assistance in tax matters has also been included as a new catalogue business for lawyers.

Requirements under the Money Laundering Act

The Money Laundering Act requires lawyers to maintain a risk management system, comprehensively identify their clients and check them for risk factors and, under certain circumstances, submit a suspicious activity report. The scope of the measures that lawyers must fulfil can vary. A key factor here is the total number of professionals in a law firm. This can be decisive for the appointment of a money laundering officer.

Only a few suspicious activity reports from lawyers

The legal professions are under scrutiny as few suspicious activity reports have been submitted to date. According to the 2019 annual report by the Financial Intelligence Unit, there were only 21 reports for lawyers. In contrast, there were 112,439 reports in the financial sector as a whole. Suspicious activity reports in the area of property transactions in particular are only sporadic, although lawyers are regularly and intensively involved in this area.