On 24 November 2021, the potential new German coalition government consisting of the Social Democratic Party (SPD), the Green Party (Bündnis 90/Die Grünen) and the Liberal Party (FDP) published its “Coalition Agreement 2021 – 2025: Coalition for Freedom, Justice and Sustainability”. The agenda includes important initiatives relating to money laundering prevention in Germany and the European Union (EU). The basic idea is to make money laundering prevention more effective and efficient by creating a higher level of EU harmonization.
The first initiative is to increase the reach of the Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) by appointing BaFin as the competent money laundering supervisory authority (Geldwäscheaufsicht) under the German Money Laundering Act (Geldwäschegesetz – GwG) for “obligated parties” that have a close relation to financial markets. Because regulated entities such as banks, financial services institutions, investment fund managers, insurers and payment service providers are already supervised by BaFin (which includes money laundering supervision), the “obliged parties” can only mean other, non-regulated parties having a close link to financial markets. The Coalition Agreement is silent about whom this will concern.
Secondly, the Coalition Agreement envisages a more effective anti-money laundering regime for real estate transactions. Illegal financing of real estate transactions is to be more effectively targeted. According to the Coalition Agreement, one core feature to achieve this goal is to ban the acquisition of real estate against cash payments. Another tool is to require commercial real estate purchasers from outside Germany to provide the relevant tax evidence.
The third point relates to the transfer of major parts of the EU Anti-Money Laundering Directive (2015/849) into an EU Regulation. This relates to the EU Commission’s “Anti-Money Laundering and Countering the Financing of Terrorism Legislative Package” published on 20 July 2021. The proposed Regulation is to harmonize the current national measures to ensure a common quality and effectiveness throughout the EU. Cross-border money laundering has been identified as a threat to the single market, and the current legal framework, which leaves detection and operational independence to the national supervisory bodies, is deemed inadequate. The new Regulation would cover the main diligence obligations of obliged parties, including KYC-obligations and the reporting of suspicious transactions. Provisions on the transparency register and the financial intelligence units, on the other hand, would continue to be governed by the Money Laundering Directive and relating implementing law.
Closely related to this point is initiative number four: the Coalition Agreement supports the establishment of a European Anti-Money Laundering Authority (“AMLA“), as proposed by the European Commission as part of its anti-money laundering package, with seat in Frankfurt am Main. The Commission aims to have the AMLA up and running by 2026. It would be composed of representatives of both the Commission and EU Member States and would supervise national regulators to ensure they carry out their tasks properly. The Coalition Agreement contemplates that the AMLA’s jurisdiction would extend beyond traditional financial services to include the use of cryptocurrencies for money laundering and terrorism finance. Frankfurt am Main as European banking hub and seat of the European Central Bank will be the ideal seat for the AMLA.
The Covington team will continue to monitor the situation and update you on new developments.