Obligations under the Money Laundering Act

The aim of the Act on the Tracing of Profits from Serious Crimes (Money Laundering Act) is to prevent money laundering and terrorist financing.

Money laundering is the smuggling of illegally obtained money (e.g. through drug trafficking or arms dealing) into the legal financial and economic cycle.

The main purpose of money laundering prevention is to protect companies from being misused by criminals to launder money, which can damage a company's reputation. In addition, money laundering causes considerable economic damage.

In simple terms, terrorist financing is the provision or collection of funds to establish or promote a terrorist organization or to commit a serious crime against the state.

The law imposes special obligations on certain persons and companies (the so-called obliged entities) in order to make business activities transparent. The obligated parties should thereby help to prevent or uncover transactions with a criminal background.

To prevent money laundering, companies must obtain information about the identity of their contractual partners in certain cases specified in the law (know-your-customer principle). They must monitor their business relationships for anomalies and take internal security measures to identify indications of money laundering. The measures required for this should not be taken according to a rigid set of rules, but rather in a risk-oriented manner, i.e. the obligated party should use an individual analysis to identify the typical risks for their business activities and business partners and prevent misuse for money laundering purposes by taking appropriate measures in each case.

The Money Laundering Act contains the following obligations:

• Identification of the contractual partner and, if applicable, the persons acting on their behalf - Gathering information on identity and verifying the information on the basis of suitable documents,
• Clarification of the background to the business relationship - clarify the purpose and intended nature of the business relationship if this is not clearly identifiable,
• Identification of beneficial owners - clarify whether the contracting partner is acting on behalf of a beneficial owner and, if so, identify the beneficial owner,
• Monitoring the business relationship - continuously monitor the business relationship and update the existing information at appropriate intervals,
• Documentation - record all data collected and information obtained and keep the records for at least 5 years,
• Development of internal security systems - establish internal security systems and controls that enable obliged entities to detect anomalies and prevent money laundering,
• Checking the reliability of employees - employees must ensure that the provisions of the AMLA and internal principles are complied with,
• Raising employee awareness - informing and educating employees about current money laundering methods and the obligations that exist to prevent them,
• Reporting of suspected cases:
  • if facts indicate that the assets are the proceeds of criminal activity or the assets are related to terrorist financing,
  • if facts indicate that the contracting partner is acting on behalf of a beneficial owner but does not disclose this.

This suspicion must be reported immediately to the Financial Transactions Unit. The business partner must not be informed of the suspicion report.

• Appointment of an anti-money laundering officer - Financial companies must appoint an anti-money laundering officer and a representative and notify the competent supervisory authority of the appointment. This also applies to other obliged entities if the supervisory authority so orders.

If certain due diligence obligations cannot be fulfilled, the business relationship may not be established or continued and no transaction may be carried out. Existing business relationships must be terminated. The law provides relief for traders in goods.

The Money Laundering Act stipulates that the supervisory authorities monitor compliance with these obligations, order measures if necessary and punish violations with fines. They have special access and inspection rights for this purpose.