Geldwäschegesetz (German Anti-Money Laundering Act)
The Geldwäschegesetz (GwG) is Germany's federal anti-money laundering and counter-terrorism financing law. Transposing EU anti-money laundering directives, it imposes strict customer identification, transaction monitoring, and suspicious activity reporting obligations on obliged entities in Germany.
The Geldwäschegesetz is the cornerstone of Germany's anti-money laundering framework. First enacted in 1993 and extensively revised to incorporate the 4th and 5th EU Anti-Money Laundering Directives, the GwG applies to a broad spectrum of obliged entities (Verpflichtete): credit institutions, insurance companies, payment service providers, lawyers, notaries, chartered accountants, real estate agents, dealers in high-value goods, and crypto-asset service providers.
The GwG mandates a risk-based approach with three levels of due diligence. Simplified due diligence applies to low-risk situations; standard due diligence requires customer and beneficial owner identification, verification through a valid identity document, and understanding the purpose of the business relationship; enhanced due diligence is required for high-risk clients, politically exposed persons, and relationships involving high-risk third countries.
Germany's Financial Intelligence Unit (FIU), housed within customs, receives and analyses suspicious activity reports. BaFin (Federal Financial Supervisory Authority) oversees compliance for financial institutions, while the Länder and professional chambers supervise non-financial professions. Penalties for non-compliance can reach EUR 5 million or 10% of annual turnover.
Regulations
Real-world examples
- 1.A German bank opens an account for a new customer and must, in accordance with § 10 GwG, verify their identity using a valid official identity document, identify the beneficial owner, and determine the purpose of the business relationship.
- 2.A real estate agent in Berlin completes a transaction exceeding EUR 10,000 and performs enhanced identity verification of the buyer, including source of funds, as the real estate sector is classified as high-risk under the GwG.
- 3.A Geldwäschebeauftragter (AML officer) at a leasing company detects a series of structured transactions designed to avoid reporting thresholds and files a suspicious activity report with Germany's FIU.