Risk management - How does this affect me?

The necessary level of risk prevention with regard to money laundering and terrorism financing varies from company to company. This is why the legal requirements are based on the respective level of risk.

bq. Higher risk management requirements apply where the risk of money laundering is high, and lower requirements apply where risks are lower.

The legislator demands that obliged entities according to the GwG must have risk management in place that comprises two parts: A risk analysis must be performed and based on this analysis, internal safety measures must be taken to prevent money laundering and terrorism financing, in line with the organisation’s individual risk level that has been determined.

Risk management

Risk analysis + internal safety measures

The following general rule applies: You can only protect your company effectively, if you are aware of potential risks.

A member of your company’s management, who is in charge of risk management, must be explicitly appointed. This person must grant their approval for the risk analysis and any internal safety measures. Risk management is a management task!

Particular rules apply for corporate groups. Among other aspects, the parent company must perform the risk analysis for the entire group, that is for all companies, branches and subsidiaries that are part of the group. Internal safety measures must be consistent for the entire group. The money laundering officer must draw up a money laundering prevention strategy for the group and it must be ensured that information is exchanged within the group.

Real estate agents must have effective risk management in place, if they arrange for purchasing contracts and/or for leasing or rental agreements with a monthly rent or leasing fee of at least EUR 10,000.

It is determined based on a threshold value, whether goods traders, art agents and art store keepers must have effective risk management in place. The new GwG provides for the following categories:

• a) Goods traders are only required to set up risk management procedures, if they pay or accept cash amounts of at least EUR 10,000, either themselves or via third parties. This rule applies even in the case of a single cash transaction, as well as for fragmented cash payments that amount to a total of EUR 10,000.

• b) Goods traders who trade precious metals in the sense of § 1 subsection 10 sentence 2 no. 1 GwG must set up risk management procedures if they pay or accept cash amounts of at least EUR 2,000, either themselves or via third parties. This rule applies even in the case of a single cash transaction, as well as for fragmented cash payments that amount to a total of EUR 2,000.

• c) Art agents, art store keepers and goods traders who trade art objects must have risk management procedures in place, if the value of a single transaction or a connected series of transactions totals to at least EUR 10,000, regardless of whether payment is made in cash or cash-free.

Due diligence requirements apply in cases with a high risk level, regardless of any threshold values or the payment mode. The duty to report any suspicions must also be observed. Further information about the issue of reporting suspicions is available here.

To avoid violating the supervisory duties within your organisation (“§ 130 Administrative Offences Act”):https://www.gesetze-im-internet.de/owig_1968/__130.html, you must inform your staff members about their duties and must ensure that these are complied with.

A basic requirement for adequate prevention measures is that a company must clarify its individual risk level with regard to money laundering in the first step, by performing a careful, complete and suitable risk analysis that must be documented, reviewed and updated on a regular basis. The risk factors listed in the attachment of the GwG must be taken into account in particular:

In Attachment 1 of the GwG, the legislator lists indicators and factors for a potentially lower risk level, in Attachment 2 of the GwG for a potentially higher risk level.
You must take the factors indicated there into account in your risk analysis, as well as regarding your specific due diligence duties. In addition to this, the national risk analysis provides for further constellations that will help you to assess your individual risk level more effectively, before concluding any transactions. It is therefore essential that the national risk analysis is observed.

bq. The supervisory authority can request access to the risk analysis at any time.

Further information about the issue of risk management is provided in chapter B of the basic information sheet, the risk management information sheet and in our short overviews. This information is available in our download area.