Update on German Suspicious Transaction Reporting

06/02/2015

STR covers suspicion of money laundering or terrorist financing. Reports are sent to the Federal Criminal Police Office (Bundeskriminalamt – ‘BKA’). On 5 March 2014 the Federal Financial Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – "BaFin") published 'Circular 1/2014 (GW) – suspicious transaction report in accordance with sections 11, 14 of the GwG', setting out the administrative practice regarding the STR requirements.)

A BaFin circular introduces rules on the circumstances when a transaction should be viewed as suspicious. Although the reporting party has a degree of discretion, BaFin says that there must be sufficiently clear indications for the reporting obligation to be triggered. A number of factors may be taken into account including the purpose of the transaction, the identity of the customer, their financial background and the source of the assets to be transferred.

BaFin also provides rules on the internal organisation of STR and related reporting procedures that companies should have in place. For example, a company must make sure that instructions on how to report suspicious transactions are available to their employees. Any suspicious transactions must be reported to the company's compliance officer. Suspicious transaction reports have to be kept for 5 years.

BaFin’s circular also introduces a requirement to file a suspicious transaction report if a client has submitted a self-declaration of tax evasion to the tax authorities or intends to do so. This new requirement has proved controversial within the German financial industry.

Following a request for clarification by the Association for Investment Fund Management Companies and Investment Funds (Verband für Kapitalverwaltungsgesellschaften und Fonds - "BVI"), BaFin has stated that the Money Laundering Act does not require the filing of a suspicious transaction report just because a client requests an overview or copies of account statements going back several years.

To read the circular in english, click here.