Corporate Alert | December.04.2019
In the course of the “Panama Paper” scandal, Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing – known as 4. Anti-Money Laundering Directive (“4. AMLD”) – was amended by Directive (EU) 2018/843 which is known as the Fifth Anti-Money Laundering Directive (“5. AMLD”), despite being only an amendment to 4. AMLD. 5. AMLD came into force mid-2018. Each EU-member state must transpose 5. AMLD into the national legislation by 10th January 2020.
In general, the 5. AMLD implements the following changes:
Based on this, the German Ministry of Finance presented a draft bill (Referentenentwurf) of the implementation provisions in May 2019. In June 2019 the draft bill was revised by the German Government and a new government draft bill (Regierungsentwurf) was presented. In September 2019 the bill was submitted by the German Government to the Federal Council (Bundesrat). After the receipt of comments of the Federal Council, the bill was forwarded to the German parliament (Bundestag) at the beginning of October. Following the first consultation of the bill in the German parliament on 18th October 2019 and hearings in the competent parliament's committee it was recently adopted by German Parliament and finally the Federal Council on 29th November 2019, having implemented some of the changes from the committee (“Bill”).
The adopted Bill implements the rules required under the 5. AMLD, however, also “gold plates” some of the provisions, especially by introducing new regulatory rules for crypto currency related businesses as well as making certain service providers including limited financial brokers and M&A advisors to be obliged persons (Verpflichtete), who now have to fully comply with the AML regulation. In addition, the opportunity is used to clarify and amend some of provisions which were not perfectly transferred into national law within the implementation of the 4. AMLD.
When the Bill comes into force, inter alia the following service providers will be obliged persons (Verpflichtete) under the German AML rules:
To cover further angles of M&A related services, the legislator is also introducing additional services of lawyers (Rechtsanwälte) resulting in a mandatory performance of AML obligations. These include (cf. the amended § 2 (10) GwG):
Based on this, certain players in the market would need to be fully AML compliant. In particular, the implementation of organizational structures (e.g. implementing AML policies and strategy, appointing an AML officer, etc.) and the performance of AML-DD, in particular identification, (e.g. obtaining documents regarding the contractual partner and its ultimate beneficial owner; for the above purposes review of the transparency register), before entering into a contractual relationship, will be mandatory.
Though not required by 5. AMLD, the German legislator is, however, taking the opportunity and the requirements of 5. AMLD to introduce AML procedures for brokers/traders/market places of crypto assets and to implement a new regulatory basis for crypto assets. Instead of just amending the German AML provisions, the legislator has decided to designate the brokering or holding in custody of crypto assets for third parties as a financial service requiring a license under the German Banking Act (“KWG“) (Art. 2 of the Bill). Since financial services providers pursuant to KWG are obliged persons (Verpflichtete) ipso jure, such service providers will also be required to comply with German AML rules.
In this context the legislator also explicitly introduced crypto assets as a new financial instrument in KWG (even through the German regulator is of the opinion that crypto assets were already covered by KWG as financial instruments), therefore clarifying all doubts with regard to this question and resulting in the necessity of a MiFID II similar license without respective usual brokering obligations even if safekeeping, administration or safeguarding of crypto assets is concerned. The government proposal that if crypto assets related financial services are performed, no other financial or banking services can be performed at the same time by the same entity, has not been implemented in the adopted version of the Bill.
Providers of the captured crypto asset services will have the advantage of a transition period and will not be required to have a license until 30th November 2020. However, to benefit from this they must inform the regulator about the performed regulated activity by 31st March 2020.
In line with the 5. AMLD requirements, the German legislator implemented:
Last but not least, if an obliged person (Verpflichteter) would like to rely on other obliged persons (Verpflichteten) in the future for AML-DD, stricter requirements for reliance will be applicable. Such reliance with regard to persons resident in Germany will be only possible if the obliged third party on which the reliance is based performed the AML-DD in compliance with the German AML-rules (new § 17 (3) GwG). This may force foreign (financial) institutions providing AML onboarding services dealing in Germany to amend their processes to be compliant with the new rules.
 Cf. the detailed legislation procedure here: http://dipbt.bundestag.de/extrakt/ba/WP19/2517/251728.html.
 The original German text is as follows: „Finanzunternehmen […] ist ein Unternehmen, dessen Haupttätigkeit darin besteht Unternehmen über die Kapitalstruktur, die industrielle Strategie und die damit verbundenen Fragen zu beraten sowie bei Zusammenschlüssen und Übernahmen von Unternehmen diese Unternehmen zu beraten und ihnen Dienstleistungen anzubieten“.