The new Money Laundering Act transposing the Fourth EU Anti-Money Laundering Directive came into force on 26 June 2017. With the obligation to introduce a risk management system geared towards money laundering, the legislator has shifted the responsibility for generally complying with the obligations under the Money Laundering Act directly to the Vorstand (Board of Directors) or Geschäftsführung (Executive Board) of a company.
Every obliged entity must in future nominate a “Mitglied der Leitungsebene” (member of the Board of Directors) who will assume personal responsibility for the risk management and who must approve the accompanying risk assessment and internal security measures and ensure that these remain effective and up to date.
In addition, many obliged entities must appoint an anti-money laundering officer “auf Führungsebene” (at senior management level), as well as a deputy.
Whereas the term “Mitglied der Führungsebene” (member of the senior management) is defined in the Act (section 1(15) Money Laundering Act), it does not specify what is meant by “Mitglied der Leitungsebene” (board member). Members of the senior management are by definition managerial staff or executive officers who have the power to make decisions on how to deal with the anti-money laundering obligations.
Since the term “Geschäftsleitung” (Management Board) has to date only been used in the Banking Act and other legislation regulating the financial sector, whereas corporate law generally refers to the “Vorstand” (Board of Directors) or the “Geschäftsführer” (Managing Directors), it is helpful to look at the English version of the Fourth EU Anti-Money Laundering Directive for assistance in interpreting these terms. Whereas “Mitglieder der Führungsebene” are referred to as “senior management”, “Leitungsorgan” is rendered either as “board of directors” or “management board”.
The German legislator could not use “Mitglied des Leitungsorgans” (member of the Board of Directors) as per the Directive because partnerships and other structures such as foundations or trusts often do not have such a “Leitungsorgan”; it therefore used the term “Mitglied der Leitungsebene” (board member) instead.
This means that the overall responsibility for money laundering prevention and the duty to approve risk management measures is to be shifted directly to the highest operative body of the company, i.e. the Vorstand (Board of Directors) (for a stock corporation) or the Geschäftsführung (Executive Board) (for a limited liability company and other corporate forms).
Although by ascribing responsibility to a single board member, the law does not change the overall corporate responsibility of all board members – which goes beyond the principle of being responsible for a specific area - this attribution of responsibility would however at the same time appear to constitute commissioning within the meaning of section 9(2), sentence 1 Administrative Offences Act, which clearly expands and simplifies the possibility of imposing fines on the board member in question.
Added to this is the fact that, in practice, the consequences of violating the obligations laid down in the new Money Laundering Act are much graver and more extensive than before. The Act has resulted in a massive expansion of the list of fines and a clear increase in the amount of the fines. It is also worth noting that in future fine notices will as a rule be made public by the competent regulatory authorities, i.e. will be published on their websites. It is only if a natural person’s personal rights would be violated by the publication of a fine notice that this can be postponed or anonymised.
Conclusion
If the fining authorities take a strict approach to implementing the new provisions, any affected companies will suffer significant damage to their reputations. Now is the time for all obliged entities - which include goods traders, financial undertakings, estate agents and many other obliged entities outside of the financial sector - to realise that money laundering prevention is an integral part of a company’s compliance measures and to pay the necessary attention to this issue at the highest corporate level.
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