Germany: Massive money laundering in real estate, KYC, beneficial ownership issues – research
21 Dec 2018

Criminals are able to use Germany’s real estate sector to launder billions of euros annually as its laws and resources for authorities are out of step with the swift movement of corrupt cash, a new study has found.

It is estimated that 15 to 30 percent of all criminal assets are invested in real estate, according to research by Transparency International Germany.

An area of concern is that firms such as estate agents, lawyers and notaries are hardly submitting suspicious activity reports, despite this being required under the Money Laundering Act.

Such sectors also do not sufficiently examine if their clients are politically exposed persons (PEPs), the research found.

“For us, it is clear: There is a massive problem with money laundering in real estate in Germany. The current laws and the equipment of the investigating authorities are out of all proportion to the limitlessness of international financial flows,” said Prof. Dr. med. Edda Müller, chairwoman of Transparency International Germany.

In addition, a new requirement, the Transparency Register of True Beneficial Owners which was introduced in 2017, is ‘inadequate’ for ‘real transparency.’

“The transparency register still has too many loopholes. It cannot be that only representatives can be named instead of the true owners,” said Markus Henn, author of the study and financial markets consultant at WEED.

“Foreign companies and organisations that own real estate in Germany should also have to report their beneficial owners to the Transparency Register.”

Contacted for a comment, the BKA, Germany’s Financial Intelligence Unit, told KYC360 that it generally welcomes the report’s findings.

In an emailed statement, Dr. Andreas Mattner, President of ZIA German Property Federation, said: “Transparency is desirable and imperative. However, there are also good reasons for protecting private interests, which do not only serve to conceal illegal transactions.

“It is the task of the legislator to create an appropriate balance, which on the one hand serves to combat actual risks but on the other hand does not disproportionately burden or impair the economy.”

Irene Madongo

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