“Privileged” goods dealers find themselves in a field of tension. On the one hand, they are obliged entities under Section 2(1) no. 16 of the German Anti-Money Laundering Act (GwG). On the other hand, they enjoy a statutory exemption with regard to risk management and internal preventive measures under anti-money laundering compliance.
A goods dealer, within the meaning of the Act, is anyone who commercially sells goods, regardless of in whose name or for whose account, Section 1(9) GwG.
Not privileged are dealers of goods who
- commercially sell goods, regardless of in whose name or for whose account, and who, in doing so, make or accept cash payments of €10,000 or more, or who
- commercially sell high-value goods (precious metals such as gold, silver, and platinum, precious stones, jewellery and watches, works of art and antiques, motor vehicles, ships and motorboats, as well as aircraft) and accept cash payments of €2,000 or more.
If a goods dealer excludes all cash payments, it acquires the status of a “privileged goods dealer,” which is permitted to dispense with a differentiated risk management system and further individual preventive measures, Section 4(5) GwG. This means that extensive anti-money laundering compliance measures are then not required.
Naturally, a company remains free to establish a higher level of anti-money laundering compliance for itself. This may be sensible where the specific nature of the business makes it appear necessary. However, there is then no statutory obligation to do so.
Nevertheless, privileged goods dealers also remain on the list of obliged entities under Section 2(1) no. 16 GwG and must provide notice of facts giving rise to a suspicion of money laundering.
This means that the privileged status does not exempt them from notification obligations backed by criminal sanctions; the company must have the requisite knowledge as to when a notification must be made. This means that, even without extensive risk management and individual preventive measures, all goods dealers are required to have a basic compass in place that is triggered where:
- facts exist indicating that an asset connected with a business relationship, a brokerage transaction, or a transaction originates from a criminal act that could constitute a predicate offence for money laundering,
- a business transaction, a transaction, or an asset is connected with the financing of terrorism, or
- the contracting party has failed to fulfil its obligation, under Section 11(6), third sentence, to disclose to the obliged entity whether it intends to establish, continue, or carry out the business relationship or the transaction on behalf of a beneficial owner.
In these cases, an obligation nonetheless arises to file a report with the Financial Intelligence Unit (FIU).
Conclusion
These varying statutory obligations, with their partial exemptions, make it far from straightforward for privileged goods dealers to determine the necessary, but not excessive, level of anti-money laundering compliance appropriate for them. We would be glad to assist you in evaluating the level appropriate to your business, in adapting your organisational structure accordingly, or in training your designated staff.
