Enhanced Due Diligence Obligations; Authorisation to Issue Statutory Instruments

(1) Enhanced due diligence obligations shall be fulfilled in addition to the general due diligence obligations.
(2) Obliged entities shall fulfil enhanced due diligence obligations where they determine, in the course of the risk analysis or in an individual case, taking account of the risk factors set out in Annexes 1 and 2, that a higher money laundering or terrorist financing risk may exist. Obliged entities shall determine the specific scope of the measures to be taken in accordance with the respective higher money laundering or terrorist financing risk. Section 10(2), fourth sentence applies correspondingly to demonstrating appropriateness.
(3) A higher risk exists in particular where
1. a contracting party of the obliged entity, or a beneficial owner, is a politically exposed person, a family member, or a person known to be a close associate,
2. the matter involves a business relationship or transaction involving a high-risk third country identified by the European Commission under Article 9(2) of Directive (EU) 2015/849, as amended by Article 1, no. 5 of Directive (EU) 2018/843, or a natural or legal person established in such a third country; this does not apply to branches of obliged entities established in the European Union within the meaning of Article 2(1) of Directive (EU) 2015/849, as amended by Article 1, no. 1 of Directive (EU) 2018/843, and to majority-owned subsidiaries of such obliged entities that are located in a high-risk third country, provided such branches and subsidiaries fully comply with the group-wide strategies and procedures under Article 45(1) of Directive (EU) 2015/849 that they are required to apply,
3. the matter involves a transaction that, compared with similar cases,
a) is particularly complex or unusually large,
b) follows an unusual transaction pattern, or
c) has no apparent economic or lawful purpose, or
4. for obliged entities under section 2(1), nos. 1 to 3 and 6 to 8, the matter involves a cross-border correspondent relationship with respondents established in a third country, or, subject to assessment by the obliged entities as posing a heightened risk, in a state of the European Economic Area.
(4) In a case under subsection (2) or subsection (3), no. 1, at least the following enhanced due diligence obligations shall be fulfilled:
1. establishing or continuing a business relationship requires the consent of a member of senior management,
2. appropriate measures shall be taken to establish the origin of the assets employed in the business relationship or the transaction, and
3. the business relationship shall be subject to enhanced ongoing monitoring. Where, in the case under subsection (3), no. 1, the contracting party or the beneficial owner has begun to exercise an important public function only in the course of the business relationship, or the obliged entity learns only after the business relationship was established that the contracting party or the beneficial owner exercises an important public function, the obliged entity shall ensure that the business relationship is continued only with the consent of a member of senior management. In the case of a former politically exposed person, obliged entities shall, for at least twelve months following departure from the public office, take account of the risk specific to politically exposed persons and shall, for so long, take appropriate and risk-oriented measures until it may be assumed that this risk no longer exists.
(5) In the case under subsection (3), no. 2, obliged entities shall fulfil at least the following enhanced due diligence obligations:
1. they must obtain:
a) additional information on the contracting party and the beneficial owner,
b) additional information on the intended nature of the business relationship,
c) information on the origin of the assets and the wealth of the contracting party,
d) information on the origin of the assets and the wealth of the beneficial owner, with the exception of a person deemed to be beneficial owner under section 3(2), fifth sentence,
e) information on the reasons for the planned or executed transaction, and
f) information on the intended use of the assets employed in the transaction or business relationship, insofar as this is necessary to assess the danger of terrorist financing,
2. establishing or continuing a business relationship requires the consent of a member of senior management, and
3. in the case of a business relationship, they must subject the business relationship to enhanced monitoring by way of
a) more frequent and more intensive controls, and
b) the selection of transaction patterns requiring further examination.
(5a) In the case under subsection (3), no. 2, and in addition to the enhanced due diligence obligations under subsection (5), the competent supervisory authorities may, in a manner proportionate to risk and consistent with the international obligations of the European Union, order one or more enhanced due diligence obligations to be fulfilled by obliged entities, which may also comprise the following measures:
1. the reporting of financial transactions to the Financial Intelligence Unit,
2. the restriction or prohibition of business relationships or transactions with natural or legal persons from high-risk third countries,
3. the prohibition on obliged entities established in a high-risk third country from forming subsidiaries, branches or representative offices in Germany,
4. the prohibition on forming branches or representative offices in a high-risk third country,
5. the requirement for branches and subsidiaries of obliged entities established in a high-risk third country to undergo enhanced review of compliance with money-laundering-law obligations
a) by the competent supervisory authority, or
b) by an external reviewer,
6. the introduction of stricter requirements as regards an external review under no. 5, letter b),
7. for obliged entities under section 2(1), nos. 1 to 3 and 6 to 9, the review, amendment or, where necessary, termination of correspondent banking relationships with respondents in a high-risk third country. Subsection (10), second sentence applies correspondingly to the competent supervisory authorities when ordering these measures.
(6) In the case under subsection (3), no. 3, at least the following enhanced due diligence obligations shall be fulfilled:
1. the transaction and its background and purpose shall be examined by appropriate means, so as to be able to monitor and assess the money laundering or terrorist financing risk of the business relationship or transactions concerned, and, where applicable, to be able to examine whether the reporting obligation under section 43(1) applies, and
2. the business relationship underlying the transaction, where one exists, shall be subject to enhanced ongoing monitoring, so as to be able to assess the money laundering or terrorist financing risk associated with the business relationship and with individual transactions, and to monitor it where the risk is higher.
(7) In the case under subsection (3), no. 4, obliged entities under section 2(1), nos. 1 to 3 and 6 to 9 shall, when establishing a business relationship, fulfil at least the following enhanced due diligence obligations:
1. sufficient information shall be obtained on the respondent, so as to be able fully to understand the nature of its business and to assess its reputation, its controls for the prevention of money laundering and terrorist financing, and the quality of its supervision,
2. the consent of a member of senior management shall be obtained before a business relationship is established with the respondent,
3. the respective responsibilities of the parties involved as regards fulfilment of the due diligence obligations shall be established before such a business relationship is established, and documented in accordance with section 8,
4. measures shall be taken to ensure that they do not establish or continue a business relationship with a respondent known to allow its accounts to be used by a shell bank, and
5. measures shall be taken to ensure that the respondent does not permit transactions via pass-through accounts. Where the matter involves a cross-border correspondent relationship between crypto-asset service providers, the obliged entity shall, in addition to the enhanced due diligence obligations under the first sentence, no. 1, obtain information on the respondent's authorisation or registration.
(8) Where facts, relevant evaluations, reports or assessments of national or international bodies responsible for the prevention or combating of money laundering or terrorist financing exist that justify the assumption that a higher risk exists beyond the cases referred to in subsection (3), the supervisory authority may order that obliged entities subject the transactions or business relationships to enhanced monitoring and fulfil additional due diligence obligations, appropriate to the risk, and necessary countermeasures.
(9) Where the obliged entity is not able to fulfil the enhanced due diligence obligations, section 10(9) applies correspondingly.
(10) The Federal Ministry of Finance may, by statutory instrument not requiring the consent of the Bundesrat,
1. determine fact patterns in which, in particular as regards states, customers, products, services, transactions or distribution channels, a potentially higher money laundering or terrorist financing risk exists and in respect of which obliged entities must fulfil particular enhanced due diligence obligations and countermeasures,
2. order particular enhanced due diligence obligations and countermeasures for fact patterns within the meaning of subsection (3), no. 2, and make provision for the ordering and design of enhanced due diligence obligations by the competent supervisory authorities under subsection (5a). The Federal Ministry of Finance shall, when issuing a statutory instrument under this provision, take account of relevant evaluations, assessments or reports of international organisations or standard-setting bodies with competence in the field of the prevention of money laundering and the combating of terrorist financing as regards the risks emanating from individual third countries.