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Today, the federal cabinet adopted the draft of a Second Sanctions Enforcement Act. It is now being transmitted to the Bundesrat for comments. In parallel to this, the coalition parties in the German Bundestag can use the draft to adopt a legislative initiative with the same wording in order to expedite the legislative process.
Whilst the first legislative package (Sanctions Enforcement Act I) entered into force at the end of May 2022 and contained measures that could be rolled out swiftly, this second act now also proposes structural improvements for the enforcement of sanctions in Germany.
The Federal Government is keeping the promise it made to the Länder by transferring the powers to investigate and freeze assets, which were introduced in the first act and were to be exercised by the Länder, to a central federal body: the Federal Ministry of Finance is setting up a Central Office for Sanctions Enforcement for this purpose. The Central Office, an agency of the Finance Ministry, will initially be attached to the Central Customs Authority.
The establishment of the Central Office for Sanctions Enforcement also regulates the relevant powers for sanctions-related investigation of assets and the setting up of a register of assets of sanctioned persons and partnerships in the Sanctions Enforcement Act II, including the possibility to include certain assets which cannot be clearly allocated in a sanctions-related asset investigation procedure.
Also, greater transparency is to be introduced, particularly in the real estate sector. In order to cover the period before a nation-wide online system to access Real Property Registers (real property register database) is in place, the draft legislation provides that real estate data which are shared in the Länder between the real estate registries and the land registries can also be made available for the transparency register.
The draft legislation also contains regulations to combat money laundering. In particular, it will no longer be permitted to pay for real estate with cash. The ban will also cover payments in crypto currencies and commodities. The measure effectively addresses money laundering risks in the real estate sector.
The draft includes many other provisions which, cumulatively, will help to make sanctions enforcement even more effective and to achieve important improvements in the future fight against money laundering. This refers for example to the establishment of a system for submitting tip-offs about potential crimes, the possibility to appoint a special commissioner to monitor compliance with sanctions by companies, and the opening up of ownership and control structure overviews in the transparency register for use by authorities and obligated persons.
Following up on the concept for effective combatting of financial crime, work is taking place on measures to overcome the deficiencies identified in the review of Germany by the Financial Action Task Force and on further improvements in the legal framework, with the relevant ministries being comprehensively involved from an early stage. This work includes structural changes in the shape of new federal agency, the strengthening of investigations into complex and international money laundering cases, and improvements in oversight in the non-financial sector. Further information (in German) can be found here.
The Financial Action Task Force’s report can be downloaded here.
