The German real estate market has been attracting criminals from Germany and abroad for many years. The reason for this is simple: you can pay most of the house purchase in Germany in cash. Cash is a suitable and popular instrument to launder money from illegal transactions. European supervisory authorities and organizations such as Transparency International have been sounding the alarm for many years. The federal government is also aware of this problem.
Every year criminals smuggle 20 to 30 billion illegally generated euros into the non-financial sector alone, which also includes real estate. That was the result of a study recently carried out on behalf of the Federal Ministry of Finance. This is an alarm signal for the federal government. “The German real estate sector has a special focus on combating money laundering and terrorist financing,” says a letter from the Ministry of Finance that NewsABC.net has received.
Only 17 money laundering suspicions from notaries throughout 2019
A new ordinance now makes notaries and lawyers more responsible for handling property purchases. In future, they should warn the responsible Financial Intelligence Unit (FIU) more quickly if they recognize a risk of money laundering in a real estate deal. The ordinance is designed in such a way that notaries and lawyers do not have to breach their duty of confidentiality.
So far, the thresholds for notaries to report to the authorities have been very high, for example. This is only possible if the notary has “positive knowledge of money laundering or terrorist financing”, according to a message from the Federal Chamber of Notaries to the “Handelsblatt”. If a mere suspicion was reported, notaries would previously violate the duty of confidentiality.
This fact has led to a significant reluctance on the part of notaries to report suspicious activity. This emerges from the latest FIU annual report. Of 115,000 suspicious transaction reports, only 1,500 are in the non-financial sector – for example real estate transactions. Only 17 of these came from notaries.
The new ordinance, which comes into force at the beginning of October, is intended to turn things around according to the will of the federal government.
“On the basis of the ordinance, significantly more suspicious transaction reports from legal professionals due to possible money laundering connections are expected than in the past,” says a statement from the Federal Ministry of Finance.