Compliance requirements
Institutions shall have in place adequate risk management as well as policies and procedures for the prevention of money laundering, terrorist financing or other criminal actions which might jeopardise the institution’s assets.
To this end, they shall create and update adequate business and customer-related safeguards, and conduct checks.
Sec 25h § 1 Banking Act (Kreditwesengesetz – KWG)
Key position of banks
Banking and financial services providers occupy a key position in export control, particularly with regard to sanctions. Risk management and safeguards relate to the following areas:
- Know Your Customer (KYC): in the case of legal entities, this also includes the respective shareholding structure.
- Freezing of economic resources and funds
- Provision prohibitions
- Identification of critical securities (International Security Identification Numbers – ISIN)
- Digital currency services
- Financing of export transactions
As early as 2008, the Council of the European Union formulated in a line of action (conclusions according to document 17172/08) that financial institutions should be made more aware in order to prevent the financing of proliferation activities and to protect banks from the malicious intentions of those who pursue such activities.
Risk factors:
- Non-Resident Alien Accounts
- letters of credit and trade finance products
- foreign correspondent bank accounts (esp. USD)
- foreign branches and subsidiaries
- participation of intermediaries, trustees and transactions initiated by third parties
Sanctions Compliance Program
The sanctions compliance program should include the following components tailored in banking practice:
- Review of new customers
- Regular review of existing customers
knowledge of critical goods and delivery targets of customers (example case BitGo) - ongoing monitoring of payment transactions (example case UBAF)
- Review of securities and trade finance transactions (especially for letters of credit)
„„A sanctions risk assessment has, to some degree, the most overlap with ML and is often performed in conjunction with a ML risk assessment, but also requires Sanctions-specific, and often only centrally available, data and information feeds.“
Current topics on export control in the financial sector:
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Reference:
Prof. Dr. Schindler, founder of the law firm Prof. Dr. SCHINDLER Rechtsanwaltsgesellschaft mbH, was admitted to the bar until October 31, 2019 and was a specialist attorney for banking and capital markets law.
Today, he is a university lecturer and Of Counsel of the law firm.
