Allegations of the real estate market being used for money laundering (ML) and tax evasion have made headlines in the German media. This has resulted in heated political debates across the political spectrum, particularly, debates on the role of intermediaries. Notaries have been accused by various political parties of neglecting their responsibility in the fight against ML in the real estate sector. In 2017, Berlin’s Senator for Justice Dirk Behrendt asserted that of the 60,000 reports of suspected ML filed nationwide with the financial intelligence unit (FIU), only five were filed by public notaries. The discrepancy between the low number of reports filed by notaries and the confiscation of 77 apartments, houses and allotments in Berlin in July 2018 for suspected ML was used to highlight notaries’ lack of attention to ML indicators. In mid-2019, Behrendt announced that he was planning on establishing a ‘money laundering task force’ to prevent the investment of illegal proceeds in real estate. He stated that the primary assignment for this task force would be to review the work of public notaries.
In 2017, following the implementation of the Fourth AML Directive (4AMLD), real estate agents were drawn into the scope of Germany’s revised anti-money laundering (AML) legislation Geldwäschegesetz (GwG). As soon as an interested buyer pays a deposit or receives a sales contract, the real estate agent is obliged to undertake know your customer procedures, including identifying and verifying the ultimate beneficial owner (UBO) of the acquired property. Following the implementation of the Fifth AML Directive (5AMLD), which came into force in Germany in January 2020, public notaries who play a key role in authorising real estate transactions in Germany (besides real estate agents) are obliged to implement AML measures. The following article will focus on the due diligence requirements for public notaries and how revisions in tax law related to real estate transactions should make these transactions less attractive for tax optimisation.
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