Suspicious Activity Report

The most important points in brief:

1. In the event of suspected money laundering, many companies and professionals are obliged to submit a suspicious activity report (SAR) to the Financial Intelligence Unit (FIU) using an online form.
2. Anyone who fails to submit a suspicious activity report may face a fine of over one million euros.
3. A suspicion of money laundering exists if a specific situation is conspicuous according to general experience and suggests the possibility of money laundering or terrorist financing. Suspicion does not require absolute certainty, nor should suspicious activity reports be made in the blue.

What is a suspicious activity report?

A suspicious activity report is a report that must be submitted to the Financial Intelligence Unit (FIU) if there is a suspicion of money laundering by companies, consultants and other persons covered by Section 2 GwG. The aim of the money laundering report is to identify suspicious activities at an early stage and to enable investigations by the competent authorities.

When is money laundering suspected?

A suspicion of money laundering exists if a specific situation is conspicuous according to general experience and suggests the possibility of money laundering or terrorist financing. Absolute certainty is not required for a suspicion. At the same time, however, no reports should be made in the dark. Accordingly, it is necessary that a reasonable third party would come to the conclusion that a criminal offense has been committed. Whether this is the case depends in particular on whether there is an indication of money laundering.

A suspicion of money laundering presupposes that one of the following three cases exists:

1. Money laundering: an asset associated with a transaction originates from a criminal offense that could constitute a predicate offense to money laundering.
2. Terrorist financing: A transaction or object is connected with terrorist financing.
3. Beneficial owner: The obligation to disclose the beneficial owner has not been met.

The following aspects may be indications that a suspicion exists:

• The transaction does not match the customer and / or his financial circumstances.
• Invoices are paid by third parties, so there are indications that a straw man transaction is involved.
• There are doubts about the authenticity of documents.
• Questions about the transaction and the background are not answered or are answered evasively.
• After the customer is asked for identification, the transaction is canceled.
• There is a significant discrepancy between the purchase price and the value of an item.

When must a money laundering report be submitted?

A suspicious activity report requires the following conditions to be met:

• Obliged party (Section 2 GwG): The obligation to submit suspicious money laundering reports only applies to obliged entities under Section 2 GwG. This includes banks, insurance companies, lawyers, tax consultants, auditors, trustees, real estate agents, gambling providers and traders.
• Presence of facts: The suspicion must be based on facts; mere conjecture, speculation or similar is not sufficient.
• Suspicion of a reportable matter: The above-mentioned requirements must be met.
• Irrespective of value: It is important to bear in mind that the reporting obligation in the case of the Money Laundering Act exists regardless of the value of the transaction and the form of payment (cash or non-cash).
• Exception for consultants: There is also a narrowly defined exception for lawyers, tax consultants and auditors in cases where knowledge of the reportable facts arises from knowledge obtained in the context of legal advice or legal representation.

How is a suspicious money laundering report submitted?

There are strict requirements for submitting a suspicious activity report (SAR):

• Deadline: A suspicious money laundering report must be submitted immediately. This means that there is little time to clarify the facts and a report often has to be submitted within one day.
• Addressee: The suspicious activity report must be submitted to the Financial Intelligence Unit (FIU).
• Form: The SAR must be submitted via an online FIU form.

To ensure that SARs are submitted in the correct form and on time, it is important to set up processes for passing on information. Corporate groups must take into account that each unit requires separate access to the FIU.

What are the consequences of submitting a suspicious activity report?

Submitting a suspicious activity report in the event of money laundering has the following consequences:

• Prohibition of passing on information: Neither the contracting party nor third parties may be informed about the submission of a suspicious money laundering report.
• Prohibition of transactions: A transaction for which a report has been made may not be carried out until at least three days after the suspicious activity report has been submitted, unless the FIU prohibits it. It is important to note that waiting for the three-day period does not legalize the execution of the transaction. Not even an approval of the transaction by the FIU has a legalizing effect. Earlier execution is possible if postponing the transaction is not possible or could hinder prosecution.
• General and enhanced due diligence obligations: In addition to the suspicious activity report, there is also an obligation to carry out at least the general due diligence obligations, Section 10 para. 3 no. 3 GwG, and enhanced due diligence obligations may also be required.
• Exemption from liability: Anyone who submits the report in good faith cannot be held liable for submitting the SAR. This applies to both civil and criminal law obligations.
• Feedback to obligated parties: Obliged parties will only receive a confirmation of receipt and feedback regarding the relevance of the report.
• Access to information for data subjects: It should be borne in mind that once the FIU has completed its analysis of the SAR, the person concerned has a right to information. Due to this right to information, it is possible that the person concerned will learn of the report.
• No obligation to file a criminal complaint: There is no obligation to file a criminal complaint in addition to the suspicious activity report.

What are the consequences of not submitting a suspicious activity report?

Failure to submit a suspicious activity report in accordance with the Money Laundering Act has considerable consequences:

• Fines: Failure to submit a suspicious activity report or submitting it incorrectly, incompletely or late constitutes an administrative offense, meaning that a fine of one million euros is possible.
• Aiding and abetting money laundering: The question of whether it is an aiding and abetting of money laundering if the reporting obligation is not fulfilled has not yet been clarified. Until this question is clarified by case law, there is also a risk of criminal liability.

What should be done if money laundering is suspected?

If money laundering is suspected, it is important to act quickly and carefully. Otherwise there is a risk of high fines.

It is therefore important to take the following actions immediately:

• Report to the money laundering officer: if the company has a money laundering officer, the matter must be reported to them as soon as possible.
• Suspected money laundering report: If the above-mentioned requirements are met, a suspected money laundering report must be submitted immediately.
• Carrying out the general and possibly enhanced due diligence obligations: Based on the suspicion, the general due diligence obligations must be fulfilled in any case, cf. section 10 (1), (3) GwG. Depending on the facts of the case, enhanced due diligence obligations may also be required.
• Stop transaction: The transaction that gives rise to the suspicion of money laundering should not be carried out; in any case, the transaction must not be carried out for three days.
• Examination of the facts: The facts of the case must then be examined further internally in order to decide on how to proceed. At this point, it may make sense to turn to external consultants who have experience in dealing with such situations.

This article merely provides a non-binding overview of the topics addressed in it. It does not replace legal advice. Please do not hesitate to contact us for advice on this topic:

Dr. Martin-Gross Langenhoff

Dr. Carsten Lösing