Following the Money: The Germany-Türkiye-Anti Money Laundering (AML) / Countering the Financing of the Terrorism (CFL) Regulations – Insights and Implications

Money laundering is mostly an international crime, where the perpetrators try to incriminate the origin of the money from a criminal activity by smuggling it into the legitimate economy. The perpetrators usually operate internationally and use various systems such as banks, real estate, assets or trade. As the money is usually smuggled through banks, which has become easier with online banking[1] and cryptocurrencies, it is crucial that the authorities have effective regulations and authorities specialising in money laundering. Lawyers, real estate agents and tax advisors should be able to take a risk-based approach to anti-money laundering in cooperation with the authorities, companies or private individuals in specific sectors.

The Regulation in Germany and in Türkiye

Germany

The origin of the money becomes important with § 261 German Criminal Code. A characteristic feature of § 261 StGB (Strafgesetzbuch) is the existence of an unlawful activity from which the money to be “laundered” originates. The wide range of unlawful activities which have to fulfil the criminal offence has been subjected to criticism in the literature due to requirement of clarity and specificity.[2] With European and FATF impulses[3], the Act to Improve the Fight against Money Laundering and against the Financing of Terrorism in Germany (das Geldwäschegesetz or Geldwäschebekämpfungsgesetz) has entered into force in Germany. With more optimisations in 2008 and 2017 the Act has been developed in line with EU and international standards.[4] The new laws ensure a preventive character and include the person with a “legitimate interest”. Persons who are in the circle of “legitimate interest” can be lawyers, real estate agents, media professionals, banks, civil society organizations, members of art sector, insurance companies and others more.[5] The latest development is that the EU’s new central anti-money laundering authority (AMLA) will begin its operations in mid-2025.[6]

To summarise what has been achieved so far, it is implied by the law that the group of "legitimate interest” has a duty of care to collect and analyse financial information from its potential counterparty (known as the KYC "Know Your Customer" process). They must group their counterparties according to their risk factors (low risk, medium risk and high risk). They are also obliged to inform the local FIU (Financial Intelligence Unit) if they identify a potential risk during the transaction. In addition, the limit of €10,000 in cash without proof of the source of income in a transaction has been agreed to avoid organised crime and terrorism in daily transactions.[7]

Türkiye

Money laundering is regulated in Article 282 of the Turkish Penal Code No. 5237. The first AML regulation in Türkiye (The Act No. 4208) came into force in 1996 and the Central Financial Crimes Investigation Board has established in 1997. According to this law, the circle was defined as "those who operate in the fields of banking, insurance, private pensions, capital markets, money lending and other financial services, postal and transport services, gambling and betting; those who trade in foreign currencies, real estate, precious stones and minerals, jewellery, transport vehicles, construction equipment, historical artefacts, works of art and antiques, or those who mediate in these activities, as well as notaries, sports clubs (...)”[8]. The lawyers have been excluded out of this group by the Decision of the Constitutional Court. The law implied that obligated persons must "identify the identity" of the customer or contracting party and "take other necessary measures".[9] Some of the measures to be taken for the establishment of processes in responsible companies have been concretised by the Regulation on the Compliance Programme with the Obligations Related to the Prevention of Laundering of Proceeds from Crime and Financing of Terrorism. In contrast to the EU Directives, the measures to be taken for the KYC process are not specified in detail in the law.

Know-Your-Customer Principle (“KYC”)

Two regulatory systems imply the development of a KYC system for the group of “legitimate interest”. Both systems require an identification of the contract partner, and the clarification of transaction itself based on § 10 of the Act to Improve the Fight against Money Laundering and against the Financing of Terrorism in Germany or Law No. 5549 Section 3 in Türkiye.

The identification and risk-based approach has been further specified in German law. The risk-based approach can be divided into three categories: transaction-related suspicions, behaviour-related suspicions, non-transparent business relationships. [10] In addition, the factors of potentially lower and higher risks have been specified in Annexes 1 and 2.[11] Moreover, there is a requirement to identify the beneficial owner, with a minimum of 25% of the shares in a company.

It should also be remembered that the collection of data in relation to money laundering has implications for data protection law in both systems. The processing under the legitimate interest of KYC is legal, although the measures of the GDPR should apply. The European Data Protection Supervisor emphasized that the data subject should be informed about the data processing and its purposes. [12] As a result, the Art. 41 (3) of the 4^th AML-Directive stated that obliged circles should comply with their obligations under Art. 13 GDPR[13].

Conclusion

Compared to Türkiye and Germany, the legislator in Türkiye takes a less risk-based approach at the end of the circle with “legitimate interest” and relies on a centralised system with reporting obligations that even a lower risk also should be reported, see Art. 4 of the Law No. 5549. Overall, the fight against and prevention of money laundering should continue at the legislative, political and corporate levels due to the complexity and the different methods used by criminals. The efforts of people with legitimate interests and employees of companies should not be ignored, and clear instructions and education should clarify their obligations and encourage them to report.