I.

(a) In Circular 7/2008 (ML) of 30.07.2008 I had informed you of the so‑called third-country equivalence list.

The background to the production of such a list by EU States was that, for the purposes of fulfilling the due diligence requirements the Third EU Money Laundering Directive in various provisions, offers simplified due diligence requirements for relationships with third countries provided these third countries impose due diligence requirements equivalent to those laid down in the Third Money Laundering Directive (e.g. Art. 11 (1), Art. 16 (1) (b), Art. 28 (4) ). The Act Supplementing the Act to Fight Money Laundering and Terrorist Financing, the Banking Act and the Insurance Supervisory Act also contain in various places references to such third countries (sections 5 (2) Nos. 1 and No. 3, 6 (2) No.2, 7 (1) and 12 (1) Nos. 2 and 4 of the Money Laundering Act; section 25d (1) No. 3 letter (b) of the Banking Act; section 80e (1) No. 4 letter (b) of the Insurance Supervisory Act).

The EU Member States had agreed on a list of third countries in respect of which they could assume, on the basis of objectively ascertainable criteria, equivalence of the relevant due diligence requirements.

I take this opportunity to point out that the third-country equivalence list is merely an indicator that an institutions or a financial sector undertaking from a country mentioned therein applies due diligence requirements that are equivalent to the requirements within the European Union. The third-country equivalence list does not, however, mean that institutions or financial sector undertakings that have their registered office in the countries or areas listed therein can always be routinely assumed, despite any indicators in any particular case of an enhanced risk situation, to present a low risk.

Rather, the provisions of section 5 (3) of the Money Laundering Act apply in this respect, too. This means that, in the cases referred to in section 3 (2) Nos. 1, 2, and 4 of the Money Laundering Act, those affected may not ignore the need to comply with the due diligence requirements if in respect of a specific business relationship or transaction with a institution or a financial sector undertaking from a country mentioned in the third-country equivalence list they are in possession of information which suggests that the risk of money laundering or terrorist financing is not low. Nor may the circumstances referred to in the provisions of section 6 of the Money Laundering Act or section 25f of the Banking Act exist either.

(b) The same also applies in respect of business relationships or transactions with institutions or financial sector undertakings that are based in other EU Member States. The provisions of section 5 (3) of the Money Laundering Act apply in this respect, too.
Nor may the circumstances referred to in the provisions of section 6 of the Money Laundering Act or section 25f of the Banking Act exist either.

(c) For the purposes of the risk categorisation mentioned under (a) and (b) above, one of the prime sources of information should be the Country Review reports of the Financial Action Task Force on Money Laundering (FATF) and the FATF Regional Groups (FATF-Style Regional Bodies - FSRBs) produced in the course of their Mutual Evaluations, which are published on the FATF website and links to the relevant Groups that may be found there). On the basis of the review findings encountered there, with regard to institutions and undertakings from Greece or Poland, for example, currently it cannot be refrained from full compliance with the due diligence requirements of section 3 (1) of the Money Laundering Act.

II.

Concerning the requirements of the Money Laundering Act under section 6 (2) No. 1, there is also a need for further clarification regarding the implementation of the Act Supplementing the Act to Fight Money Laundering and Terrorist Financing of 21.08.2008:

(a) Pursuant to section 6 (2) No. 1 sentence 3 of the Money Laundering Act, persons who have exercised no prominent public functions for at least a year are no longer to be regarded as “politically exposed”.
Irrespective of this, former classification as a “politically exposed person” (PEP) is also to be taken into account as a key factor in the risk categorisation of the customer or the business relationship with him even after the loss of his PEP status. Against this background, the fact of a customer’s former status as a PEP is to be recorded and preserved in the corresponding customer files.

(b) The due diligence requirement in connection with “PEPs” pursuant to section 6 (2) No. 1 (b) of the Money Laundering Act applies not only in the establishment of a business relationship but also, according to the wording of section 6 (2) No. 1 (b), to transactions outside an existing business relationship within the meaning of section 3 (2) No. 2.
Section 25f (3) of the Banking Act does not apply in this respect.

In addition to the foregoing, in a business relationship risk-oriented procedures are to be applied at appropriate intervals in respect of customers residing abroad, in order to determine whether they meet the conditions for being classified as PEPs after the business relationship was established.

III.

Further clarification is required for the purposes of the implementation of section 4 (5) sentence 2 of the Money Laundering Act. This clarification supplements sub-section 30 of the Application and Interpretation Guidelines of the Central Credit Committee (ZKA) of 17.12.2008:

Pursuant to section 4 (2) sentence 2 of the Money Laundering Act, in order to verify the identity of the beneficial owner, those affected have to satisfy themselves, by risk-adequate measures, that the information collected in accordance with sentence 1 are correct.
This means that, pursuant to section 4 (5) sentence 2, steps must always be taken to verify the identity of the beneficial owner even in cases of normal risk; only the scale and scope of the measures to be taken in this respect can be devised in a risk-adequate manner. A complete failure to take measures to verify the identity of the beneficial owner is therefore not permissible in cases of normal risk. In this context, asking the customer to provide pertinent details is not a verification measure but merely a means of establishing the identity of the beneficial owner.

This interpretation is also derived from the injunctions of Recommendation 5 (b) of the Financial Action Task Force on Money Laundering (FATF).