Request for Information

Request for Information (RFI)

In the dynamic world of Anti-Money Laundering (AML) compliance, the concept of Request for Information (RFI) has emerged as a vital tool for financial institutions and regulatory bodies.

Understanding the intricacies of RFIs, especially within the context of the European Union’s AML Directives and the German GwG, is crucial for anyone involved in financial compliance and regulation.

The 4th AMLD (Directive (EU) 2015/849) and 5th AMLD (Directive (EU) 2018/843) laid the groundwork for harmonized AML practices across Europe. These directives expanded the powers of Financial Intelligence Units (FIUs), enabling them to request information proactively. Germany’s GwG aligns with these directives, particularly in Section 30 (3), which empowers the German FIU to obtain necessary information from both reporting and non-reporting entities.

BaFin, Germany’s financial supervisory authority, provides further clarity on RFIs in its interpretation and application guidance. Key points include the autonomy of AML officers in responding to RFIs, the legal protections for reporting entities, and the prohibition on tipping off about ongoing investigations or reports.

RFIs pose significant compliance challenges for obligated entities. They must develop efficient internal procedures to manage RFI responses, ensuring accuracy and timeliness while balancing resource constraints.

RFIs must be carefully managed to respect privacy and data protection laws. Entities must assess the necessity and proportionality of the information requested to ensure compliance with broader legal standards.

The future of RFIs is likely to be shaped by digitalization and automation, enhancing efficiency in the AML compliance process. The integration of big data analytics and artificial intelligence can significantly improve the analysis of financial transactions and suspicious activities.

Effective use of RFIs often requires international cooperation. As financial crimes cross borders, so must the efforts to combat them, emphasizing the need for global standards and information sharing.

Request for Information (RFI) is a cornerstone of AML compliance, enabling authorities to proactively combat financial crime. While empowering FIUs and AML officers, RFIs also place considerable responsibility on financial institutions. Balancing effective law enforcement with the burdens of compliance and protection of individual rights remains key. As the financial landscape evolves, so too will the mechanisms and strategies employed in RFIs to maintain their effectiveness in the ongoing fight against money laundering and terrorist financing.

4th AMLD

Obliged entities, their directors, and employees must inform FIUs of suspected funds related to criminal activity or terrorist financing and respond promptly to FIU requests for additional information. All suspicious transactions, including attempts, must be reported.

5th AMLD

Article 1 (18) of Directive (EU) 2018/843 amends Directive (EU) 2015/849 by adding a new paragraph to Article 32. This new paragraph enhances the powers of Financial Intelligence Units (FIUs) within the EU. The key points of this amendment are:

  1. Enhanced Information Access for FIUs: Each FIU is granted the authority to request, obtain, and use information from any obliged entity.
  2. Independence from Prior Reports: FIUs can exercise this power even if there hasn’t been a prior report filed. This means that FIUs are not restricted to acting only after receiving a formal notification or suspicion report from obliged entities.
  3. Purpose of the Information Request: The information requested by the FIU should be for the prevention, detection, and combatting of money laundering and terrorist financing.

German GwG

Section 30 (3) of the German Anti-Money Laundering Act (Geldwäschegesetz – GwG) outlines the powers and procedural aspects for the Financial Intelligence Unit (FIU) in Germany regarding the collection of information. The key points are:

  1. Authority to Obtain Information: The FIU has the authority to obtain information from obliged entities (such as financial institutions, lawyers, real estate agents, etc.) which are typically required to report suspicious activities related to money laundering.
  2. Independence from prior reports: This power is not contingent upon the existence of a prior report of suspicious activity. The FIU can proactively seek information if deemed necessary for their anti-money laundering (AML) and counter-terrorist financing (CTF) efforts.
  3. Purpose-driven information collection: The FIU is allowed to gather information as long as it is necessary for the fulfillment of their tasks. This suggests a focus on collecting only relevant information that is essential for their AML and CTF investigations and analysis.
  4. Reasonable deadline for response: When the FIU requests information, they are required to grant the obliged entity a reasonable deadline to respond. This balances the need for timely data collection with the practicalities and constraints faced by the entities providing the information.

BaFin-Interpretation and Application Guidance on the German GwG

The BaFin Interpretation and Application Guidance on the German Anti-Money Laundering Act (Geldwäschegesetz – GwG) provides detailed instructions and clarifications on several aspects of anti-money laundering (AML) compliance. Key points from the provided chapters are summarized below:

Anti-Money Laundering Officer and Deputy

  • Authority of AML Officers: The AML officer and their deputy have the power to issue instructions to employees within the scope of their AML tasks.
  • Independence in Specific Cases: They are generally subject to the instructions of the management, except in cases outlined in Section 7 (5) sentence 6 of the GwG. In these instances, the AML officer is not subject to management’s instructions, particularly in relation to reports under Section 43 of the GwG or responses to requests for information from the FIU.

Organizational Structure for the Reporting Procedure

  • Autonomy in Reporting: The AML officer and their deputy can independently decide to submit a report under Section 43 (1) of the GwG or respond to a request for information from the FIU (Section 30 (3) of the GwG), without being subject to management’s instructions.
  • Independent Reporting Obligation: The obligation to report under Section 43 (1) of the GwG is an independent obligation, even if another entity has already reported the same circumstances. This ensures that all relevant information is captured, regardless of other reports.
  • Assessment of New Information: If new information is received from the public prosecutor’s office, the AML officer must assess whether this triggers an additional reporting requirement under Section 43 (1) of the GwG.
  • Role of FIU and Prosecuting Authorities: The FIU does not cooperate in preliminary report assessments. They only reject reports lacking plausibility. Post-report, the FIU and prosecuting authorities can request additional details from the reporting entity.

Suspicous Activity Report (SAR) and consequences

  • Legal Protection for Reporters: A person submitting a report under Section 43 (1) of the GwG is protected from civil, criminal, or disciplinary actions, provided the report is not intentionally or grossly negligently untrue. This protection applies even if the person was not fully aware of the underlying criminal activity.

Forwarding of information concerning reports

  • Prohibition of Tipping Off: Obliged entities are prohibited from notifying customers or third parties about a submitted or envisaged report under Section 43 (1) of the GwG, the initiation of an investigation due to such a report, or a request for information from the FIU (Section 30 (3) sentence 1 of the GwG). This is known as the „ban on tipping off“ (Section 47 (1) of the GwG) and is crucial to prevent the potential interference with investigations.

Termination of Business Relationships

  • Restrictions on Actions Based on Requests for Informations (RFIs): When the German Federal Office for the Protection of the Constitution or other security authorities request information, obliged entities are prohibited from taking unilateral actions that disadvantage the affected person, such as terminating contracts or business relationships or changing fees, based solely on the information request. This restriction ensures that the request for information does not lead to prejudicial treatment of the person involved, especially since such a request does not imply unlawful activity or suspicion.