Transaction

Transaction

Definition

Transaction according to the German GwG means any act or, insofar as they appear to be connected, several acts aimed at or resulting in a transfer of funds or other movement of assets or property.

Notice:

In the case of intermediation activities of obliged entities as defined in section 2 (1) nos. 14 and 16, the intermediated legal transaction is deemed to be a transaction.

Section 2 (1) nos. 14 and 16 German GwG

14. estate agents,

16. traders in goods, persons acting as intermediaries in the trade of works of art and persons storing works of art, where this storage is carried out by free ports.

History of the term in Germany

The term „transaction“ plays a pivotal role in the realm of financial regulation, especially in the context of anti-money laundering (AML) efforts. In Germany, this concept has undergone significant evolution, as seen in various legislative documents.

The Old Version of the German GwG Initially, the German GwG (Old Version) offered a broad definition of a transaction. A transaction was any action intending or effecting the movement of funds or other asset transfers. This wide-ranging definition was instrumental in encompassing a variety of financial activities, not just limited to monetary exchanges but also including the transfer of other types of assets.

German Bundestag Printed Matter 168/08 Moving forward, the BT-Drs. 168/08 highlighted the influence of the Third EC Money Laundering Directive on German law. It restructured the definition of a transaction in the GwG, emphasizing a more inclusive approach. This included not only the acceptance and dispensing of cash but also contract conclusions, banking transactions like transfers or loan repayments, and property rights transfers. This expansion aimed to obsolete the previous restriction to financial transactions, acknowledging the evolving nature of financial crimes.

Latest Version of the German GwG In the latest version of the German GwG the definition of a transaction became even more comprehensive. It included any act or series of connected acts aimed at or resulting in a transfer of funds, asset movements, or property. Notably, it also covered intermediated legal transactions by obliged entities, broadening the scope to capture a wider array of activities potentially related to money laundering.

German Bundestag Printed Matter 18/11555 The 4th AMLD’s implementation, further refined the concept of a transaction. It addressed the practice of „smurfing“ or „structuring,“ where larger transactions are broken into smaller ones to evade detection. The legislation emphasized recognizing connected transactions, even if individually they fall below threshold values, to prevent circumvention of due diligence obligations.

German GwG – Old Version

The old version of the German Money Laundering Act (GwG) defines the term „transaction“as any action that is intended to, or does in effect, result in the movement of funds or the transfer of other assets.

This broad definition encompasses a wide range of financial activities, not limited solely to the exchange of money but also including the transfer of other types of assets.

The key elements of this definition are:

  1. Action: This implies that a transaction involves some form of activity or conduct by one or more parties.
  2. Movement of Funds: This refers to the transfer of money from one party to another, which can include various forms such as bank transfers, cash payments, and electronic money transfers.
  3. Transfer of Other Assets: This extends beyond mere monetary exchanges to include the transfer of different kinds of assets, which could be tangible (like real estate or goods) or intangible (like stocks or intellectual property).
  4. Intent or Effect: The definition covers actions that are either intended to move funds or transfer assets, or actions that actually have that effect, regardless of the initial intention. This means that even if the primary purpose of an action is not to transfer funds or assets, it could still be considered a transaction if it results in such a transfer.

German GwG – Latest Version

The latest version of the German GwG defines the term „transaction“ slightly different:

  1. Broad Definition of Transaction: The Act defines a transaction as any act, or series of connected acts, that are aimed at or result in a transfer of funds, movement of assets, or property. This broad definition encompasses a wide range of financial activities, including but not limited to the simple exchange of money.
  2. Series of Connected Acts: The definition extends to consider several acts as a single transaction if they appear to be connected. This implies that a series of smaller, related acts can collectively be treated as a single transaction under the Act, which is important for identifying and monitoring complex financial activities that might be structured to avoid detection.
  3. Scope Beyond Monetary Transactions: The definition includes not only the transfer of funds but also other forms of asset or property movements. This broad scope is intended to capture a wide array of transactions that could be relevant for money laundering or terrorist financing, including the transfer of tangible or intangible assets.
  4. Inclusion of Intermediated Legal Transactions: Specifically mentioned in this context are the intermediation activities of certain obliged entities (as defined in section 2 (1) nos. 14 and 16 of the GwG). In cases where these entities are involved in intermediation activities, the intermediated legal transaction itself is deemed to be a transaction under the Act. This inclusion is significant because it ensures that transactions facilitated by intermediaries are also covered under the GwG.

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