The German cabinet adopted the draft Sanctions Enforcement Act II on 26 October 2022. The bill, which was prepared jointly by the Federal Ministry of Finance and the Federal Ministry for Economic Affairs and Climate Action, reorganises the German government’s structures for enforcing sanctions. In the future, sanctions will be implemented even more effectively. The German Bundestag adopted the Sanctions Enforcement Act II on 1 December 2022, and the Bundesrat approved the act on 16 December 2022.
The Sanctions Enforcement Act I, which took effect in May 2022, provided the legal basis for short-term enforcement measures, including new powers for investigating and freezing assets. The Sanctions Enforcement Act II now aims to make structural improvements to (a) the operative implementation of sanctions and (b) anti-money laundering measures.
Sanctions will be implemented more effectively in the future in order to ensure that they have a swift impact and help defend peace in Europe. The bill also reinforces Germany’s efforts to fight money laundering, with far-reaching measures and a strategic shift to “follow the money”.
What specific improvements will the new legislation make?
- The powers to investigate and freeze assets will be transferred from Land governments to the federal government and placed under the remit of a new Central Office for Sanctions Enforcement. This will enable nationwide coordination of sanctions enforcement in Germany.
- A register of sanctioned persons and assets will be established that makes it easier to trace ownership information (including information on beneficial ownership).
- Basic land register data on owners, land parcels and land register files will be added to the transparency register and assigned to the entities listed there.
- A system for submitting tip-offs about potential crimes will be established.
- United Nations sanctions lists will apply automatically in Germany (for a temporary period of up to five days) in order to prevent delays in the enforcement of sanctions.
- Cash payments for real estate will no longer be permitted. This will minimise money laundering risks in the real estate sector.
In August 2022, Finance Minister Christian Lindner unveiled the outlines of a plan to fight financial crime and enforce sanctions more effectively in Germany. One of the main components of the plan is to pool the most important powers within the remit of a new federal authority. The overall aim is to make decisive progress in curbing financial crime in Germany.