BaFin’s recently published consultation on an amendment to its Application and Interpretation Guidance (AuA) on the Money Laundering Act contains, among other things, significant changes for insurance holding companies and other companies under the VAG (see PayTechLaw of 10 July 2024).
Changes for insurance holding companies
Insurance companies within the meaning of Art. 13 No. 1 of Directive 2009/138/EC (Solvency II) are subject to the Money Laundering Act (GwG) and the money laundering regulations of the Insurance Supervision Act (VAG) as obliged entities if they offer products or services that fall under the activities listed in Section 2 (1) No. 7 GwG. These include life insurance activities (insofar as they are subject to Solvency II), accident insurance with premium refunds, loans granted within the meaning of Section 1 (1) sentence 2 no. 2 KWG and capitalisation products.
The new consultation draft on the BaFin AuA, which is expected to apply from January 2025, is now also aimed for the first time at
- Insurance holding companies in accordance with Art. 212 (1) f Solvency II,
- Companies pursuant to § 293 para. 4 VAG and
- Companies with a controlling influence over an insurance company within the meaning of the GwG or a pension fund pursuant to section 236 (1) sentence 1 VAG
as obliged entities under money laundering law.
As a result, the AuA now also includes companies whose parent company holds interests in subsidiaries subject to anti-money laundering requirements, domestic companies that are not subject to VAG supervision and whose main activity is the acquisition and holding of direct or indirect interests in insurance or reinsurance companies or pension funds, or companies with a controlling influence over an insurance company or pension fund.
Of course, BaFin is not expanding the group of obliged entities here on its own authority (keyword: administrative and supervisory authority, but not legislator), but is anticipating a legislative expansion of the group of obliged entities in the insurance sector (PTL of 21 May 2024 and 10 July 2024), which is pending at both national and EU level. The German legislator intends to make insurance holding companies and other VAG companies obliged entities under money laundering law with the draft law to improve the fight against financial crime (FKBG). Under the AML-R, insurance holding companies and mixed insurance holding companies are classed as financial institutions and are therefore per se obliged entities under money laundering law.
Effects on practice
For the insurance holding companies and other VAG companies newly addressed in the BaFin consultation draft, it should be noted that they are only subject to the obligations under money laundering law with regard to the activities listed in the new section 2 para. 1 no. 7 a-c GwG n.F. to be created with the FKGB. listed in the new section 2 para. 1 no. 7 a-c of the AMLA, i.e. ultimately their holding activities, unless they already have to fulfil anti-money laundering obligations due to other obligated party status (e.g. because they not only carry out holding activities, but also other operational business with AMLA relevance).
As a result, the legislator is likely to aim for the same programme of obligations for insurance holding companies as for financial holding companies and mixed financial holding companies in accordance with section 25l KWG (soon to be section 2 para. 1 no. 2a GwG following the introduction of the FKBG): Own internal security measures, own compliance with due diligence obligations under money laundering law, own record-keeping and retention obligations, in each case relating to the AMLA-relevant holding activity.
Insurance holding companies and other VAG companies must register with BaFin, stating their respective status as obliged entities.
Increased monitoring of insurance companies by BaFin in the context of preventing money laundering and combating terrorism
Addressing insurance holding companies and other VAG companies in the AuA consultation draft is in line with BaFin’s recent administrative practice. As recently as the end of June 2024, it publicly called for more controls vis-à-vis those subject to AMLA obligations in the insurance sector and criticised alleged weaknesses, particularly in the areas of risk analysis, the recording of certain product risks and the continuous monitoring of business relationships.
BaFin is now announcing a stronger focus on the monitoring of insurance companies, especially the branches of foreign insurance companies operating in Germany, as these are not subject to any direct reporting obligation to BaFin with regard to their measures to prevent money laundering and terrorist financing.
Outlook
The tightening of anti-money laundering controls by BaFin, particularly with regard to insurers, is clearly noticeable. Insurers subject to AMLA must expect increasing expectations of their preventive measures. There is also an opportunity to comment on the AuA consultation draft until 9 August 2024. As no transitional periods are envisaged for the validity of the revised AuA, it is advisable to deal with the changes now and adapt internal processes accordingly.
