How are ‘money laundering’, ‘terrorism financing’ and ‘fraud’ legally defined in your jurisdiction?
Money laundering The German Anti-money Laundering Act does not define ‘money laundering’. However, in the materials pertaining to the act, the legislator states that money laundering is the infiltration of the legal financial and economic cycle by financial assets obtained by terrorists and criminal organisations for the purpose of covering up their origin. The value of the financial assets shall be maintained, but the prosecution authorities are deprived access to them. Therefore, ‘money laundering’ means any action that aims to conceal the existence, origin or purpose of financial assets that result from illegal businesses with the purpose to let such assets appear as legitimate revenue.
Terrorism financing ‘Terrorism financing’ means the financing of terrorist groups. The money used to commit terrorist attacks often derives from criminal activities, but can also originate from legal sources. In these cases, the owner of the assets knows about the purpose of the financing.
Fraud ‘Fraud’ is defined as the damage to the property of another by causing or maintaining an error by pretending false facts or by distorting or suppressing true facts with the intent of obtaining an unlawful material benefit for the perpetrator him/herself or a third person.
Principal and secondary offences
What are the principal and secondary offences in relation to money laundering, terrorism financing and fraud?
Money laundering An offence in relation to money laundering is the hiding of the proceed of an unlawful act listed in the second sentence of Section 261(1) of the Criminal Code, the concealing of its origin or the obstruction or endangerment of the investigation of its origin, its being found, its confiscation, its deprivation or its being officially secured (Section 261(1)). Equally punished is who procures such an object for him/herself or a third person, or keeps such an object in his or her custody, or uses it for him/herself or a third person if he or she knew the origin of the object at the time of obtaining possession of it (Section 261(2). The attempt is punishable as well (Section 261(3). An ‘especially serious case’ as described in Section 261(4) typically occurs if the offender acts on a commercial basis or as a member of a gang whose purpose is the continued commission of money laundering.
Terrorism financing The gathering, acceptance or provision of financial assets with the knowledge or intent that they will be used to commit a ‘terrorist offence’ as defined in Points 1 to 8 of the first sentence of Section 89c(1) of the Criminal Code is an offence in relation to terrorism financing. In cases of Points 1 to 7, the offence must intimidate the population substantially or compel unlawfully a public authority or an international organisation with force or threat of force to eliminate the political, constitutional, economic or social structure of a state or an international organisation. Additionally, it must be an intentional act that, given its nature or its context, may seriously damage a state or an international organisation (Sections 89c(1) and (2)).
Fraud The offence in relation to fraud according to Section 263(1) of the Criminal Code is the damaging of the property of another by causing or maintaining an error by pretending false facts or by distorting or suppressing true facts with the intent of obtaining for him/herself or a third person an unlawful material benefit. In accordance with Section 263(2), the attempt is punishable as well. An ‘especially serious case’ within the meaning of Section 263(3) typically occurs if the offender acts on a commercial basis or as a member of a gang whose purpose is the continued commission of forgery or fraud, if he or she:
- causes a major financial loss or if he or she acts with the intent of placing a large number of persons in danger of financial loss by the continued commission of offences of fraud;
- places another person in financial hardship;
- abuses his or her powers or position as a public official; or
- pretends that an insured event has happened after he or she, or another, has for this purpose set fire to an object of significant value or destroyed it, in whole or in part, through setting fire to it, or caused the sinking or beaching of a ship.
In cases of computer fraud, the action must refer to the influencing of the result of a data processing operation through incorrect configuration of a program, use of incorrect or incomplete data, unauthorised use of data or other unauthorised influence on the course of the processing (Section 263a(1) of the Criminal Code). Preparatory acts, such as writing computer programs, are covered by Section 263a(3).
‘Subsidy fraud’, as defined in Section 264(1) of the Criminal Code, requires the submission of incorrect or incomplete statements about facts relevant for granting a subsidy to the offender him/herself or another that are advantageous for him/herself or the other, to the subsidy giver, the use of an object or monetary benefit that is restricted by law or by the subsidy giver in relation to a subsidy contrary to that restriction, the withholding – contrary to the law relating to grants of subsidies – of information about facts relevant to the subsidy from the subsidy giver, or the use of a certificate of subsidy entitlement or about facts relevant to a subsidy, which was acquired through incorrect or incomplete statements in subsidy proceedings. An ‘especially serious case’ typically occurs, according to Section 264(2) of the Criminal Code, if the offender acquires, out of gross self-seeking or by using counterfeit or falsified documentation, an unjustified large subsidy for him/herself or another, abuses his or her powers or position as a public official, or uses the assistance of a public official who abuses his or her powers or position.
The offence in relation to capital investment fraud according to Section 264a(1) of the Criminal Code is the submission of incorrect favourable statements or the concealment of unfavourable facts in prospectuses or in representations or surveys about the net assets to a considerable number of persons in relation to circumstances relevant to the decision about acquisition or increase. The submission or concealment has to be made in connection with the sale of securities, subscription rights or shares intended to grant participation in the yield of an enterprise or an offer to increase the capital investment in such shares. According to Section 264a(2) of the Criminal Code, this also applies if the act is related to shares in assets that an enterprise administers in its own name but for the account of a third party.
Insurance fraud covers offenders who damage, destroy, impair the usefulness of, disposes of or supplies to another an object that is insured against destruction, damage, impairment of use, loss or theft in order to obtain for him/herself or a third party a payment from the insurance. Any attempt to do so is also punishable under Section 265(2).
How are predicate offences defined?
According to second sentence of Section 261(1) of the Criminal Code, ‘predicate offences’ of money laundering are either felonies (ie, any unlawful act punishable by a minimum sentence of one year’s imprisonment under Section 11(1) of the code) or misdemeanours. The latter consist of:
- taking bribes meant as an incentive to violating one’s official duties (Section 332), giving bribes as an incentive to the recipient’s violating his or her official duties (Section 334), drug trafficking (Section 29 (1)(1) of the Drugs Act) and trafficking basic material that can be used to produce drugs illegally (Section 19(1)(1) of the Drug Precursors (Control) Act);
- professional smuggling (Section 373 of the Fiscal Code) and tax evasion (Section 374(2) of the Fiscal Code);
- misdemeanours committed on a commercial basis or by a member of a gang whose purpose is the continued commission of such offences – namely, counterfeiting of debit cards, cheques and promissory notes (Section 152a of the Criminal Code), controlling prostitution (Section 181a of the CriminalCode), human trafficking (Section 232), forced prostitution (Section 232a), forced labour (Section 232b), labour exploitation (Section 233), exploitation taking advantage of a deprivation of liberty (Section 233a), theft (Section 242), unlawful appropriation (Section 246), blackmail (Section 253), handling stolen goods (Section 259), fraud (Sections 263 to 264), fraud relating to sport bets (Section 265c), embezzlement and abuse of trust (Section 266), forgery (Section 267), forgery of data intended to provide proof (Section 269), causing wrong entries to be made in public records (Section 271), organising unlawful gaming (Section 284), taking and giving bribes in commercial practice (Section 299), unlawful disposal of waste (Section 326), unlawful handling of radioactive substances, dangerous substances and goods (Section 328) and making false entries in public records (Section 348); smuggling people into the country (Section 96 of the Residence Act), Incitement to file an incorrect application for asylum (Section 84 of the Asylum Procedure Act), tax evasion (Section 370 of the Fiscal Code), as well as committing the acts listed under the criminal provisions of the Securities Trading Act (Section 119), the Act on the Protection of Trademarks and other Symbols (Sections 143 to 144), the Act on Copyright and Related Rights (Sections 106 to 108b), the Utility Models Act (Section 25), the Design Act (Sections 51 and 65), the Patent Act (Section 142), the Semiconductor Protection Act (Section 10) and the Plant Variety Rights (Protection) Act (Section 39); and
- preparing a serious violent offence endangering the state (Section 89a of the Criminal Code), forming criminal organisations (Section 129 of the Criminal Code), forming terrorist organisations (Section 129a) and forming criminal and terrorist organisations abroad (Section 129b).
De minimis rules
What de minimis rules apply to money laundering, terrorism financing and fraud offences?
Money laundering There are no de minimis rules applying to money laundering. The German legislator wanted to achieve a complete isolation of articles that are the product or proceeds of a crime named in Section 261(1) of the Criminal Code, even in cases of bagatelles or daily business transactions.
Terrorism financing Section 89c(5) of the Criminal Code provides that the penalty range is decreased to a custodial sentence of three months up to five years if the financial assets of an act listed in Sections 89c(1) or (2) is of low value. The baseness is defined in accordance with Section 248a. Therefore, the limit is €50 if the offence is committed in Germany. When the offence is committed abroad, the limit has to be specified in consideration of the economic conditions abroad.
Fraud According to Section 263(4), Section 243(2) shall apply mutatis mutandis. Accordingly, an especially serious case can be excluded if the asset components are of minor value (ie, if they do not exceed €50). Additionally, Section 248a of the Criminal Code (which also applies mutatis mutantis) states that, if the asset components are of minor value, the offence may be prosecuted only upon request, unless the prosecuting authority considers propio motu that prosecution is required because of special public interest.