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Real estate in Germany – Money laundering laws tightening

Posted by Tanya Yujelevski on 17/11/2020

Following money laundering cases affecting real estate in Germany: toughening of laws

In order to maintain maximum transparency in the real estate market, Germany decides to toughen the laws once again

With a view to preventing money laundering cases, in which real estate is bought with dubious money, Germany sets new laws. According to this, notaries will have to refuse notarization under certain conditions.

The German Bundestag has drafted new laws aimed at increasing the level of transparency in real estate purchases. Among other things, the purpose of the new laws is to better monitor foreign investment and to demand real estate agents to submit better-detailed reports in a general effort to combat money laundering in Germany. The Bundesrat must approve these laws first.

According to a report by FIU, the financial intelligence unit, the real estate market is particularly vulnerable in the context of questionable financial operations: in practice, very few transactions are reported. Of the 77,252 cases reported on suspicion of money laundering or terrorist financing, 76,137 were from the real estate sector and only 597 were related in other fields. In most cases, these reports came not from the brokers but from the bank.

According to the German Financial Intelligence Unit, most of the suspicious activity in the real estate business comes from cash payment. In this way, the source of the capital is unknown, or is discovered as a result of extensive investigation. Another danger inherent in the real estate is the mispricing of the cost of the property in either direction. In such cases, a window of opportunity for selling the property was created legally, but with room for financial maneuvering.

For example, as revealed in Transparency International’s research, € 30 billion were laundered for real estate in Germany in 2017 alone – partly through a drug dealing mafia. Only 77 properties with a total cost of € 9 million were confiscated in recent times by the authorities, since it was apparently acquired through illegally obtained capital, which demonstrates well the need for tougher laws in the field.

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