BaFin Issues New Guidance to Enhance Quality of Suspicious Activity Reports

New Regulatory Framework for SARs

Germany's financial watchdog, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), has issued new guidance to firms under its supervision, focusing on enhancing the quality of Suspicious Activity Reports (SARs). This initiative, undertaken jointly with the Financial Intelligence Unit (FIU), seeks to provide clarity and improve the effectiveness of anti-money laundering (AML) and counter-terrorist financing (CFT) measures across the German financial sector. The updated Interpretation and Application Guidance on the German Anti-Money Laundering Act (AuA 2024) was published on November 29, 2024, with the updated guidance taking effect on February 1, 2025.

Clarifying 'Promptness' and 'Completeness'

A core objective of the new guidance is to clarify the concepts of 'promptness' (Unverzüglichkeit) and 'completeness' (Vollständigkeit) in the submission of SARs. Firms are now expected to file reports on the same working day or the next working day at the latest, once facts indicating potential money laundering or terrorist financing are identified. This timeline allows for necessary background information gathering to ensure the report is comprehensible and actionable by the FIU. The guidance emphasizes that SARs must be 'comprehensible' and 'understandable on a stand-alone basis', meaning they should contain sufficient relevant information on persons, organizations, accounts, and transactions.

Key aspects highlighted in the new guidance include:

• Submission of SARs in structured formats, either via the reporting form or the XML schema of GoAML.
• Clarification that a discrepancy report to the transparency register under Section 23a of the Anti-Money Laundering Act does not automatically necessitate a SAR.
• Guidance on transaction suspension: while transactions can generally proceed after the third working day following a SAR submission if no prohibition is issued, institutions may need to continue suspension if indications of money laundering or terrorism financing persist.
• Acknowledgement that a SAR is not required if further factual clarification is needed to determine the reporting obligation, though extensive investigation of all facts is not mandated.

Impact on Supervised Entities

BaFin supervises a broad range of financial entities in Germany, including approximately 2,700 banks, 800 financial services institutions, and over 700 insurance undertakings, alongside asset management companies, payment institutions, and e-money institutions. The regulator's focus on SAR quality stems from past issues, including sanctions against financial institutions for delayed or omitted SAR filings. Conversely, BaFin has also penalized firms for submitting an excessive volume of 'unsubstantiated' SARs, underscoring the need for targeted and high-quality reporting. This new guidance aims to streamline the reporting process, ensuring that the FIU receives pertinent and timely information to effectively combat financial crime. AML officers are now also tasked with maintaining written documentation for monitoring activities.