European Gaming Lawyer magazine EGL_Spring2017_opt | Page 8

Implementing the 4th AML Directive:
New challenges ahead for
the German market
by Dr Joerg Hofmann, Dr. Matthias Spitz and Jessica Maier,
”I
’ve lost a million and a half on the
horses and dice in the last two years.
And the funny part is, I still like ‘em,
and if someone handed me another
million I’d put it right in the nose
of some horse that looked good to me.”
(Al Capone on his gambling habit)
Joerg Hofmann
Matthias Spitz
Jessica Maier
Introduction
Al Capone certainly is not the kind of patron modern-
day online gambling operators would wish to form part
of their customer base. Yet, so far horse-race betting
has not been subject to anti-money laundering (‘AML’)
requirements under federal law in Germany and this
may well stay like this under the future German AML
regulation that is to enter into force by June 2017.
Hence, Al Capone’s heirs would still be able to enjoy
a gamble on German racetracks. In contrast, retail
and online sports betting will be subject to strict AML
requirements from June 2017 onwards.
Implementing the 4th AML Directive of the
European Union 1 (the ‘4AMLD’) the Federal
Government of Germany approved a draft AML Act
on 22 February 2017 and initiated the parliamentary
procedure. Th is article will summarise the key elements
of the draft law and the challenges the gambling
industry may face implementing them in practice.
Status Quo
Under the current AML Act, only two types of
gambling operations are subject to AML requirements
as per the federal AML Act: Bricks-and-mortar
casinos and operators of online gambling. Th ese are
obliged to implement internal safeguards against
money laundering (‘ML’). Th ese include internal
policies to combat ML, which have to be created and
periodically reviewed by an AML offi cer who has to
be appointed, together with a deputy AML offi cer.
Further key requirements include the vetting and
1 Directive (EU) 2015/849 of 20 May 2015 on the prevention of the use of the
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8 | European Gaming Lawyer | Spring Issue | 2017
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training of staff , monitoring of customer transactions
and the establishment of implementing procedures for
suspicious transaction reporting (‘STR’). Customer due
diligence – commonly also referred to as “know-your-
customer” (‘KYC’) has to be applied in bricks-and-
mortar casinos for transactions exceeding 2,000.– EUR,
i.e. single or combined purchases of chips in that
amount. For online gambling operations, the current
law already prescribes a general KYC obligation upon
customer registration, i.e. irrespective of a certain
transaction threshold. Consequently, it would have
been a surprise if the German legislator reverted to the
2,000.– EUR threshold provided for in the 4AMLD for
KYC obligations in relation to gambling services now
when implementing the directive into national law.
Scope of the new law
Consequently, the online gambling market in Germany
continues to be subject to AML requirements
under the new law, and KYC will have to be applied
irrespective of a certain threshold of online gaming
transactions being met.
In contrast – and this is where Mr Al Capone
enters the scene again –, the draft AML Act that
was approved by the Federal Government provides
for considerable exemptions for other gambling
sectors. Th ese include:
1) Slot machine operations in gaming halls
and restaurants;
2) Land-based horse-race betting at racetracks;
and
3) Retail lottery sales.
Th e parliamentary explanatory notes attached to
the draft AML Act provide some sketchy considerations
as to why the above should be entirely (!) excluded
from the scope of the new law. Th ese mainly focus
on a “rather low ML risk” being associated with these
products which allegedly allows for these products to
be excluded from the scope of the law. While this may
be plausible from a product-centred point of view, the
4AMLD stipulates that Member States may decide to