What exactly does black money mean?
What you should know about money laundering
In money laundering, money from criminal offenses is brought into the normal economic cycle in order to white-wash the black money.
Pursuant to Section 261, Paragraph 1 of the Criminal Code, anyone who hides an object that originates from one of the acts listed below, conceals its origin or endangers the discovery, decay, determination of the origin, seizure or confiscation of such an object, is liable to prosecution for money laundering even thwarted.
Preventing the infiltration of illegal funds
The aim of the regulation is, on the one hand, to prevent the infiltration of illegal funds into the economic cycle and, on the other hand, to isolate the predecessor with his assets. Unlawful acts within the meaning of Section 261, Paragraph 1, Sentence 1 of the Criminal Code, which may be linked to the criminal offense of money laundering, are crimes within the meaning of Section 12, Paragraph 1 of the Criminal Code, i.e. offenses that are threatened with a minimum penalty of one year.
This also includes: Bribery and corruption (Sections 332, 334 of the Criminal Code), the formation of criminal associations (Section 89a of the Criminal Code, Section 129 of the Criminal Code, Section 129a Paragraphs 3 and 5 of the Criminal Code), individual narcotics offenses as well as commercial or gang-related offenses from the core area of criminal law (e.g. theft, receiving stolen goods, embezzlement, fraud and subsidy fraud, breach of trust).
Tax evasion as a predicate offense to money laundering
Money from certain serious tax crimes can be subject to money laundering. In December 2001, with the introduction of the Law to Combat Tax Reduction, serious tax evasion was sanctioned for the first time as a suitable predicate offense of money laundering with imprisonment.
Since January 1, 2008, tax evasion (Section 370 AO), which has been committed on a commercial basis or by a member of a gang that has joined forces to continue the commission of tax evasion, has also been eliminated.
In these cases, this also applies to tax refunds and payments wrongly received, and in cases under Section 261, Paragraph 1, Sentence 2, No. 3 of the Criminal Code also to an item for which taxes have been evaded.
The first two prerequisites, of which only one has to be met, are quickly met:
There is commercial activity if a source of income is to be created from which a not insignificant part of the livelihood is to be made.
Affected persons act as a member of a gang when three people get together to commit a criminal offense. This can already be the case if a married couple uses the help of a third party (e.g. a tax advisor) who knows about the planned tax evasion.
This results in verification difficulties for investigating authorities: The term “object” in the sense of money laundering is not clearly defined. In addition to money, other incriminated objects and rights as well as surrogates are recorded.
In the case of tax evasion as a predicate offense to money laundering, it is unclear what object the tax evasion must be. The situation is clear for tax advantages that are obtained without justification under Section 370 (3) No. 1 AO.
Here the perpetrator receives a pecuniary advantage in the form of the refunded taxes. The situation is different with the other types of tax evasion. Here the perpetrator does not receive a specifically definable asset component, but only the possibility of unlawful non-payment of the tax debt.
The advantage is that he does not have to pay the tax debt from his assets. In this regard, it has been disputed since the introduction of the standard whether an “object” can still be seen in it.
Even the later amendment of the standard in such a way that it also applies to “assets with regard to which taxes have been evaded” does not solve the problem in our opinion. The tax savings are merely a - indistinguishable - computational or virtual advantage.
Otherwise, in these cases, the tax evasion would contaminate the entire property. That in turn would mean that the cashier in the supermarket would make herself liable to prosecution if she knew that the customer was being investigated at the checkout.
The object resulting from the money laundering offense is therefore limited to the taxes saved from the specific tax evasion. However, this only limits the amount in the abstract and the question of which specific part of the property is contaminated remains unanswered, which is likely to pose problems for the investigating authorities.
Modern money laundering uses classic templates
Money laundering: black turns gray into white
Money laundering often brings illegal revenue to a legal company. These are declared as income and then taxed normally.
The path that the Mafia likes to use still leads through bars and pizzerias. What sounds like something out of a gangster epic from the 70s and 80s is also widespread in Germany.
For example, a pizzeria that barely has any guests but has existed for years is inevitably under the suspicion that it could be a money laundering shop.
The landlord uses the black money to buy drinks and groceries every week, mainly from a subsidiary. However, a gastronomic success is not wanted at all and the goods are secretly resold to colleagues.
However, in the books of the restaurant, bogus receipts from guests who were never present appear. In this very simple way, the black money is washed white. For this reason, when checking the books, tax authorities often calculate exactly whether, for example, the relationship between sausage, cheese and flour is correct.
Accountants and tax advisors should also pay particular attention to whether bogus companies are used for money laundering. In this context, high cash receipts, high sales that do not match the use of materials and transactions that have nothing to do with the company's purpose can be conspicuous.
Money laundering: black turns gray into white
A little more complicated, but no less effective, money laundering works on a large scale. First of all, cash is converted into "bank money". Illegally acquired capital is deposited into bank accounts; in the past often in Luxembourg, in the Principality of Monaco, in Liechtenstein or in Switzerland.
The foreign countries are very attractive here than the domestic regions, because in Germany the identity of the depositors has to be checked by banks from an amount of 15,000 euros.
This process turns black money into “gray money”. Now the origin of the money of accomplices is obscured by numerous transactions across the world. Thus, the tax authorities can no longer understand the flow of money.
In the following stage, the money is reinvested. This can take the form of company investments, hotels or construction projects, for example.
Through profit distributions or sales, the former black money has now turned into pure white income from "respectable" business people.
Punishment for money laundering - from fines to imprisonment
German criminal law provides for a prison sentence of three months to five years for the offense of money laundering. In particularly serious cases, a prison sentence of between six months and ten years can be imposed.
This is usually the case when the perpetrator is acting as a member of a gang. In minor cases, money laundering can be punished with a fine or imprisonment for up to two years.
Pursuant to Section 261 (2) of the Criminal Code, anyone who procures an item named in Section 261 (1) of the Criminal Code for himself or a third party (Section 261 (2), No. 1 of the Criminal Code), stores it or keeps it for himself, must also expect a penalty for money laundering or used by a third party, provided that the origin was known at the time at which he obtained the object (Section 261 (2) No. 2 StGB).
For a criminal liability, not only the intent is relevant, because who in cases of § 261 Abs. 1 and 2 StGB does not recognize frivolously that the object originates from one of the illegal acts mentioned in § 261 Abs. 1 StGB, has to face a prison sentence of Expect up to two years or a fine.
Carelessness is understood as an increased degree of negligence, comparable to gross negligence in civil law. It is also based on tax offenses, for example the frivolous tax reduction in accordance with Section 378 AO.
Carelessness is given if the person concerned has not recognized the possibility of a factual realization out of particular recklessness or complete indifference, even though it has almost imposed itself on him.
Mere ignorance does not always protect against punishment when it comes to money laundering and tax evasion.
Criminal liability for money laundering
Money laundering refers to the reintroduction of illegal black money into the legal economic and financial cycle.
The illegal money is either the result of illegal activities (for example from drug or arms trafficking, possibly also from tax evasion) or is intended to finance illegal activities.
Accordingly, property or rights are often the subject of tax evasion.
The original version of the offense of money laundering dates back to 1992. At that time there was no reference to either customs or tax offenses.
In view of the increasing expansion of customs and tax offenses, the offense of money laundering has been subject to increasing changes.
In particular, cases of tax evasion now also fall under the scope of money laundering if the tax evasion was committed on a commercial basis or as a gang.
Since tax evasion can be committed not only in the assessment procedure, but also in the field audit, in connection with the conclusion of an understanding in the actual sense, in legal remedies or before the tax court, tax evasion is becoming increasingly important as a predicate offense to money laundering.
The development shown leads in particular to the fact that if the offense of money laundering is fulfilled, the suspicion of the commission of tax evasion is at least close.
If there is such a suspicion of tax evasion, records obtained by the criminal police and the public prosecutor's office as part of the money laundering investigation are passed on to the tax authorities.
Furthermore, records and information can be used for criminal tax proceedings or for the determination of a back tax payment.
In this case, there may be problematic points of contact with the legal and tax advisory professions. This applies, for example, if a tax evader turns to a lawyer or tax advisor about possible investigations on suspicion of tax evasion.
In this case, in which a consultant and a tax evader enter into a business relationship, it is not unproblematic, especially with regard to the consultant fee, how receiving a consultant fee from a tax evader affects.
According to § 261 Abs. 1 S. 2 Nr. 4 b, S. 3 of the Criminal Code (StGB), anyone who knowingly or recklessly incurs the expenses saved by tax evasion as a result of commercial or gang tax evasion according to § 370 Tax Code (AO) and hides unlawfully obtained tax refunds and rebates, disguises their origin or thwarts or endangers the determination of the origin, the discovery, the forfeiture, the confiscation or the seizure or procured or kept for themselves or a third party or used for themselves or a third party.
It follows from this that, in addition to the tax refunds and reimbursements obtained illegally through tax evasion, saved expenses are also contaminated.
As a result, the assets that were obtained through tax evasion can usually no longer be distinguished from the other assets of the tax evader.
Self-disclosure and money laundering
When advising in the context of a voluntary disclosure, funds that do not explicitly come from unproblematic sources should not be accepted by the advisor without further ado.
In this context, it should be noted that it is unclear whether the privileges for criminal defense lawyers apply here. With an effective voluntary disclosure, in our opinion, the predicate offense of money laundering also becomes obsolete.
It is well known that the term money laundering does not mean cleaning banknotes. Modern people also know that money laundering is illegal and that it should conceal the origin of the money.
Put simply, money laundering is a dubious cycle in the monetary system.
Nowadays there are several ways in which illegally acquired capital can be cleaned up. According to estimates by the Federal Intelligence Service, around 100 billion euros from betting fraud, arms trafficking, illegal prostitution and drug deals are washed clean within the European Union alone.
Tax advisors are confronted with stricter reporting requirements in the event of suspected money laundering. Where previously an expressly justified suspicion was a prerequisite, the tax advisor must now report every suspected case of money laundering in which his advice is used himself for the purpose of money laundering.
Legal advice from lawyers specializing in professional law for tax advisors is therefore recommended in cases of doubt.
Relevant information when establishing identity
In the case of a natural person, Section 4 (3) No. 1 of the GwG stipulates that their name, place and date of birth, nationality and address must be recorded.
If it is a partnership or a legal person, Section 4 (3) No. 2 GwG provides that the company, name or designation, legal form, if available, register number, address of the seat or main branch and the names of the legal representatives or Members of the representative body are to be raised by the tax advisor.
In the event that the legal representative or a member of the representative body is a legal person, the tax advisor must collect their company name, name or designation, legal form, address of the main branch or registered office and, if available, the registration number.
Subject to the provisions of Section 6 (2) No. 2 of the GwG, the identification of natural persons should be based on a valid official photo ID.
Section 4 (4) No. 1 of the GwG stipulates that the document must be suitable for fulfilling the passport and identification requirement in Germany, for example in particular by means of a passport, identity card or passport or passport approved or recognized in accordance with foreigner law provisions ID replacement. It is easiest for tax advisors to make a copy of your ID.
In the case of legal entities or partnerships, in accordance with Section 4 (4) No. 2 of the GwG, an extract from the commercial or cooperative register or a comparable official directory or register, founding documents or equivalent conclusive documents or the inspection of the register and directory data are used to determine the identity.
Recording and archiving
Insofar as there is a duty of care under the Money Laundering Act, the data and information collected about contractual partners, beneficial owners, business relationships and transactions carried out must be recorded (Section 8 (1) sentence 1 of the GwG).
In the cases of Section 4 (4) sentence 1 no. 1 of the GwG, the type, number and issuing authority of the document submitted for identity verification must also be recorded (Section 8 (1) sentence 3 of the GwG).
The creation of a copy of the document with which the identity check was carried out in accordance with Section 4 Paragraph 4 Sentence 1 No. 1 and 2 of the GwG, in accordance with Section 8 Paragraph 1 Sentence 3 of the GwG, is deemed to be a record of the information contained therein.
Should a renewed identification according to § 4 Abs. 2 GwG be refrained from, the tax advisor must nevertheless record the name of the person to be identified and the fact that this person was identified on an earlier occasion.
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