Determination: In Place But Needs Improvement
Germany’s domestic legislative framework is in place and contains many of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures, but it needs improvement in relation to the scope of Reporting Financial Institutions required to report information (SR 1.1), the scope of Financial Accounts required to be reported (SR 1.2), and the framework to enforce the requirements (SR 1.4). More specifically, Germany’s legislative framework provides for jurisdiction-specific non-Reporting Financial Institutions and Excluded Accounts that do not meet the requirements, and there are insufficient sanctions related to the making and collection of self-certifications.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Germany has defined the scope of Reporting Financial Institutions in its domestic legislative framework in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. More specifically, Germany provides for seven jurisdiction-specific Non-Reporting Financial Institutions that are not in accordance with the requirements. The definition of Reporting Financial Institutions, including the provision of Non-Reporting Financial Institutions, is material to the proper functioning of the AEOI Standard, although it should be noted that several of the incorrect entries are likely to have a very limited impact.
Recommendations:
Germany should amend its domestic legislative framework to remove four entries from its jurisdiction-specific list of categories of Non-Reporting Financial Institutions as they are Non-Financial Entities and should therefore be treated as such under the AEOI Standard. The entries are: i) “bad banks”; ii) leasing entities; iii) factoring entities; and iv) Chambers of Commerce.
Germany should amend its domestic legislative framework to remove a further three entries from its jurisdiction-specific list of categories of Non-Reporting Financial Institutions as they do not meet the requirements. The entries are: i) foundations; ii) closed ended funds; and iii) Building and Loan Associations.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Germany has defined scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. More specifically, Germany provides for 19 jurisdiction-specific Excluded Accounts that are not in accordance with the requirements. The definition of Financial Accounts, including the provision of Excluded Accounts, is material to the proper functioning of the AEOI Standard, although it should be noted that several of the incorrect entries are likely to have a very limited impact.
Recommendations:
Germany should amend its domestic legislative framework to remove 19 entries from its jurisdiction-specific list of categories of Excluded Accounts as they are either not Financial Accounts or do not meet the requirements for exclusion from being Financial Accounts. The entries are: i) (OTC Derivatives and similarly derived non-depository instruments; ii) letters of credit; iii) deposits without financial instruments; iv) customer cards; v) personal credit; vi) liens; vii) corporate mortgages; viii) credit lines; ix) factoring products; x) leasing products; xi) receivables in cash management; xii) passive loans, in particular promissory note (bond) loans; xiii) Riester accounts; xiv) collateral orders; xv) financing arrangements; xvi) credit line accounts; xvii) time-limited overdraft facilities; xviii) pocket-money accounts; and xix) escrow/securities accounts managed by lawyers, auditors, chartered accountants (tax advisers) and insolvency administrators.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Germany has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
Recommendations:
No recommendations made.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Germany has a legislative framework in place to enforce the requirements in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. More specifically, Germany’s legislative framework:
does not impose sanctions on Account Holders and Controlling Persons for the provision of a false self-certification; and
does not incorporate measures to ensure that self-certifications are always obtained and validated by Reporting Financial Institutions and in particular in the limited circumstances where valid self-certifications may be obtained after the opening of the account as required,
These are key elements of the required enforcement framework and are therefore material to the proper functioning of the AEOI Standard.
Recommendations:
Germany should amend its domestic legislative framework to include sanctions on Account Holders and Controlling Persons for the provision of a false self-certification.
Germany should amend its domestic legislative framework to include strong measures to ensure that valid self-certifications are always obtained for New Accounts and, more specifically, in the limited circumstances where a valid self-certification is permitted to be obtained after the opening of a New Account.
