The application of Regulation (EU) 2024/1624 (“AMLR”) from 10 July 2027 marks a significant shift in the European anti-money laundering framework. One issue of particular relevance for German corporate structures concerns holding companies that include financial institutions within their shareholding structure. Under the current German Anti-Money Laundering Act (Geldwäschegesetz, “GwG”), such holding companies may benefit from a specific exemption that excludes them from the scope of AML obligations. With the AMLR entering into force, this exemption will no longer be available. As a result, numerous holding companies may (potentially) become an obliged entity and will be subject to AML requirements.
Executive summary
1. From 10 July 2027, the AMLR will significantly change the treatment of holding companies from an AML perspective.
2. Under the current GwG, holding companies benefit from a de minimis exemption permitting financial sector participations of up to 5% without triggering AML obligations.
3. The AMLR eliminates this exemption: any holding company with a subsidiary qualifying as a credit or financial institution will be classified as a “financial mixed activity holding company” and become an obliged entity.
4. Whilst Article 6 AMLR offers potential relief for marginal financial activities, its application to holding structures remains uncertain. Affected entities should assess their corporate structures and engage with legislators regarding proportionate implementation.
The current regime under the GwG
I. The general rule as regards financial institutions
Under the GwG, “financial institutions” (Finanzunternehmen) are obliged entities pursuant to section 2 para. 1 no. 6 GwG and subject to the requirements imposed by the GwG. A financial undertaking is defined as an undertaking whose main activity consists of acquiring, holding, or disposing of participations in other entities (section 1 para. 24 sent. 1 no. 1 GwG). As such, it must comply, in particular, with general due diligence requirements, transaction monitoring obligations, and reporting requirements in relation to the Financial Intelligence Unit (Zentralstelle für Finanztransaktionsuntersuchungen, “FIU”).
II. The exemption for holding companies
However, the GwG provides for an exemption specifically designed to exclude certain industrial or “pure” holding companies from AML requirements. Pursuant to section 1 para. 24 sent. 2 GwG, holding companies which exclusively hold participations in undertakings outside the credit institution, financial institution, and insurance sectors and which do not conduct any business activities beyond those associated with the administration of their shareholdings are not considered financial undertakings.
The legislative materials accompanying this provision (see the explanatory memorandum under BT-Drucksache 19/13827, p. 69) provide additional guidance on the interpretation of this exemption. They clarify that non-material participations (i.e. participations not exceeding 5%) in undertakings in the credit institution, financial institution, or insurance sector are harmless and do not prejudice the exemption. Likewise, operational activities of entirely subordinate significance do not affect the holding company’s status under the exemption.
This exemption has practical relevance for industrial groups structured with a top-level holding company. Where such a holding company holds a de minimis participation in a regulated financial services entity, e.g. a company licensed to provide leasing or factoring services, the current German framework permits the holding company to remain outside the scope of the AML, provided the participation does not exceed the 5% threshold and the holding company’s activities remain limited to pure holding activities.
III. Ambiguity regarding the 5% materiality threshold
Notwithstanding its practical utility, the 5% materiality threshold provided in the GwG’s legislative materials leaves a critical question unresolved: what is the reference point against which the 5% threshold is to be measured? The wording of the explanatory memorandum does not clarify whether the threshold applies to individual participations in financial sector entities or to the aggregate of all such participations relative to the holding company’s total portfolio.
Ultimately, the better arguments are in favor of an aggregate calculation of all participations in financial sector entities not exceeding the 5% threshold. In particular, section 1 para. 24 sent. 2 GwG provides that holding companies are not financial undertakings if they “exclusively” hold participations in undertakings outside the financial sector. Exclusivity denotes the absence of any financial sector participations in the overall portfolio. The 5% threshold therefore operates as an “exception to the exception” permitting de minimis financial sector exposure without forfeiting the exemption.
The new regime under the AMLR
I. Definition of “financial institutions”
The AMLR introduces directly applicable definitions and requirements that will replace within scope the current AML framework established by the GwG. In this respect, it applies to “financial institutions” as obliged entities (see Article 3 para. 2 AMLR) which must therefore comply with the AML requirements envisaged under the AMLR. Pursuant to Article 2 para. 1 point 6(a) AMLR, a financial institution includes, among others, “an undertaking the principal activity of which is to acquire holdings, including a financial holding company, a mixed financial holding company and a financial mixed activity holding company.”
II. Financial mixed activity holding company
The critical element for holding structures lies in the definition of a “financial mixed activity holding company”. Pursuant to Article 2 para. 1 point 10 AMLR, this term refers to an undertaking which (i) is not a financial holding company or mixed financial holding company, (ii) is not itself a subsidiary of another undertaking, and (iii) has among its subsidiaries at least one credit institution or financial institution.
This definition has far-reaching consequences for industrial groups. A parent holding company that controls an industrial group but happens to include a single credit institution or financial institution, i.e. in particular a factoring or leasing company, insurance undertaking, investment firm or an insurance or credit intermediary (Versicherungs- oder Kreditvermittler), among its downstream subsidiaries will qualify as a “financial mixed activity holding company” under the AMLR. As such, it will be classified as a financial institution under Article 2 para. 1 point 6(a) AMLR and, consequently, as an obliged entity under Article 3 para. 2 AMLR.
III. Comparison with the GwG exemption
Unlike the GwG, the AMLR does generally not incorporate a comparable de minimis threshold for participations in financial sector entities. The 5% materiality threshold under the GwG has no equivalent in the AMLR’s definitional framework nor in the AMLR’s recitals. Where a holding company holds even a minority stake in a financial institution, such holding company would qualify as “financial mixed activity holding company” if the financial institution is a (indirect) subsidiary of the holding company.
Potential exemption under the AMLR
I. The exemption for engagement in financial activity on an occasional or very limited basis pursuant to Art. 6 AMLR
Generally, the AMLR’s broader scope reflects the European legislator’s approach of including holding companies with mixed activities in the AML framework to ensure consistent supervision by financial supervisors. Recital 10 of the AMLR specifically notes that “holding companies that carry out mixed activities and have at least one subsidiary that is an obliged entity should themselves be included as obliged entities in the scope of the of [the AMLR].”
However, the AMLR does provide for certain exemptions which may offer relief for entities engaging in financial activities on an occasional or very limited basis. Pursuant to Article 6 para. 1 AMLR, EU Member States may decide to exempt legal or natural persons which engage in a financial activity as listed in Annex I, points 2 to 12, 14 and 15 to Directive 2013/36/EU (Credit Requirements Directive, “CRD”) on an occasional or very limited basis from the requirements of the AMLR where there is little risk of money laundering or terrorist financing, provided that all of the following cumulative criteria are met: (i) the financial activity is limited in absolute terms; (ii) the financial activity is limited on a transaction basis; (iii) the financial activity is not the main activity of such persons; (iv) the financial activity is ancillary and directly related to the main activity of such persons; (v) the main activity is not itself a regulated AML activity; and (vi) the financial activity is provided only to customers of the main activity and is not generally offered to the public.
For the purposes of determining whether a financial activity constitutes the “main activity”, Article 6 para. 4 AMLR provides a quantitative threshold: EU Member States must require that the turnover of the financial activity does not exceed 5% of the total turnover of the natural or legal person concerned. This percentage echoes the materiality threshold embedded in the GwG exemption.
II. Limitations of Article 6 AMLR
Critically, the exemption under Article 6 AMLR is, by its wording, directed at legal or natural persons directly engaged in the relevant financial activity. It is not expressly designed to cover holding companies that merely hold participations in entities conducting financial activities. A holding company which qualifies as a “financial mixed activity holding company” because one of its subsidiaries is a credit institution or financial institution would not, under a strict textual reading, benefit from the Article 6 AMLR exemption since it is not itself the provider of the financial activity.
However, notwithstanding the literal scope of Article 6 AMLR, one may argue that the underlying rationale of the exemption, i.e. to exclude entities whose involvement with regulated financial activities is marginal or incidental, corresponds to the policy objective of the current GwG exemption. Both provisions seek to ensure that entities with de minimis or peripheral connections to the financial sector are not burdened with disproportionate AML compliance obligations. Whether the German legislator or regulatory authorities will adopt an analogous interpretation in transposing or applying the AMLR remains to be seen.
III. Outstanding question
As of today, it remains uncertain whether and to what extent Germany will exercise the discretion granted by Article 6 AMLR. EU Member States are required to notify the European Commission (“Commission”) of any exemptions they intend to grant, and the Commission must confirm within two months whether or not the exemption may be granted based on the justification provided by the EU Member State (see Article 7 AMLR). Should Germany seek to preserve the substance of the current GwG exemption for holding companies, it would need to design a national exemption that satisfies the conditions of Article 6 or, alternatively, seek clarification at EU level as to whether holding companies may be included in the exemption’s scope.
Conclusion
The transition from the GwG to the AMLR introduces significant changes for German holding company structures with financial sector participations. The loss of the GwG’s de minimis exemption and the broad definition of “financial mixed activity holding company” under the AMLR mean that many (parent companies of) industrial groups may find themselves subject to full AML obligations from 10 July 2027. Affected entities should assess their corporate structures, evaluate the classification of group entities under the AMLR definitions, and consider whether any available exemptions may apply.
Given the current uncertainty regarding Germany’s implementation of Article 6 AMLR, stakeholders may also wish to engage with legislators to advocate for an approach that preserves proportionality for holding companies with only marginal exposure to the financial sector.
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