On 30 May 2024, the European Union issued new regulations to combat money laundering and terrorist financing. From 2027, the Anti-Money Laundering Regulation will also require industrial holding companies, so-called non-financial mixed holding companies, to comply with anti-money laundering obligations. The new requirements create an acute need for action. Find out what you need to bear in mind and how to implement them here.
Position of the holding company within a group under money laundering law
Holding companies are companies whose business purpose is the acquisition and management of investments. The holding company is often responsible for the strategic management of the group and provides centralised services for the group. The operating business is usually outsourced from the holding company and delegated to the subsidiaries. By virtue of their function, holding companies are therefore regularly at the head of corporate groups.
According to money laundering law, each company must fulfil its obligations under money laundering law independently. Within a corporate group, additional group-wide requirements also apply to the parent company.
A group under anti-money laundering law is a group of companies consisting of a parent company and its subsidiaries, as well as companies that are obliged to prepare consolidated financial statements due to their relationship. Companies fall within the scope of the regulation if they are domiciled in the European Union and perform a qualifying catalogue activity (e.g. luxury goods dealers or real estate agents). Even if the group headquarters is located outside the EU, a relevant (sub)group under money laundering law may still exist. This requires at least two subsidiaries to be obliged entities domiciled in the EU. One of these subsidiaries:
- must not be subordinated to any other EU company,
- must be of sufficient importance within the group and have a sufficient understanding of the activities of the European subsidiaries it monitors and
- must have been entrusted with the responsibility for implementing the group-wide requirements.
Special case of "pure industrial holding companies"
The Act on the Tracing of Profits from Serious Criminal Offences ("Money Laundering Act" for short) already obliges holding companies with interests in the financial sector, so-called financial enterprises, to comply with money laundering regulations. However, there are also pure industrial holding companies among the holding companies. These only hold investments in companies outside of the credit institution, financial institution and insurance sector and are not involved in business activities beyond the tasks associated with the management of the investment holdings. They are not affected by the current regulations and are therefore not subject to the current requirements under money laundering law.
Barbara Scheben
Partner, Audit, Regulatory Advisory, Head of Forensic, Head of Data Protection
KPMG AG Wirtschaftsprüfungsgesellschaft
Niclas-Andreas Müller
Senior Manager, Audit, Regulatory Advisory, Forensic
KPMG AG Wirtschaftsprüfungsgesellschaft
Due to their activities, subsidiaries within such a group of companies had to fulfil their obligations under anti-money laundering law without central management and control, which meant that their structure within the group could differ significantly in some cases.
This will change in future. The Money Laundering Ordinance extends the previous scope of application to include "non-financial mixed holding companies". By definition, this is a company that does not hold any interests in the financial sector and whose subsidiaries include at least one obligated party from the non-financial sector. This also includes the previously exempted pure industrial holding companies. Their obligations under money laundering law will be limited as they do not have their own operating business. Nevertheless, they will have to fulfil group-wide requirements for the first time and take into account the associated implementation costs.
The consistent implementation of group-wide measures to combat money laundering and terrorist financing is the key to robust and effective risk management within a group.
To this end, parent companies must carry out a group-wide risk analysis, implement group-wide strategies, procedures and controls on this basis and set up a compliance function at group level for management purposes. In addition to complying with the original obligations under money laundering law (including customer due diligence and the reporting of suspicious transactions), the strategies, procedures and controls also require measures to be taken to ensure the exchange of information and data protection within the group.
If the group headquarters is located in the EU, the parent company must also ensure compliance with these requirements by all subsidiaries in third countries.
The new obligations will apply from 10 July 2027, but due to the scope and complexity of the requirements, holding companies should address them at an early stage. In particular, carrying out a group-wide risk analysis for the first time and merging heterogeneous process, IT and personnel structures as well as databases that were previously held in individual subsidiaries harbours extensive challenges.
At the same time, there are also opportunities. Companies that organise change proactively and with foresight can gain the trust of business partners and investors and thus secure long-term competitive advantages.
With our many years of auditing and consulting experience at numerous companies subject to anti-money laundering legislation, we can help you find the right implementation concept for you. Please feel free to contact our experts.