GER: SDG II Introduces Cash Ban on Real Estate Purchases

Nov 11, 2022 Benn-Ibler Rechtsanwälte

In the not too distance future, a cash payment ban on real estate transactions will go into effect in Germany. Additionally, the German government is planning on creating a central office at the federal level for the enforcement of sanctions. For this purpose, the cabinet has recently passed relevant regulations in the form of the Sanctions Enforcement Act II (Sanktionsdurchführungsgesetz, SDG II).

After the Sanctions Enforcement Act I (SDG I) had brought forth measures to more effectively enforce EU sanctions against Russia in the short term, SDG II is now intended to bring about structural improvements for the enforcement of sanctions and combating money laundering.

In its response to Russia’s invasion of Ukraine, an action contrary to international law, the EU has introduced a number of sanctions packages. These EU basic regulations are directly in force in Germany. Thus, no special provisions are required for the sanctions to be put into effect at a national level. However, German national regulations currently in place are not sufficiently specific enough for sanctions enforcement and are thus insufficient for Germany to be able to effectively and fully meet sanctions targets. In the short-term, SDG I served to close existing regulatory gaps. SDG II is intended to provide more substantive solutions.

Specifically, SDG II will introduce the following regulatory means:

1. Establishing of a central office for sanction enforcement on a federal level, insofar as the Federal Office for Economic Affairs and Export Control (BAFA) and the German Bundesbank are not the competent bodies
2. Provision of administrative procedures for identifying the assets of sanctioned persons and entities as well as creating a corresponding register
3. Establishment of an information office
4. Linkage of real estate data from the land registries and cadastral offices with the transparency register (the transparency registry will list the economic beneficiaries and serve to prevent money laundering and terrorism)
5. Compulsory notification for associations based abroad that hold real estate property in the Federal Republic of Germany (current ones as well as new acquisitions)
6. Ban the use of cash payments (as well as on cryptocurrency and commodities) in real estate transactions

Draft bill of the German Federal Government Sanctions Enforcement Act II