Ruling [DEU] ¦ Anti-Money Laundering: Requirements for Identity Verification of an Estate Administrator acting on behalf of Unknown Heirs

Anti-Money Laundering Compliance and Estate Administration: BGH Clarifies Identification Duties for Banks and “Nachlasspfleger”

The Federal Court of Justice (Bundesgerichtshof, BGH) issued a pivotal ruling on April 20, 2021 (XI ZR 511/19), clarifying the scope and strictness of customer due diligence obligations under Germany’s Anti-Money Laundering Act (Geldwäschegesetz, GwG) in the context of estate administration. The decision confirms that banks must conduct full identity verification of a court-appointed estate administrator (Nachlasspfleger) acting for unknown heirs before executing transfers — even for modest account balances — and that notarized ID copies are not sufficient. For financial institutions and legal practitioners, the judgment settles key questions about the acceptable methods of identity verification, the applicability of simplified due diligence, and the boundaries of proportionality.

Case Background

A bank customer died in early 2018, leaving a checking account balance of €1,112.42. A lawyer was appointed as Nachlasspfleger to manage the estate for unknown heirs and requested the bank to transfer the funds to a separate trust account. He provided the court appointment order (Bestallungsurkunde) and a notarized copy of his national ID card. The bank confirmed the balance but refused to pay without a “legitimized” signature and insisted on an in-person identity check or a bank-confirmed ID copy (e.g., via a branch-based verification). The estate administrator sued. The trial court ordered payment, but the appellate court reversed, and the BGH ultimately rejected the heirs’ revision, siding with the bank.

Core Legal Holding

The BGH held that the bank could not process the payout without first identifying and verifying the identity of the Nachlasspfleger under §§ 10–13 GwG. Absent proper verification, the bank would risk committing an administrative offense under § 56 GwG. Notarized photocopies of ID do not satisfy the statutory verification methods. The court affirmed that banks may legally refrain from executing transactions under § 10(9) GwG when unable to fulfill customer due diligence.

Bastian Schwind-Wagner_Follow "The BGH confirmed that banks must verify the identity of a court-appointed estate administrator using GwG-compliant methods before releasing funds, and notarized ID copies are insufficient. Simplified due diligence does not apply where heirs are unknown, no approved remote method is used, and the amount exceeds €1,000."

Identification vs. Verification: The Two-Step Obligation

The court underscores the distinction between:

• Identity data collection: Gathering personal details under § 11(4) GwG (name, birth date, etc.). This can be done based on documents submitted.
• Identity verification: Confirming identity using specific methods prescribed by §§ 12–13 GwG.

While the administrator’s court order and notarized ID copy enabled data collection, they did not permit verification. Verification requires either physical examination of the original ID “presented on site” (§ 13(1) No. 1 GwG) or use of recognized remote/electronic methods (§ 13(1) No. 2 GwG; § 12(1) No. 2–4 GwG), such as the electronic ID function, qualified trust services, or compliant video identification.

No Return to Pre-2017 Practice: No Reliance on Notarized ID Copies

The court expressly notes that the option to verify non-present customers using a certified copy of a national ID, which existed under the pre-2017 GwG, was removed in the 2017 reform. The legislature shifted toward face-to-face verification or secure remote/electronic procedures, with a focus on sensory inspection and, where appropriate, haptic checks of the original identity document. A notarized copy, even from a notary, does not meet the equal security level required for “other suitable procedures” under § 13(1) No. 2 GwG.

Court Appointment Order Is Not a Substitute for ID Verification

The Bestallungsurkunde confirms the administrator’s authority but is not an “official ID” for verifying the administrator’s person under § 12(1) No. 1 GwG. Even in contexts where court orders can support identity checks (e.g., for the identity of the represented person under specialized rules), they must be combined with proper verification of the representative’s identity using approved methods. In short, the court order does not displace the need to verify the administrator’s identity.

Simplified Due Diligence Not Available

The court rejects applying simplified due diligence under § 14 GwG in this scenario. Key reasons:

• The heirs were unknown, which inherently increases risk and precludes certainty of a lower risk profile.
• No personal contact occurred, and none of the approved remote/electronic methods were used — both are factors and possible indications of a potentially higher risk listed in Annex 2 to the GwG.
• The transfer amount exceeded €1,000, a threshold used in several GwG provisions to delineate potential risk significance.

Proportionality and Practicality

Arguments based on proportionality and cost to the estate did not persuade the BGH. The court emphasized:

• Banks offer nationwide branches where in-person verification can occur.
• Once verified, repeat identification is typically unnecessary for future transactions (§ 11(3) GwG).
• Administrators can use alternative approved methods, notably the electronic ID function under the German ID card law or compliant video identification, to avoid physical presence.

No Exemption for Officers of the Court or Lawyers

The ruling makes clear that GwG obligations apply irrespective of the administrator’s professional status. While tax law (§ 154 AO) allows certain identification relaxations for parties acting ex officio, those exceptions are not transferable to the GwG, which contains no comparable waiver. The fact that the administrator is a lawyer — and himself subject to GwG obligations in some circumstances — does not change the bank’s duty to verify him when he acts as a customer or representative.

Reliance on Third Parties Must Meet GwG Requirements

The administrator argued he had already been identified by another bank when opening the trust account. The court noted that while § 17 GwG allows reliance on third parties, the original institution remains responsible for fulfilling due diligence and must ensure that reliance meets the statutory conditions. “Know Your Customer” remains the core principle for the executing bank.

EU Law Context: Minimum Harmonization Supports Germany’s Stricter Approach

The court references the EU’s Fourth AML Directive (as amended), which requires verification based on “documents, data, or information obtained from a reliable and independent source” (Art. 13(1)(a) Directive (EU) 2015/849) and permits electronic identification methods. Member states may adopt stricter national rules. Germany’s requirement for on-site original document inspection or secure electronic procedures is consistent with minimum harmonization, rendering a reference to the Court of Justice unnecessary.

Practical Takeaways for Financial Institutions

• Maintain strict adherence to § 13 GwG verification methods. Do not accept notarized ID copies as sufficient verification for non-present customers or representatives.
• Offer compliant remote verification options: video identification aligned with BaFin guidance, eID functions, and qualified trust services.
• Document the risk assessment. Unknown heirs and absent personal contact increase risk; do not apply simplified due diligence without clear, documented low-risk factors.
• Train staff on estate workflows. A court appointment confirms authority but does not replace verifying the administrator’s identity by approved means.
• Use third-party reliance judiciously. If relying under § 17 GwG, ensure all conditions are met and retain ultimate responsibility.

Implications for Estate Administrators and Legal Practitioners

• Plan for identity verification early. Use eID or videoident procedures to avoid branch visits, especially when handling multiple institutions.
• Expect banks to insist on GwG-compliant verification even for small balances above €1,000 and even with court appointment orders.
• Do not assume tax law identification relaxations extend to AML requirements.

Conclusion

The BGH’s decision strengthens the message that AML verification standards are non-negotiable — even in routine estate payouts and even where the representative is court-appointed. For banks, the ruling validates cautious practice: no transaction should proceed if identity verification cannot be completed using the specific methods set out in §§ 12–13 GwG. For administrators, it sets a clear operational expectation: bring the original ID in person or use approved electronic identity tools. This judgement aligns national practice with the EU’s push toward robust, technology-enabled, and risk-aware customer due diligence.

Dive deeper

• BGH ¦ Urteil vom 20.4.2021, XI ZR 511/19; Geldwäschebekämpfung: Anforderungen an die Identitätsüberprüfung eines für unbekannte Erben tätigen Nachlasspflegers ¦ Link