Ruling [DEU] ¦ German Federal Court Limits Money Laundering Charges in Shadow Payment System Case

Pass-through funds in a shadow payment system are not automatically laundered proceeds

The German Federal Court of Justice (Bundesgerichtshof, BGH) has clarified how far the offence of money laundering under Section 261 of the Criminal Code reaches in cases of unlicensed cross-border payment services. In a decision of 9 July 2026 that it designated for publication in the official reports, the Third Criminal Senate held that assets which are exclusively the instrument or the object of an unlawful act generally do not originate from it. They therefore cannot be the subject of money laundering.

The ruling removed 247 money laundering convictions that rested on transfers of more than 32 million euros through a Russia-linked shadow financial system. The other convictions for the scheme largely stood, and the court also decided how forgery of data and forgery of documents relate to each other.

The scheme and the convictions

According to the findings of the Munich Regional Court I, two defendants belonged from at least October 2018 to a cross-border organisation that aimed to build a payment system outside state control. It collected large sums in Russia, moved them through two companies based in Cyprus to two German companies and distributed them onward to firms worldwide. Sham invoices and forged invoices concealed the flows so that the customers behind the transactions stayed as anonymous as possible. The organisation aimed to circumvent Russian payment restrictions, customs rules and sanctions.

Between March 2021 and September 2022, the accounts of the two German companies received 247 transfers worth a total of 32,735,609.99 euros from the Cypriot companies. The funds came from the organisation’s customers in Russia. One defendant was managing director of one of the companies and held a power of attorney for the other, through whose accounts the money arrived in Germany. The second defendant had a coordinating and controlling role and appeared under another name as a managing director. The court also found that one defendant carried one million euros in cash of criminal origin on a scheduled flight, that 233 files with forged incoming invoices were used for the companies’ bookkeeping, and that emergency subsidies of 9,000 euros were obtained for each company without any pandemic-related liquidity shortage.

The regional court convicted the defendants of money laundering in 248 and two cases respectively, together with membership of a criminal organisation abroad, unlicensed provision of payment services, gang-based commercial document forgery, forgery of data and, for one defendant, subsidy fraud. The aggregate sentences were seven years and four years and nine months, and confiscation of value was ordered against the defendants and against the two German companies.

Bastian Schwind-Wagner _Follow

"The Federal Court of Justice held that assets which are merely the object or the instrument of an offence do not originate from it and cannot be the subject of money laundering. In a shadow payment system that moved more than 32 million euros, the pass-through transfers therefore did not support 247 laundering convictions.

For financial crime practitioners, the decision shows that the criminal origin of funds has to be established and cannot be inferred from the illegality of the channel. The scheme itself remained punishable through other offences, and the confiscation of the earnings of the operators was left untouched."

What “originating from” an offence means

Section 261 covers objects that originate from an unlawful act, a term the statute does not define. The wording alone could allow a broad reading that also covers the means and objects of an offence, and earlier case law had left room for that. The Senate looked at the legislative history and concluded otherwise. A special rule from 1998 for smuggled goods, which extended laundering to items on which duties had been evaded, existed because the legislature assumed that such goods do not originate from the offence. When the offence was fundamentally reformed in March 2021 and the special rules on tax offences were dropped, the legislative materials called it inconsistent to include legally acquired items that merely served as the object of an offence. The reform aimed to stop the infiltration of assets gained through crime into the legal economy.

The draft law had at first tied laundering expressly to proceeds, products or their substitutes. It kept the word “originate from” so that assets remain covered after repeated conversion, transfer, mixing and processing, but the materials give no sign that objects and instruments of the offence were to be included. The same term appears in the confiscation rules, where it points to proceeds, products or what has taken their place. The established causal test, under which an item is tainted if it can be traced back to the offence, also points that way: objects and instruments usually stand in some relation to the offence but do not have their cause in it, and an offender often has access to them beforehand.

Bribery case law does not extend to instruments in general

An earlier line of decisions treated bribe payments as capable of being laundered. The Senate found that this case law rested on the view that the statute had no clear contours, a premise that fell away with the 2021 reform, and that it concerned payments to bribed public officials specifically. The court called it a special case and saw no basis for generalising it to every instrument of an offence. It therefore found no deviation from earlier case law that would require a referral to another senate or to the Grand Senate for Criminal Matters.

Both possible predicate offences fail

The regional court treated as the predicate offence a breach of the Cypriot payment services law, because the Cypriot companies received and forwarded customer funds without a licence from the central bank. The Federal Prosecutor General added that the organisation also met the definition of a criminal organisation under an EU framework decision, which under Section 261 can also serve as a predicate. The Senate left open whether either predicate offence exists, because in both cases the transfers did not originate from it.

For unlicensed payment services, the forwarded money is the object of the offence, in the same way as under the comparable German offence. For active participation in the criminal activity of an organisation, the money was an instrument, because it was received to be forwarded within the shadow system and thereby to enable further acts of participation. A different result would arise where the funds were not meant to enable further activity by the organisation and were therefore proceeds. The Senate found no such constellation. It also saw no prospect of findings that the money originated from other offences.

Consequences for the convictions and for confiscation

The convictions for the 247 transfers fell away. For each defendant, one case of money laundering remained, in connection with the cash transport, and because the organisation offence unites the individual acts, it encompasses all the money transfers. New individual sentences have to be set for it. Under the ban on making the defendants worse off, a new sentence may exceed each of the dropped individual sentences but not their sum. The aggregate sentences lost their basis, and parts of the case return to another chamber of the regional court.

The confiscation orders against the two German companies had been based on the laundering convictions and fall away, except for 9,000 euros each from the subsidy fraud. The money could not be confiscated as an instrument of membership in a criminal organisation or as the object of unlicensed payment services. Confiscation against the defendants remained, since it covers commissions and payments received for their membership and for the unlicensed services.

Membership offence and the two forgery offences

The Senate also removed a separate conviction of one defendant for mere membership of a criminal organisation. Membership generally merges all activities of a member into one offence and links other offences to it. Only when at least two further offences, committed by separate acts, carry clearly greater weight than the organisation offence do they stand in real concurrence. Acts that do not fulfil any other offence cannot be convicted separately.

The second guiding principle deals with forgery. Forgery of evidentially relevant data and forgery of documents can be punished side by side, even when both relate to the same content, because they protect against different media and the creation or use of several falsifications is a greater wrong. Here the forged electronic invoices and the later submission of printed copies to the tax office were separate offences, since a new decision to commit the offence had been made.

Practical significance for financial crime practice

The decision is about criminal liability for money laundering, not about the obligations of firms under the anti-money laundering rules. Its lesson for investigators and for institutions that describe typologies is that criminal origin has to be shown for the funds in question. A channel can be illegal, as with unlicensed payment services or a criminal organisation, without the money that passes through it being tainted. Identifying the offences that generated the customers’ funds becomes central in shadow banking and underground payment cases, and it is the point where the laundering charges failed here.

The scheme remained punishable through membership of a criminal organisation, unlicensed payment services and forgery, and the earnings of the operators remained subject to confiscation. Practitioners should treat pass-through structures as a criminal-law problem in which different offences carry different consequences, and should record the origin of funds separately from the illegality of the service.

Dive deeper

• Bundesgerichtshof (BGH) ¦ Decision Database, Order dated July 9, 2026, Case 3 StR 202/25, ECLI:DE:BGH:2026:090726B3STR202.25.0 ¦ Link