The (none-existent?) Cash Limit in Germany

It is not only the recent tightening of German anti-money laundering regulations that has reignited discussions about cash. Already during the Corona crisis, calls for a move away from cash became louder again. In the heat of the moment, however, many are increasingly losing sight of the applicable principles governing the use of cash. Particularly when it comes to the supposed cash limit in Germany, Youtubers and even high-ranking politicians are now wildly confusing facts and fantasies.

Why There is Misinformation About the Cash Limit in Germany

It is said that in no other country is cash as important to citizens as it is in Germany. It embodies freedom and privacy. Those who pay in cash can still participate in economic life in a truly anonymous way.

The Corona crisis was and is therefore not an easy time for genuine advocates of cash. To protect against infection, almost all retailers took measures to enable contactless payments by card or with e-money. And lo and behold, an astonishing number of people were not unhappy about finally no longer needing cash for payment at the bakery.

Nevertheless, a not insignificant proportion of Germans feel a lasting fear that the state will rob them of their beloved cash at any moment. They also say that protection against infection is only an excuse to slowly wean Germans off cash. Everyone is entitled to his or her personal opinion on the matter.

However, the level of misinformation about the facts of handling cash in Germany is steadily increasing. Youtubers, influencers and politicians alike are hopelessly irritating about what is actually (still) subject to relatively simple rules.

Is It All a Question of Definition?

Before making statements about the level of a supposed cash limit or cash cap, one should ask what is actually meant by it. After all, there are several ways of interpreting this term. And all the options can mean different things.

Does the cash limit mean a sum up to which cash transactions can be carried out in Germany? Or does it describe the maximum amount of cash that a German may hold? Perhaps it means that no proof of origin is required up to this limit?

The variations are numerous, and this is where the trouble begins.

Just a few days ago, a crisis prophet on YouTube proclaimed in a new video that, as of recently, one can only conduct cash transactions in Germany up to EUR 10,000; for anything above that, proof of origin of funds must be presented.

The chairman of a major German party that has announced government ambitions for the upcoming federal elections also expressed indignation in a recent interview, saying that it was unacceptable that cash transactions in Germany could now only be made up to EUR 10,000. He made this statement in connection with the recently introduced guarantees of origin for cash deposits at banks.

It is not clear whether both statements were deliberately intended to confuse or were simply worded in an unfortunate manner. However, confusion is created among citizens in any case. This makes clarification all the more important!

There is No “Real” Cash Limit in Germany!

In the context of everyday transactions, many people understand the cash limit as a maximum amount up to which one is allowed to pay in cash, for example, in purchase transactions. This understanding is misleading! Because two “cash limits” are definitely not existent in Germany:

1. There is no maximum sum for the possession of cash!
2. No limit for the payment with cash (exceptions only for few goods)!

Since in Germany everyone is allowed to possess as much cash as he or she likes and to make cash purchases of any amount, this should clear up some misunderstandings. There are simply not such maximum sums after German right (conditions August 2021)! And that makes the two statements of the Youtuber and the top politician above also so wrong.

The cash limit can therefore only be understood in the context of everyday life as an amount up to which cash payments can be made without any condition.

And Yet There is A “Perceived” Cash Limit in Germany

Because it’s such a popular and striking example: You can also pay the purchase price for a car of, say, EUR 40,000 in cash if the dealer agrees. The purchase price can be exchanged at will! The legislator does not prohibit this, but “merely” requires the dealer to observe the money laundering regulations (see below). These, however, pose great formal challenges for traders. And the proof of origin of funds does not even play a role in this area.

This is because German anti-money laundering regulations do provide for constellations in which you have to provide certain information if you want to make certain cash transactions. For example, you must at least identify yourself when making cash payments of EUR 10,000 or more. This also applies to the above example of a car purchase, as the assumed purchase price there is over EUR 10,000.

An example that is currently very present in the media and goes beyond the identification requirement is the requirement of proof of origin for cash payments worth more than EUR 10,000 to your checking account. There are further proof of origin requirements, for example, for the purchase of precious metals from credit institutions that are not your house bank, from a limit of over EUR 2,500. There are also special regulations for real estate purchases due to the increased risk of money laundering, which even completely prohibit cash payments here.

ID Requirement For Cash Payments Over EUR 10,000 Does Not Yet Mean a Cash Limit in Germany

It is true that for the vast majority of people, cash payments in excess of EUR 10,000 are not likely to occur all that frequently in everyday life. However, this amount regularly overwrites purchases of cars, furniture or musical instruments, for example. There is therefore a certain relevance to everyday life.

Why do I have to present my ID when making cash payments of EUR 10,000 or more?

The simple answer to this is: Because the legislator has stipulated this. The Money Laundering Act (“Geldwäschegesetz“, GwG) contains corresponding regulations and also obliges merchants to establish your identity when making cash payments of this amount.

In all three examples mentioned above, we are dealing with cases of sales of goods (e.g. cars, furniture, musical instruments). Dealers in goods are obliged to comply with and implement the provisions of the GwG. As dealers in goods, they are so-called obligated parties under the GwG.

Legal Background to the Circumstances Surrounding Cash Payments Over EUR 10,000

All entities subject to the provisions of the GwG must have an effective risk management system in place to prevent money laundering and terrorist financing. This must be appropriate with regard to the nature and scope of their business activities.

For dealers in goods, it is expressly stipulated that if they make or receive cash payments of at least EUR 10,000 themselves or through third parties, they must

• have an effective risk management system in place and
• must comply with so-called general due diligence requirements.

What is now hidden behind the term general due diligence is very comprehensively regulated in the GwG. We are therefore unable to reproduce all the details here. The GwG differentiates between the type of transaction and the persons who wish to conclude this transaction, i.e. who wish to pay with cash.

Identification Process As a Core Element of Cash Money Control

However, the core element of the general due diligence obligations is the identification of the contracting party and, if applicable, of the person acting on his behalf, as well as the verification whether the person acting on behalf of the contracting party is authorized to do so. And it is precisely this core element that you will encounter at local merchants when you want to make cash payments of more than EUR 10,000.

You will be asked for your ID and the merchants will retain a copy of your ID. At least if you do the procedure correctly. Because merchants are also obliged to store your data according to the GwG. You can find out more about data storage in our FAQ.

In principle, all common sales of goods fall under the aforementioned explanations. For precious metals such as gold and silver, however, the regulations are stricter. Here, the GwG already obliges traders to demand your identification document for transactions of EUR 2,000 or more, as these are certain high-value goods as defined by the GwG.

Dealers Are Allowed to Refuse Cash!

To stay with the example of car sellers: Car sellers, as dealers in goods, are also obligated parties in the sense of the GwG. When paying more than EUR 10,000 in cash, they must establish their identity or the identity of the person carrying out the transaction on their behalf. This is usually done by presenting an identification document. If you commission another person to carry out your transaction, further checks are required to ensure the person’s authorization.

But that is not all. All in all, the requirements of the GwG with regard to traders are extremely high. It is true that we repeatedly cite the example of identity verification, which merchants must carry out for cash purchases of more than EUR 10,000. However, this is far from sufficient to meet the requirements of the GwG. The law provides for a whole catalog of measures that merchants should actually fulfill in these situations.

Merchants are worried about violating the Money Laundering Act. And are increasingly turning away from cash

It is no exaggeration to say that average-sized retail businesses without their own legal expertise are often not even capable of comprehending the relevant regulations, let alone implementing them. At the same time, however, there are severe penalties and consequences for non-compliance. Following the recent tightening of the GwG, more and more merchants are solving this dilemma for themselves by taking a pragmatic step:

They no longer accept any cash payments at all above the respective thresholds. This way, they do not run the risk of inadvertently violating the complex money laundering regulations.

They can’t be blamed for that. It is therefore worth pointing out the freedom of contract that applies in Germany. This means that anyone may conclude contracts with any content as long as this does not violate any legal regulations.

In the context of cash payment, this means: Merchants are allowed to refuse to conclude a contract with you if you want to pay in cash! This is not a legal regulation, but the free entrepreneurial decision of the traders participating in the private economic life. As long as you are informed in advance of the conclusion of the contract that cash payments of a certain amount are not possible, there is nothing to prevent this contractual condition.

After all, as a customer you are free to decide whether you wish to make the purchase from other merchants who accept cash.