What international examiners advise Germany now
Berlin For the first time in ten years, it has been examined how efficient Germany money laundering fought. With a good result, Federal Minister of Finance Christian Lindner (FDP) not expected in advance: “There are deficits in practice,” he said on Wednesday. The Financial Action Task Force (FATF) audit report was released on Thursday. This body is at the industrialized nations organization OECD to combat money laundering and terrorist financing.
The international experts have been examining the German rules for months. They spoke to ministerial officials, officials and politicians. The result is a 326-page report that confirms that Germany still has some catching up to do in the fight against financial crime.
First of all, the experts still praise: “Germany has significantly improved its framework for combating money laundering and terrorist financing in the last five years.” The auditors also praised the establishment of a transparency register. There it is listed who is the beneficiary behind certain constructs such as letterbox companies.
But while the rules have improved, their application has failed. Responsibilities are divided between the federal and state governments, and cooperation does not always work. “Germany has engaged at the political level in investigating and prosecuting money laundering,” the report says.
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“However, it is not clear whether this engagement has yielded full results at the operational level.”
How big the problem is can only be estimated: The criminologist Kai Bussmann from the University of Halle-Wittenberg came to the conclusion in a study a few years ago that 50 to 100 billion euros are laundered in Germany every year. Other studies come up with a lower amount.
Targeted fight against money laundering is expandable
But one thing is clear: Germany has a money laundering problem, and the country has had a reputation as a money laundering paradise for years. The Financial Intelligence Unit (FIU), a special force at customs, says it expects more than 200,000 suspicious activity reports in 2021. The annual report has not yet been published. In 2020, there were 144,000 tips.
>> Read here: How Lindner wants to catch big money launderers with a new authority
The last major FATF report from 2010 was also bad. Germany met the requirements for just 29 of the 49 criteria examined. The worst grade was given five times: “not fulfilled”.
It’s gotten better now. Germany did not fail any of the 40 criteria examined this time. At least 16 were fulfilled and 19 at least “mostly fulfilled”, the rest “partially”.
But the inspectors also make it clear that the progress is not enough. “Germany was able to prove investigations and prosecutions in the field of money laundering in a large number of cases,” they write. “However, the total number of money laundering cases investigated and prosecuted in Germany is small given the size of the country and economy.”
Germany is pursuing “a reactive rather than a proactive approach,” the examiners write. In relation to large cases of organized money laundering, too little is happening. Money laundering is often just a by-catch in investigations that often involve drug deals or arms traffickers.
The targeted fight against money laundering, on the other hand, could be expanded. “There is no clear policy or strategy for a coherent and comprehensive prevention and sanctioning of money laundering.”
The inspectors praise some reforms, such as the strengthening of the FIU. It collects suspicious activity reports, evaluates them and forwards them to the law enforcement authorities. However, the FIU had to struggle for a long time with a lack of staff and problems due to poor technical equipment.
Hardly any money laundering investigations against businesses
“Germany has taken a number of positive steps to strengthen the role of the FIU and improve the quality of financial information,” the international experts said. However, there is still “room for further improvement”. The coordination between the FIU and law enforcement agencies does not work smoothly. They could also be technically better equipped.
Another problem: the majority of suspicious transaction reports to the FIU come from the financial sector, especially from banks. There are comparatively few reports from the commercial sector, such as brokers, art or car dealers. While the financial supervisory authority Bafin watches over the banks, the local authorities, such as the trade office, are responsible for tradespeople. In Germany, responsibility is spread over 300 authorities, as criticized in the test report.
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From the anti-money laundering point of view, there is also no cash limit. While there is an upper limit in many other countries, in Germany large sums can also be paid in cash. Former Finance Minister Wolfgang Schäuble (CDU) had proposed an upper limit of 10,000 euros, but then dropped it because of public protest.
The FATF auditors have also noticed how sensitive the issue is: “Germans have strong social and historical ties to cash,” they write. Despite this, they recommend introducing a cap, albeit cautiously worded: “Considering the risks associated with cash-based money laundering, comprehensive strategies to manage these risks should be developed and all available measures should be considered,” they say. This includes “for example a cash limit”.
Lindner wants to reorganize the fight against money laundering
in their coalition agreement SPD, Greens and FDP agreed at least a “ban on the purchase of real estate with cash”. This is now to be implemented. In addition, Finance Minister Lindner is planning further measures with which he intends to comply with the recommendations of the FATF report. For example, he would like to set up a Federal Financial Criminal Police Office and use it to reorganize the fight against money laundering.
“We will bundle the essential core competencies for fighting financial crime and for enforcing sanctions under one roof,” said a paper from the Federal Ministry of Finance that became known on Tuesday.
Germany should “no longer be a paradise for money laundering,” said Lindner. There are hardly any investigative successes in large, complex cases. But not only the small fish should be caught. “To do this, we will follow the trail of money,” explained the Minister of Finance.
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The planned structure is to be implemented in the coming years. There will also be additional staff, but above all a more efficient use of existing capacities is necessary.
In the countries, however, there is resistance. Bavaria’s Finance Minister Albert Füracker (CSU) told the Handelsblatt: “The federal government already has large authorities that are or could be dedicated to the issue. I therefore doubt that the creation of a Federal Financial Criminal Police Office is the philosopher’s stone.”
A new federal authority would first have to be laboriously set up and would only lead to more bureaucracy and a confusion of responsibilities, explained Füracker. The new reform will probably also have to be approved by the Federal Council.
More: Deutsche Bank joins the board of the anti-money laundering body AFCA