Germany has announced measures to more effectively combat financial crime by establishing a new federal authority to bolster enforcement and enhance cooperation among the more than 300 present supervisors across the nation.
German Finance Minister Christian Lindner unveiled a three-point proposal to reduce the country's involvement in money laundering and other financial crimes on August 24. The main goals are to create a new organization to manage enforcement actions and pool resources, offer training to create more highly qualified financial investigators, and encourage the digitalization and linking of company and property registers to make it easier to find the real owners of businesses.
"Germany must overcome its reputation as a money-laundering paradise," according to Lindner. "We are not afraid to take bold and decisive action. We will create strong and effective structures to make sure that honest players are protected from those who don’t stick to the rules."
Three pillars will support the proposed Higher Federal Authority for Combating Financial Crime (BBF).
The Federal Police Office for Financial Crime will look into complicated situations, and it will work with the Financial Intelligence Unit to look into pertinent complaints of suspicious transactions. Additionally, a central office for anti-money laundering (AML) monitoring will be established to organize the oversight of businesses outside the financial services industry. Its establishment intends to minimize the number of regional supervisory authorities situated in "Länder," which has previously made coordinated enforcement and supervision challenging.
The AML office will also serve as the main point of contact for the upcoming Anti-Money Laundering Authority of the European Union.
The new system, according to the German Federal Ministry of Finance, should result in the simplification of reporting processes, better enforcement, and more focused and risk-based future investigations.
The government has not provided any information on the programs' finances and resource levels, nor has it provided a schedule for when they would go into effect.
Konrad Duffy, financial crime officer at Finanzwende, a German advocacy group for more openness in business, said in a statement that Lindner's suggestions to centralize efforts are "a step in the right direction" and would assist in eradicating the confusion and "unclear responsibilities" of numerous different regulators currently operating piecemeal at the national level.
The suggestions, however, "remain vague in important areas or fall short," Duffy continued. As an example, he stated that "A new office should deal with all facets of financial crime [and] not apparently exclude topics such as serious tax crime." Additionally, he noted that authorities must have the proper equipment if they are to prevent Germany from continuing to be a favored location for money launderers from across the globe.
Money laundering and financial crime have received inconsistent attention in Germany. It seems sense that the greatest economy in Europe will face significant flows of illicit funds. But because Germans have overwhelmingly favoured spending cash over utilizing cards or swiping cellphones, the nation is more susceptible to higher risks of money laundering (though the legacy of the Covid-19 pandemic might be changing that trend, albeit slowly).
According to German news site Deutsche Welle, firms in Germany frequently conduct cash transactions in part because the government has been hesitant to limit them to 5,000 euros (U.S. $5,000) in accordance with AML legislation and best practices implemented in other nations.
The publication of a report by the Financial Action Task Force (FATF) on Germany's recent efforts to combat financial crime coincided purposely with the announcement by the Federal Ministry of Finance.
While Germany has made significant improvements in the last five years to strengthen its system and combat money laundering and terrorist financing more successfully—with asset confiscation being particularly strong—the FATF found that the country still needs to make additional improvements and improve resources to ensure proper oversight, monitoring, and enforcement.
The FATF cited cooperation across Germany's 16 states (Länder) as a particular difficulty and that the nation's 300+ supervisors require greater resources to combat terrorist funding and dirty money.
Additionally, it stated that the gathering, analysis, distribution, and use of financial intelligence by German authorities needed to be improved. According to Germany's risk profile, they should "o more to proactively and systematically investigate and prosecute ML activity in line with Germany’s risk profile," the FATF advised.
By fLEXI tEAM