Quo Vadis: Anti-Money Laundering in Germany 2024
For many years, Germany was not exactly considered a model student when it came to money laundering prevention. However, an analysis by the Federal Ministry of Finance revealed several years ago that around 100 billion euros are laundered annually in Germany.
However, things have changed recently. This article examines the current developments, outlining the challenges and the measures Germany has taken to address them.
The FATF report as a wake-up call
At the end of the 2010s, the world still seemed to be in order. Money laundering? Primarily a banking issue.
But then came the Fatf and put her finger on the sore spot. In the fall of 2020, she began a review of the Federal Republic of Germany in the area of combating money laundering, terrorist financing and proliferation financing.
With the publication of the final report[1] The FATF completed its review of Germany in August 2022. While the report highlighted that Germany had made overall progress in preventing money laundering and terrorist financing, it also identified several areas where significant improvements were needed.
The real estate sector as the black sheep
The real estate sector in particular has been identified as especially vulnerable to money laundering. The reason: Real Estate They could still be paid for entirely in cash – ideal for criminals to quickly invest large amounts of dirty money in secure real estate.
Of the estimated 100 billion euros, one fifth was laundered using real estate.[2].
There was great concern – what if the FATF gave Germany a bad report card? What if the world's fourth-largest economy, the largest in the EU, suddenly found itself on the same level as Panama or Cyprus when it comes to money laundering?
Germany's measures to combat money laundering
Such a devastating verdict was not an option, especially since, in the opinion of some, it could also entail serious economic disadvantages. [3]And so Germany pooled its resources, rolled up its sleeves, and began to make the fight against money laundering a priority.
Improvement of the Transparency Register (2021)
The Federal Ministry of Finance has adopted a draft law to amend the Money Laundering Act in order to improve the fight against money laundering through increased transparency.
The transparency register It was expanded into a full register in which all beneficial owners are directly listed and digitally accessible. This is intended to facilitate the identification of straw men and shell companies. Furthermore, the exchange of information at the European level was intensified to strengthen the networking of actors in the field of money laundering prevention and terrorist financing.
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Sanctions Enforcement Act II (2022)
SDG II aims to strengthen existing Sanctions to tighten sanctions against Russia and improve their enforcement. This includes expanding the powers of the authorities to better track and freeze assets. The law particularly strengthens cooperation between different agencies and creates new structures for monitoring and enforcing sanctions.
A key component of the law is the establishment of a central enforcement unit within the Customs Criminal Investigation Office. This unit is authorized to conduct comprehensive investigations and seize assets. The Central Enforcement Unit (ZFS) is not responsible for money laundering prevention, but rather for the enforcement of sanctions.
Cash payment ban for real estate purchases (2023)
The SDG II also brought about changes to the money laundering law. One of the most important changes: As of April 1, 2023, real estate may no longer be paid for in cash.[4]
This adjustment is a direct consequence of the FATF audit report and an important step in Germany's fight against money laundering.
FIU: New head and risk-based approach (2023)
Large backlogs and no tangible successes – the FIU had long faced criticism. In mid-2023, the agency changed course. Daniel Thelesklaf is now at its helm.
In October 2023, the Federal Ministry of Finance, and above all Finance Minister Christian Lindner, set a new course with the FIU Strengthening Act. This law clarifies that the FIU may and should carry out its work on a risk-based approach – in order to catch the really "big fish" in the future.
Establishment of the Anti-Money Laundering Authority (AMLA) (2024)
A significant development at the European level is the establishment of the new Anti-Money Laundering Authority (AMLA), which will be based in Frankfurt. This authority will become operational in 2025 and is intended to centralize and coordinate the fight against money laundering at the EU level.
AMLA will have direct and indirect supervisory powers over obligated entities and will be able to enforce sanctions and measures.
Conclusion and outlook
Germany has made significant progress in money laundering prevention in recent years. The FKBG (Funding on Anti-Money Laundering) and the establishment of the AMLA (Anti-Money Laundering Agency) are important steps to better position the country in the fight against money laundering.
These measures demonstrate Germany's ambition to play a leading role in the global fight against money laundering. It remains to be seen how these initiatives will fare in practice and whether they will contribute to tackling increasingly sophisticated money laundering.
The new regulations and authorities create a solid foundation upon which further progress can be built. It is hoped that Germany will be able to distinguish itself as a pioneer in the fight against money laundering and financial crime in the coming years.
Sources
[1] https://www.fatf-gafi.org/en/publications/Mutualevaluations/Mer-germany-2022.html
[2] https://www.sueddeutsche.de/wirtschaft/geldwaesche-immobilien-deutschland-1.4655801
[3] https://www.u4.no/publications/the-impact-of-grey-listing-by-the-financial-action-task-force-fatf/fullversion#other-ramifications
[4] https://www.haufe.de/immobilien/wirtschaft-politik/geldwaesche-was-immobilienunternehmen-beachten-muessen_84342_523282.html
Credit: Photo by Tina Bosse on Unsplash
Roczniewski