Financial Crime World

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Financial Crimes Definition in Germany: BaFin Takes Center Stage

In an effort to prevent financial crimes and maintain the integrity of the German financial market, the Federal Financial Supervisory Authority (BaFin) has taken a proactive approach in combating money laundering, terrorist financing, and other criminal offenses. As the sole competent authority in this field, BaFin is responsible for ensuring that institutions under its supervision implement statutory obligations to prevent such crimes.

The Department for the Prevention of Money Laundering

To achieve this goal, BaFin has established a Department for the Prevention of Money Laundering, which carries out money laundering supervision of all institutions, companies, and persons subject to section 50 of the Money Laundering Act (Geldwäschegesetz – GwG). The department is also responsible for supervising the implementation of statutory regulations to prevent the commission of other criminal offenses within the meaning of section 25h of the Banking Act (Kreditwesengesetz – KWG).

Simplifying Money Laundering Supervision

In order to simplify this process, BaFin has bundled all responsibilities relating to money laundering supervision under the Department for the Prevention of Money Laundering. This department is responsible for ensuring transparency in business relationships and financial transactions using specific precautions on a risk-oriented basis.

Obliged Parties’ Responsibilities

According to section 4 of the GwG, obliged parties have to have a risk management system that includes a risk analysis and internal risk measures. These obligations are derived from various laws and regulations, including the Money Laundering Act, Banking Act, Insurance Supervision Act, Payment Services Supervision Act, and Investment Code.

Due Diligence Duties

The main aim is to ensure transparency in business relationships and financial transactions using specific precautions on a risk-oriented basis. Obliged parties have to comply with customer due diligence duties, which include:

  • Identifying customers, persons acting on their behalf, beneficial owners, and beneficiaries
  • Obtaining and evaluating information on the purpose and type of business relationship

Measures to Avoid Risks

To avoid risks, BaFin has implemented measures such as:

  • Simplified due diligence: applied if there is only a low risk of money laundering or terrorist financing in certain areas
  • Enhanced due diligence: applied if there might be a higher risk of money laundering or terrorist financing

Automated Account Information Access

The Department for the Prevention of Money Laundering is also responsible for automated account information access, known as the Electronic Account Retrieval System (EARS). This system allows for:

  • Identification and freezing of accounts belonging to suspected terrorists or other criminals with credit institutions registered in Germany

International Cooperation

In addition, BaFin represents Germany in various international and European bodies, such as:

  • Financial Action Task Force on Money Laundering – FATF
  • Sub-Committee on Anti-Money Laundering (AMLC), a sub-committee of the Joint Committee of the European Supervisory Authorities

By working closely with international partners, BaFin aims to prevent financial crimes and maintain the integrity of the German financial market.

Conclusion

Overall, BaFin’s efforts to combat money laundering, terrorist financing, and other criminal offenses demonstrate its commitment to maintaining the stability and integrity of the German financial system.