Financial Crime World

Germany’s New Federal Office to Combat Financial Crime Set to Take on Tough Tasks

In January 2024, Germany will launch its new Federal Office to Combat Financial Crime (BBF), a crucial step in the country’s fight against growing money-laundering and terrorist financing risks. But with numerous challenges ahead, can the BBF make a meaningful impact?

A Vital Weapon Against Money-Laundering and Terrorist Financing

The creation of the BBF was announced last year as a response to Germany’s pressing financial crime problems. The new office will have three main pillars:

  • Central Office for Sanctions Enforcement: Responsible for enforcing sanctions against individuals and organizations involved in MLTF.
  • Central Office for Financial Transaction Investigation: Focuses on investigating suspicious financial transactions and identifying potential money laundering activities.
  • Office for ML Investigation: Dedicated to investigating and prosecuting cases related to money laundering and terrorist financing.

Challenges Ahead

Germany has been described as a paradise for money launderers, particularly organized crime groups from Italy. Cash use is still high in Germany compared to other European countries, making it an attractive target for money launderers. To combat this, the BBF will focus on increasing resources for AML enforcement and criminal investigations.

Improving Anti-Money Laundering Efforts

The Financial Action Task Force (FATF) report identified Germany’s need for significant anti-MLTF improvements. The country was rated lower on anti-money laundering results compared to Spain, France, and Italy. To strengthen its efforts, the BBF will:

  • Increase resources for AML enforcement and criminal investigations
  • Implement a risk-based approach to anti-financial crime efforts
  • Enhance proactive and systematic investigation and prosecution of financial crimes

A Critical Step Towards Hosting the Anti-Money-Laundering Authority (AMLA)

The creation of the new Federal Office might strengthen Germany’s application to host the AMLA in Frankfurt, but only if it can demonstrate concrete progress against money-laundering in the short term.

Investment and Digitization

To support the BBF, German Finance Minister Christian Lindner has pledged to invest EUR 700 million over four years. The reforms aim to:

  • Accelerate digitization and interconnection of property registers and records
  • Dedicate and bundle AML competencies under the new Federal Office’s umbrella

Critics’ Concerns

While the BBF is a step in the right direction, critics argue that it lacks the power to solve Germany’s complex anti-financial crime problems. They claim more transparency of individuals’ fortunes, limits on cash-based transactions, and a rapid move towards the proposed ban on cash property sales are needed.

Conclusion

The new Federal Office to Combat Financial Crime is set to take on numerous challenges in 2024. With significant investment and reform efforts underway, it remains to be seen whether the BBF can make a meaningful impact in combating money-laundering and terrorist financing in Germany.