Banks’ Responsibilities in Preventing Financial Crime in Germany

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Germany has been taking significant steps to strengthen its sanctions enforcement capabilities in response to the European Union’s growing concern over financial crime. One of the key measures taken by the country is the creation of the Central Office for Sanctions Enforcement (ZfS).

The Creation of the ZfS

The ZfS was established through the Sanctions Enforcement Act (Sanktionsdurchsetzungsgesetz or SanktDG) in December 2022. The office is responsible for investigating and preventing potential sanctions violations related to targeted financial sanctions, including the prohibition on making funds or economic resources available to designated persons or entities.

Limited Powers

The ZfS’ enforcement powers are limited to specific tasks, such as investigating and preventing sanctions violations, but not prosecuting them. However, its creation marks a significant step towards more coordinated and centralized efforts to monitor and detect EU sanctions violations in Germany.

Obligation for Designated Persons (EUDPs)

Germany has also established an obligation for EUDPs to disclose their assets subject to German jurisdiction to the ZfS. This reporting obligation aims to counteract the risk of circumventing EU sanctions through asset concealment and has served as a prototype for similar obligations incorporated in other EU sanctions regulations.

Impact

This move is expected to have a positive impact on the effectiveness of EU sanctions and their ability to combat financial crime.

The Federal Office to Combat Financial Crime (BBF)

In 2024, Germany will establish the BBF, which will integrate the ZfS into its structure. The integration is expected to create synergy effects between sanctions enforcement and anti-money laundering enforcement measures, improving coordination between preventive and investigative enforcement powers and prosecution of sanctions violations.

Impact

The creation of the BBF is expected to lead to more effective monitoring and detection of EU sanctions violations in Germany, ultimately contributing to a stronger and more coordinated EU approach to preventing financial crime.

Conclusion

Germany has taken decisive steps to enhance its sanctions enforcement capabilities, demonstrating its commitment to combating financial crime. The creation of the ZfS and the integration of the BBF will likely lead to more effective monitoring and detection of EU sanctions violations in Germany, ultimately contributing to a stronger and more coordinated EU approach to preventing financial crime.

Key Points

• The Central Office for Sanctions Enforcement (ZfS) was established in December 2022.
• The ZfS is responsible for investigating and preventing potential sanctions violations related to targeted financial sanctions.
• Germany has established an obligation for Designated Persons (EUDPs) to disclose their assets subject to German jurisdiction to the ZfS.
• In 2024, Germany will establish the Federal Office to Combat Financial Crime (BBF), which will integrate the ZfS into its structure.