Financial Crime World

Financial Crime Prevention Strategies in Germany Face Tough Tests as New Office Opens Doors

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Germany’s new Federal Office to Combat Financial Crime (BBF) is set to open its doors in January 2024, marking a significant step in the country’s fight against money-laundering and terrorist financing. The creation of the BBF was announced last year, following a report by the Financial Action Task Force (FATF) that highlighted Germany’s need for improvement in its anti-money laundering (AML) efforts.

A New Era in Fighting Financial Crime

As the largest economy in the European Union, Germany has been criticized for its low rating on AML results compared to other EU countries such as Spain, France, and Italy. The BBF will have three main pillars:

  • Central Office for Sanctions Enforcement (Zentralstelle für Sanktionsdurchsetzung - ZfS)
  • Central Office for Financial Transaction Investigation (FIU)
  • Office for ML Investigation (Bundesfinanzkriminalamt - BFKA)

Challenges Ahead

Experts have warned that successfully fighting financial crime in Germany will be a tough task due to its federal system, which gives states significant control over prosecutions. This fragmentation of approach can create challenges in coordinating anti-MLTF efforts.

The FATF has called for more proactive and systematic investigation and prosecution of financial crime, as well as a focus on resourcing MLTF investigations and ensuring a consistent risk-based approach overall. The country also needs to prioritize the implementation of its AML reforms and enhance collection, analysis, dissemination, and use of financial intelligence to combat financial crime.

The Road Ahead

Germany’s Finance Minister Christian Lindner has pledged to create the Federal Office and train more experts, accelerate digitization and interconnection of property registers and records, and dedicate and bundle AML competencies under one umbrella. While these reforms have been welcomed by many, some critics argue that more needs to be done to tackle Germany’s pressing financial crime problems.

The new office is expected to help increase resources for AML enforcement and criminal investigations, but its success will depend on the ability of German states to work together in a coordinated system. The office will also operate the Financial Intelligence Unit (FIU), which has faced criticism in the past for slow processing of suspicious activity reports (SARs) and insufficient personnel.

What’s Next?

Germany is set to spend EUR 700 million over four years to establish the new Federal Office, but experts warn that this may not be enough to tackle the estimated EUR 100 billion laundered in Germany every year. If the states can work together effectively, the BBF could make rapid progress in tackling its to-do list next year.

A Risk-Based Approach

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  • Identity verification
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