Financial Crime World

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Germany Gets Positive Assessment from FATF on Combating Financial Crime

The Financial Action Task Force (FATF) has published its country report on money laundering prevention in Germany, giving a positive assessment to BaFin’s efforts. However, recommendations have been made for improvements to be implemented.

Strengths and Weaknesses of BaFin

Assessors from the FATF confirmed that BaFin has made progress in the area of money laundering prevention and has a strong understanding of risks. The assessment focused on ministries and authorities involved in combating money laundering and terrorist financing, including BaFin.

  • Technical Compliance: BaFin scored well in this area, with all 40 FATF recommendations on money laundering being in place.
  • Effectiveness: Germany received a moderate rating for two key areas:
    • Effectiveness of supervision
    • Preventive measures in the private sector

Recommendations for Improvement

The assessors highlighted BaFin’s strengths, including its differentiated risk-based supervisory approach and the range of measures and sanctions used to prevent money laundering. However, they also recommended further improvements, such as:

  • Increasing the frequency and intensity of supervisory actions in the non-bank financial sector
  • Making greater use of its arsenal of measures and sanctions for long-standing shortcomings in preventative systems

Next Steps for Germany

BaFin has implemented some of the recommendations and plans to increase staffing levels in anti-money laundering supervision. The authority will also make greater use of its arsenal of measures and sanctions for long-standing shortcomings in preventative systems.

  • Publication of Country Report: The publication of the country report marks the completion of Germany’s FATF assessment, which began in 2020.
  • First Report on Progress: Next year, Germany will issue its first report on progress made under the FATF follow-up process.
  • New Higher Federal Authority: The Federal Finance Minister has proposed creating a new higher federal authority to combat financial crime and enforce sanctions.

Comparison with Other Countries

Germany’s assessment results were compared to other FATF member states that have been released so far. In the “Effectiveness” area, Germany received a moderate rating, which is in line with the average of more than 90 percent of countries assessed.

BaFin’s strengths include its strong understanding of risks and differentiated risk-based supervisory approach. However, the assessors recommended further improvements to increase the frequency and intensity of supervisory actions in the non-bank financial sector.

Germany has made progress in implementing FATF recommendations, but there is still room for improvement. The new higher federal authority proposed by the Federal Finance Minister could help enhance efforts to combat financial crime.