Financial Crime World

Germany Strengthens Global Standards for Combating Financial Crime

In its efforts to prevent financial crimes and maintain the integrity of the global financial system, Germany has taken significant steps to enhance its regulatory framework. The German Federal Financial Supervisory Authority (BaFin) plays a critical role in this endeavor.

Enhancing Regulatory Framework

All companies operating in the financial sector are required to have formal business policies aimed at preventing transactions with a criminal background. This includes detecting and combating suspicious transactions and terrorist financing activities, which can pose a threat not only to individual institutions but also to the entire financial market.

Key Responsibilities of BaFin

  • Supervising all entities subject to its jurisdiction, including:
    • Credit institutions
    • Financial services institutions
    • Payment institutions
    • Life insurance undertakings
    • German asset management companies
    • Persons and companies that sell or convert e-money

Implementing Risk-Based Approach

To achieve transparency in business relationships and financial transactions, BaFin requires all obliged parties to implement a risk-based approach. This involves:

  • Conducting regular risk analyses
  • Identifying potential risks
  • Implementing internal measures to mitigate these risks
  • Complying with customer due diligence duties, including:
    • Identifying customers
    • Beneficial owners
    • Other relevant individuals

Continuous Monitoring and Reporting

BaFin’s regulations require obliged parties to:

  • Continuously monitor business relationships and transactions for suspicious activity
  • Report any findings to the Central Customs Authority’s Financial Intelligence Unit

Enhanced Due Diligence Measures

In cases where there is a high risk of money laundering or terrorist financing, BaFin requires enhanced due diligence measures to be implemented. These measures include:

  • Applying simplified due diligence procedures in areas with low risks
  • Enhanced due diligence procedures in areas with higher risks

International Collaboration

BaFin represents Germany’s interests in various bodies, including the Financial Action Task Force on Money Laundering (FATF) and the Sub-Committee on Anti-Money Laundering (AMLC). This collaboration aims to strengthen global standards for combating financial crime and promoting transparency in international financial transactions.