Financial Crime World

Germany Steps Up Efforts to Combat Financial Crime

Introduction

As a response to expanding sanctions and anti-money laundering regulations following Russia’s war against Ukraine, Germany has taken significant measures to enhance its fight against financial crime. The country is now moving forward with the establishment of a Federal Financial Crime Agency, aimed at strengthening scrutiny and enforcement of existing rules.

The Challenge of Financial Crime in Germany

Financial crime remains a pressing challenge in Germany, with money laundering and sanctions evasion causing substantial financial and reputational damage. German authorities have recently intensified their efforts, conducting high-profile raids on properties linked to Russian oligarchs, including Alisher Usmanov. These actions are part of the Central Sanctions Enforcement Office’s (ZfS) mandate to enforce sanctions at the federal level.

Key Reforms of the Combating Financial Crimes Act

The German government is implementing reforms through the Combating Financial Crimes Act (Finanzkriminalitätsbekämpfungsgesetz – FKBG). Key features of this act include:

  • The establishment of the Federal Financial Crime Agency (BBF) in 2024 and its operation in 2025.
  • The creation of several units within the BBF, including:
    • The Money Laundering Investigative Centre (Ermittlungszentrum Geldwäsche – EZG): investigates international money laundering using a “follow-the-money” approach.
    • The Central Office for AML Supervision (Zentralstelle für Geldwäscheaufsicht – ZfG): ensures a coordinated approach by the decentralized supervisory authorities of the Federal States to pursue a uniform risk-based strategy.
  • The use of state-of-the-art technologies for investigative and analytical units.
  • Better transparency registers with additional access authorizations.
  • Incentives for companies to disclose their ownership and control structures in the transparency register.

Preparing for New Developments

Companies are advised to stay ahead of this development and adjust their internal control systems accordingly. This can be achieved by:

  • Conducting a risk assessment to identify and evaluate sanctions and money laundering sensitive issues.
  • Training employees on sanctions and AML requirements and how to recognize suspicious activities.
  • Creating a procedure for reporting any suspicious transactions to the BBF.

Preparing for Dawn Raids

Companies are advised to adjust their export control system according to new requirements. Concerning potential dawn raids, it’s essential that companies are prepared at all times. Relevant employees should know how to handle such situations to maximize the likelihood of respecting legal rights and minimizing reputational harm.

The Five Golden Rules for Company Representatives Present at a Dawn Raid

  • Do not obstruct.
  • Only exert influence verbally.
  • Accompany and document the actions of the inspectors.
  • Reserve rights over documents that may be subject to legal privilege or outside the scope of the warrant.
  • Request sealing of documents that may be subject to legal privilege or outside the scope of the warrant.

Conclusion

Germany’s efforts to combat financial crime are intensifying. Companies must stay informed and adjust their internal control systems accordingly to avoid potential fines and reputational damage.