Germany Confronts Fraudulent Activities in Finance

Germany’s Federal Financial Supervisory Authority (BaFin) is taking a proactive approach to prevent money laundering, terrorist financing, and other criminal offenses that threaten the country’s financial stability.

Proactive Approach to Combat Fraudulent Activities

To achieve this goal, BaFin has established a department for the prevention of money laundering at the forefront. This department works closely with financial institutions to ensure they implement formal business policies to detect and combat fraudulent activities.

Overseeing Financial Institutions

As part of its mission, BaFin oversees credit institutions, financial services institutions, payment institutions, life insurance undertakings, German asset management companies, and persons and companies that sell or convert e-money. The authority is responsible for ensuring compliance with statutory obligations aimed at preventing the misuse of the financial system.

Centralized Responsibilities

To simplify this process, BaFin has centralized its responsibilities under the Department for the Prevention of Money Laundering. This department carries out money laundering supervision of all institutions, companies, and persons specified under section 50 of the Money Laundering Act (GwG).

Transparency is Key to Avoiding Risks

To avoid risks, obliged parties are required to have a risk management system that includes:

• Risk analysis
• Internal risk measures
• Customer due diligence duties, including:
  • Identifying customers and persons acting on their behalf
  • Beneficial owners
  • Monitoring business relationships

Additionally, obliged parties must notify the Central Customs Authority’s Financial Intelligence Unit if they discover facts indicating that an asset related to a business relationship or transaction originates from a criminal act. This obligation is outlined in section 43 of the GwG.

Simplified Due Diligence Measures

To simplify due diligence measures, BaFin allows obliged parties to apply simplified procedures if they determine that there is only a low risk of money laundering or terrorist financing in certain areas. In cases where a higher risk is identified, enhanced due diligence measures must be applied.

Automated Account Information Access

The Department for the Prevention of Money Laundering is also responsible for automated account information access, allowing for the identification and freezing of accounts belonging to suspected terrorists or other criminals with credit institutions registered in Germany.

International Cooperation

Internationally, BaFin represents Germany in various bodies, including:

• The Financial Action Task Force on Money Laundering (FATF)
• The Sub-Committee on Anti-Money Laundering (AMLC)

By working together with international partners, BaFin is committed to preventing fraudulent activities from threatening the financial stability of Germany.