Financial Crime World

Germany Falls Short on Financial Institution Due Diligence, Report Says

BERLIN

A recent report has highlighted several areas where Germany’s financial institutions have fallen short in terms of due diligence, despite efforts to implement the Financial Action Task Force (FATF) recommendations.

Key Findings

  • Germany scored poorly on customer due diligence and record keeping, earning a rating of “partially compliant” or “non-compliant”.
  • The country performed well on metrics such as use of new technologies and wire transfers, but struggled with confiscation and provisional measures.
  • Germany was rated as non-compliant in areas such as terrorist financing offences and targeted financial sanctions related to terrorism and terrorist financing.

Weaknesses in Customer Due Diligence

  • While financial institutions were generally doing a good job of assessing risk and applying a risk-based approach, there were issues with national cooperation and coordination.
  • The report noted that financial institutions were not maintaining adequate records, which made it difficult to track transactions and identify potential money laundering activity.

Implications for Germany’s Reputation

  • The report’s findings are expected to have implications for Germany’s international reputation, particularly in light of its bid to join the European Banking Union.
  • Critics have argued that Germany’s failure to meet certain FATF recommendations undermines its ability to effectively regulate financial institutions and combat money laundering.

Response from the German Government

  • The German government has announced plans to strengthen its regulatory framework and improve cooperation between financial institutions and law enforcement agencies.
  • The government has also pledged to increase funding for anti-money laundering initiatives and enhance transparency and beneficial ownership of legal persons.

While the report’s findings are disappointing, experts believe that Germany has made significant progress in recent years in implementing the FATF recommendations.