Financial Crime Risk Assessment in Germany: BaFin Scores Well, But Recommendations Made for Improvements

The Financial Action Task Force (FATF) has published its country report on money laundering prevention in Germany, assessing the country’s efforts to combat financial crime. The report highlights both the progress made by BaFin, Germany’s federal financial supervisory authority, and areas where improvements can be made.

Strong Understanding of Risks and Effective Supervision

The FATF assessment team praised BaFin’s strong understanding of risks and its effective supervisory system, which enables the authority to take adequate preventive measures against money laundering and terrorist financing in the financial sector. The report highlights BaFin’s differentiated risk-based approach to supervision, as well as its range of measures and sanctions used to prevent financial crime.

Recommendations for Improvement

However, the assessors also noted that there is potential for even more effective monitoring of the private sector, including by BaFin. Some recommendations correspond to projects already implemented or planned by the authority, such as increasing staffing levels in anti-money laundering supervision and creating additional supervisory divisions.

Assessment Process

The FATF assessment focused on the ministries and authorities involved in combating money laundering and terrorist financing in Germany, including the Federal Ministry of Finance, the Federal Ministry of Justice, and various supervisory bodies at federal state level. The assessment also involved an on-site inspection lasting several weeks, during which BaFin provided comprehensive information and documents to the assessors.

Results and Recommendations

The report describes the strengths and weaknesses in the combating of money laundering and terrorist financing in Germany from the perspective of the international assessors, as well as a catalogue of recommendations for action to resolve the identified shortcomings. The assessment results show that Germany scored very well in terms of “Technical Compliance”, but received a moderate rating for effectiveness.

Next Steps

BaFin has welcomed the initiative by Federal Finance Minister Christian Lindner to create a new higher federal authority to combat financial crime and enforce sanctions, which would also be responsible for ensuring the coordination of supervisory activities in the non-financial sector. The publication of the country report marks the official completion of the country assessment for Germany, with a progress report on the FATF follow-up process expected next year.

Full Report

The full article can be found [here](insert link).