Germany’s AML/CFT Efforts Face Challenges Despite Progress
Berlin, Germany - Despite being the largest economy in the EU and a key financial hub, Germany is facing challenges in its efforts to combat money laundering and terrorist financing.
Progress Made, But Challenges Remain
While Germany has made significant progress in strengthening its anti-money laundering (AML) and counter-terrorist financing (CFT) measures, there are still areas that require improvement. A recent report highlights the challenges faced by Germany in combating financial crimes despite its efforts to strengthen its AML/CFT regime.
Challenges Faced
Lack of Coordination Between Government Agencies
Germany’s federal system presents a challenge in terms of centralized case management and tracking. This lack of coordination between different government agencies hinders the country’s ability to effectively combat financial crimes.
Limited Data Availability Across Governments
Another area of concern is the lack of available data across the Federal and Länder governments, making it difficult to measure the effectiveness of AML/CFT measures. The report highlights the need for Germany to apply new technologies to enhance the use of data in combating these crimes.
Ongoing Issues
Bearer Shares and Nominee Shareholders
The use of bearer shares and nominee shareholders also remains a significant issue in Germany. Bearer shares, which are shares that do not have a registered owner, can make it difficult to trace the ownership of assets and facilitate illegal activities. Nominee shareholders, who hold shares on behalf of others, can also be used to conceal the true beneficial owners of assets.
Financial Sector Concerns
High-Risk Banks and Cooperatives
Germany’s financial sector is also a concern, with six high-risk major banks and cooperatives subject to over 20 sanctions by BaFin in 2019-2020. The country’s correspondent banking relationships with high-risk countries are also a source of risk.
Additional Risks
Cash-Intensive Nature and Lack of Transaction Limits
Germany’s cash-intensive nature, international interconnectedness, and lack of cash transaction limits also present risks. The country’s strong social and historical attachment to cash means that a significant portion of transactions take place in cash, making it easier for criminals to launder money.
Recommendations
To address these challenges, the report recommends that Germany:
- Continue to prioritize international cooperation
- Improve its data collection and analysis capabilities
- Strengthen its AML/CFT measures to effectively combat financial crimes
Germany has taken steps to address some of these issues, including increasing its national ML/TF risk understanding and strengthening international cooperation. However, more work is needed to fully address the challenges posed by bearer shares and nominee shareholders, as well as the lack of data and coordination between government agencies.