Financial Crime World

Germany’s Efforts to Combat Money Laundering and Terrorist Financing Show Promise, But More Work Needed

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Germany, the world’s fourth-largest economy and largest within the European Union, has made significant strides in recent years to strengthen its anti-money laundering (AML) and combating the financing of terrorism (CFT) measures. However, more needs to be done to effectively combat illicit financial flows.

Challenges Faced by Germany

Germany faces substantial risks related to money laundering and terrorist financing due to its cash-based economy and informal money transfer services. Coordinating efforts across its 16 states remains a challenge, and consistency between supervisory and law enforcement agencies is crucial.

Informal Money Transfer Services

  • Germany’s use of cash and informal money transfer services poses significant risks that need to be mitigated.

Positive Developments in Germany

Germany’s asset confiscation regime has been effective, with non-conviction based asset confiscation laws resulting in the seizure of substantial criminal proceeds. The country’s transition to an administrative Financial Intelligence Unit (FIU) model in 2017 has improved financial intelligence collection and use.

Effective Asset Confiscation Regime

Non-Conviction Based Asset Confiscation Laws

  • Germany’s asset confiscation regime has resulted in the seizure of substantial criminal proceeds.
  • The country’s transition to an administrative FIU model has improved financial intelligence collection and use.

Areas for Improvement

Germany must do more to:

Enhance Proactive Investigation and Prosecution

Money Laundering Activity

  • Authorities need to be more proactive in investigating and prosecuting money laundering activity consistent with Germany’s risk profile.
  • More attention needs to be given to resourcing over 300 supervisors and ensuring a consistent risk-based approach is taken.

Improve the Use of Targeted Financial Sanctions

Terrorist Financing Risks

  • Germany faces significant terrorist financing risks and has demonstrated success in investigating, prosecuting, and disrupting such activities as part of a comprehensive approach to combating terrorism.
  • The country could be more proactive in using targeted financial sanctions to freeze terrorist assets.

Enhance Transparency Register

Adequate Resources Allocation

  • The introduction of a Transparency Register has been positive, but ensuring adequate resources are allocated when it transitions to a full register in 2022 is essential.

In conclusion, while Germany’s efforts to combat money laundering and terrorist financing show promise, more work needs to be done to effectively combat illicit financial flows. Addressing the challenges and areas for improvement outlined above will help ensure Germany remains a leader in this critical area.