Financial Crime World

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Germany’s New Federal Office to Combat Financial Crime Faces Challenges

Berlin - Germany’s new Federal Office to Combat Financial Crime (BBF) will face significant challenges when it opens its doors in January 2024, as the country struggles to improve its anti-money laundering and terrorist financing efforts.

Background

The BBF was created in response to a Financial Action Task Force (FATF) report that highlighted Germany’s need for significant improvements in its anti-money laundering regime. The report noted that Germany rated lower on anti-money laundering results compared to other European countries such as Spain, France, and Italy.

Challenges Ahead

The new Federal Office will have three main pillars: the Central Office for Sanctions Enforcement, the Central Office for Financial Transaction Investigation, and the new Office for Money Laundering Investigation. However, experts warn that successfully fighting financial crime requires a highly connected and coordinated approach, which is a particular challenge for Germany given its federal system.

  • “The fragmentation of approach doesn’t necessarily create the best starting point for anti-money laundering action,” said a source close to the matter.
  • The FATF has called on Germany to implement more proactive and systematic investigation and prosecution of financial crime.
  • The country also needs to focus more on resourcing money laundering investigations and ensuring a consistent risk-based approach.

German Finance Minister’s Commitment

German Finance Minister Christian Lindner has pledged to create the Federal Office, train more experts, and accelerate digitization and interconnection of property registers and records. However, some critics argue that more needs to be done to tackle Germany’s pressing financial crime problems.

The Way Forward

  • The new office is expected to help increase resources for anti-money laundering enforcement and criminal investigations.
  • It could also help solve some of the problems at Germany’s Financial Intelligence Unit (FIU), which has faced criticism over its handling of suspicious activity reports.
  • However, others have expressed concerns that the FIU’s problems will not be easy to solve, as it has repeatedly made negative headlines in recent years.

What Companies Can Do

To improve their anti-money laundering efforts, companies can partner with organizations that offer risk management and compliance solutions. Moody’s Analytics offers a full suite of risk management and compliance solutions, including:

  • Identity verification
  • UBO (Ultimate Beneficial Owner) discovery and screening for PEPs (Politically Exposed Persons), sanctions, and adverse media
  • Risk-based approach to money laundering and counter-terrorist financing

By partnering with organizations like Moody’s Analytics, companies can create a profile of risk for each individual or entity they work with and make decisions with confidence based on accurate data.

Conclusion

Germany needs to get each state on board and working in a coordinated system to turn the tide against financial crime. The country also needs more transparency of individuals’ fortunes, limits on cash-based transactions, and a rapid move towards banning cash property sales.