Financial Crime Case Studies in Germany: FATF Publishes Preliminary Mutual Evaluation Report
The Financial Action Task Force (FATF), the global standard setter for combating money laundering and terrorist financing, has published its preliminary Mutual Evaluation Report (MER) on Germany’s efforts to combat financial crime. While praising significant progress made by Germany, the report highlights several areas where improvement is still needed.
Fragmented Supervision of Non-Financial Sectors
One of the main issues identified is the fragmented supervision of non-financial sectors in Germany, with over 300 authorities responsible for supervising approximately 10,000 companies each. This has led to inefficiencies and uncertainties regarding responsibility and resource allocation.
- Lack of coordination among authorities
- Unclear distribution of tasks and responsibilities
- Inefficient use of resources
Availability of Information about Beneficial Owners
Another area of concern is the availability of information about beneficial owners. Germany’s transparency register is currently being converted into a full register, but it still lacks digital interfaces that enable direct data retrieval by obligated parties in the financial sector and notaries.
- Limited access to beneficial ownership information
- Difficulty in retrieving information quickly
- Inefficient use of technology
Coordination and Data Investigation
The report also criticizes the coordination and data investigation between individual authorities, particularly between the Financial Intelligence Unit (FIU) and prosecutors’ offices. Furthermore, there is a lack of meaningful information and data in Germany to support structured analysis of complex money laundering cases.
- Inefficient use of resources
- Lack of effective communication among authorities
- Limited availability of relevant data
Prioritizing Money Laundering Investigations and Prosecutions
Finally, the FATF recommends prioritizing money laundering investigations and prosecutions more strongly, as the FIU has been criticized for acting inefficiently and slowly in processing suspicious cases.
- Inadequate prioritization of investigations and prosecutions
- Lack of effective investigation methods
- Limited resources dedicated to combating financial crime
To address these deficits, the German Finance Ministry has published a proposal containing three main measures to improve the effectiveness of Germany’s fight against money laundering and financial crime:
Establishing a New Federal Financial Crime Agency
Firstly, a new federal financial crime agency will be established, combining investigative and supervisory powers. This agency will consist of a federal financial crime police office, a new FIU, and a central office for money laundering supervision.
- Improved coordination among authorities
- Enhanced investigative powers
- Increased effectiveness in combating financial crime
Improving Training and Education
Secondly, Germany aims to improve the training and education of investigators by bringing together necessary expertise, improving mandatory training, and building up expertise where needed.
- Improved skills and knowledge among investigators
- Enhanced collaboration among authorities
- Increased effectiveness in investigating complex cases
Implementing Digitalization and Cross-Linking of Registries
Thirdly, digitalisation and cross-linking of registries will be implemented to improve efficiency in checking ownership structures and beneficial ownership. Interim measures can be implemented quickly, while full digitalization is being developed.
- Improved access to information about beneficial owners
- Enhanced efficiency in investigating financial crimes
- Increased effectiveness in combating international economic crime
These reforms are intended to strengthen authorities’ powers and ramp up enforcement against financial crime. However, only time will tell how successful these new strategies will be in combating international economic crime.