Germany’s Battle Against Money Laundering: Progress Made, But More Needs to Be Done

Germany, the fourth largest economy in the world and the largest in the EU, has made significant strides in recent years to strengthen its system and combat money laundering and terrorist financing. However, despite these efforts, the country still faces numerous challenges and risks that need to be addressed.

Domestic Coordination: A Major Challenge

The German authorities have a good understanding of the money laundering and terrorist financing risks they face, and they cooperate constructively with other countries. However, domestic coordination across Germany’s 16 states is a major challenge, and there needs to be enhanced coordination and consistency between different supervisory and law enforcement authorities.

Progress Made: Asset Confiscation and Financial Intelligence

One area where Germany has made significant progress is in asset confiscation. The introduction of non-conviction based asset confiscation laws has resulted in the confiscation of substantial amounts of criminal proceeds.

Germany’s transition to an administrative FIU model in 2017 was a positive step towards improving the collection and use of financial intelligence. However, this transition has been challenging, and Germany needs to continue prioritizing the implementation of these reforms at the operational level and enhancing the collection, analysis, dissemination and use of financial intelligence.

Investigation and Prosecution: Room for Improvement

German authorities also need to be more proactive in investigating and prosecuting money laundering activity in line with the country’s risk profile. Additionally, while Germany has a good track record of investigating, prosecuting and disrupting terrorist financing activity as part of a holistic approach to combating terrorism, it could be more proactive in using targeted financial sanctions as a preventive measure to freeze terrorist assets.

Regulatory Framework: Robust but In Need of Improvement

Germany’s regulatory framework for combating money laundering and terrorist financing is robust and comprehensive. However, there needs to be greater priority given to resourcing the over 300 supervisors and ensuring a consistent risk-based approach. The introduction of a Transparency Register has been positive, but priority needs to be given to ensuring it is adequately resourced when it transitions to a full register in 2022.

Conclusion: A Continuing Struggle

In conclusion, while Germany has made significant progress in combating money laundering and terrorist financing, there is still much work to be done. Germany’s authorities need to continue implementing reforms at the operational level, prioritizing the investigation and prosecution of money laundering activity, and enhancing coordination and consistency across different authorities.

Key Recommendations:

• Enhance domestic coordination and consistency between different supervisory and law enforcement authorities
• Prioritize the implementation of financial intelligence reforms at the operational level
• Be more proactive in investigating and prosecuting money laundering activity in line with the country’s risk profile
• Use targeted financial sanctions as a preventive measure to freeze terrorist assets
• Ensure adequate resourcing for supervisors and a consistent risk-based approach