Financial Crime World

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Germany’s New Federal Office to Combat Financial Crime Set to Face Tough Challenges

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The upcoming launch of Germany’s new Federal Office to Combat Financial Crime (BBF) in January 2024 marks a significant step in the country’s fight against money laundering and terrorist financing. The creation of the BBF was announced last year, following a report by the Financial Action Task Force (FATF) that highlighted Germany’s need for improved anti-money laundering measures.

Challenges Ahead

Germany’s economy is the largest in the European Union, but its efforts to combat financial crime have been criticized as insufficient. According to FATF, Germany rated lower on anti-money laundering results compared to Spain, France, and Italy.

The BBF will have three main pillars:

  • The Central Office for Sanctions Enforcement (Zentralstelle für Sanktionsdurchsetzung – ZfS)
  • The Central Office for Financial Transaction Investigation (FIU)
  • The new Office for ML Investigation (Bundesfinanzkriminalamt – BFKA)

Challenges and Concerns

However, challenges lie ahead. Germany has been described as a paradise for money launderers, particularly organized crime groups from Italy. The country’s high cash use, especially in property transactions, makes it an attractive destination for criminals.

Fighting financial crime requires a highly connected and coordinated approach, which is a challenge for Germany given its federal system. The fragmentation of approach does not create the best starting point for anti-money laundering action.

The FATF has called on Germany to implement more proactive and systematic investigations and prosecutions of financial crimes, as well as improve resourcing for MLTF investigations and adopt a consistent risk-based approach.

Reforms and Concerns

Despite these challenges, German Finance Minister Christian Lindner has pledged to reform the country’s anti-financial crime efforts. He has announced plans to create the Federal Office, train more experts, accelerate digitization and interconnection of property registers and records, and dedicate and bundle AML competencies under one umbrella.

However, some critics have expressed concerns that the reforms do not go far enough in tackling Germany’s financial crime problems. They have called for greater transparency of individuals’ fortunes, limits on cash-based transactions, and a rapid move towards banning cash property sales.

Addressing Challenges

The new real estate transaction register is expected to help address these issues by requiring reporting data from courts, authorities, and notaries in the case of acquisitions worth EUR 100,000 or more. The BBF will receive corresponding data records via an interface.

Budget and Funding

It is estimated that German taxpayers will pay EUR 700 million over four years to set up the new Federal Office. This is a small price to pay compared to the estimated EUR 100 billion laundered in Germany every year.

Conclusion

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