Germany’s Anti-Money Laundering Policies: Progress Made, Room for Improvement

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Introduction

Germany has made significant strides in recent years to strengthen its anti-money laundering (AML) and counter-terrorism financing (CFT) regime. However, despite this progress, challenges remain in implementing reforms at the operational level.

Assessment Highlights

According to a new assessment, Germany’s AML/CFT framework is robust and comprehensive, with a good understanding of the risks posed by money laundering and terrorist financing. The key highlights from the report are:

Key Strengths

• Asset confiscation is a strong feature of Germany’s regime, with significant amounts of criminal proceeds confiscated under non-conviction based asset confiscation laws.
• The transition to an administrative Financial Intelligence Unit (FIU) model in 2017 has improved the collection and use of financial intelligence.

Areas for Improvement

• Domestic coordination across Germany’s 16 states (Länder) is a challenge, and consistency between supervisory and law enforcement authorities needs improvement.
• Authorities need to prioritize the implementation of reforms at the operational level, including enhancing the collection, analysis, dissemination, and use of financial intelligence.
• Proactive investigation and prosecution of money laundering activity in line with Germany’s risk profile are also needed.

Combating Terrorist Financing

Germany faces significant terrorist financing risks but has a good track record of investigating, prosecuting, and disrupting financing activity as part of a holistic approach to combating terrorism. However, the report suggests that Germany could be more proactive in using targeted financial sanctions as a preventive measure to freeze terrorist assets.

Regulatory Framework

While there is a robust framework for regulating and supervising the financial and non-financial sector for compliance with AML/CFT, more priority needs to be 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 as it transitions to a full register in 2022.

Conclusion

Germany’s AML/CFT regime shows promise, but continued effort is needed to address the challenges and ensure that the country remains effective in combating money laundering and terrorist financing.