Financial Crime World

Combating Terrorist Financing Through Financial Institutions in Germany

Germany Strengthens Anti-Money Laundering and Combating of Terrorist Financing Measures

BERLIN, GERMANY - The German Ministry of Finance has published a new national risk assessment on money laundering and terrorist financing, aiming to enhance the country’s anti-money laundering (AML) and combating of terrorist financing (CFT) measures.

Overview of the New National Risk Assessment

The updated assessment is the second version since 2019 and comprehensively describes the German AML/CFT system. It includes:

  • The principles of the financial market
  • The tasks of individual public administration bodies and market participants in combating money laundering and terrorist financing
  • An analysis of the incidence of money laundering and terrorist financing in Germany, considering various scenarios and industries

Impact on Financial Institutions

The publication of the new national risk assessment requires financial institutions to review and update their own risk assessments related to their activities. Failure to do so may result in:

  • Administrative penalties, including fines or withdrawal of authorization to operate
  • Monetary penalties directly imposed on individuals responsible for AML/CFT obligations

Even if an institution concludes that the new national risk assessment does not necessitate changes to its own risk assessment, it is recommended to document the analysis and conclusions to demonstrate due diligence in case of a possible audit by regulatory authorities.

Key Areas of Focus

Financial institutions should focus on analyzing Annex 2 of the new national risk assessment, which provides comprehensive conclusions on threats and risks per sector. The annex distinguishes between 14 sectors, including:

  • Banking
  • Payment services
  • Insurance
  • Real estate
  • Other industries

Examination of the annex may help identify which services provided by an institution are at particular risk of being used for money laundering or terrorist financing purposes. The report also provides detailed scenarios for the use of financial institutions in various sectors for money laundering or terrorist financing.

Mitigating Risks

The annex concludes with guidance on how financial institutions can mitigate risks in each area, including:

  • Monitoring customer behavior and transactions
  • Identifying both positive and negative indicators, such as:
    • Customers incurring liabilities without intention to repay them
    • Premature repayment of incurred liabilities

Financial institutions should be aware of these factors to effectively combat money laundering and terrorist financing.