Financial Crime World

Germany Intensifies Efforts to Combat Financial Crime, But More Needs to Be Done

Introduction

Despite being the 4th largest economy in the world and the largest in the European Union, Germany faces significant Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) risks. The country’s global connections, high use of cash transactions, and domestic coordination challenges make it vulnerable to illicit financial flows.

Domestic Coordination Challenges

  • Supervisory and law enforcement authorities often fail to work together seamlessly
  • Germany’s 16 states have different approaches to AML/CFT, creating inconsistencies in implementation
  • The country’s reliance on informal money transfer services and cash transactions presents a significant risk that needs to be mitigated

Progress in Asset Confiscation

  • Introduction of non-conviction based laws has led to the seizure of substantial criminal proceeds
  • However, more needs to be done to ensure effective implementation at the operational level

Financial Intelligence Unit (FIU) Model

  • Germany transitioned to an administrative FIU model in 2017, improving financial intelligence gathering and use
  • Challenges remain in collecting, analyzing, disseminating, and utilizing this information effectively
  • Authorities must prioritize proactive and systematic investigations and prosecutions of money laundering activity in line with the country’s risk profile

Terrorist Financing Risks

  • Germany faces significant terrorist financing risks
  • The country has a good track record of investigating, prosecuting, and disrupting financing activities as part of a comprehensive approach to combating terrorism
  • Experts suggest that Germany could be more proactive in using its targeted financial sanctions regime to freeze terrorist assets

Regulatory Framework and Resourcing

  • Germany has a robust framework for regulating and supervising the financial and non-financial sectors
  • However, more needs to be done to ensure adequate resourcing of over 300 supervisors and implement a consistent risk-based approach
  • The introduction of a Transparency Register has been welcomed, but authorities must prioritize ensuring it is adequately resourced when it transitions to a full register in 2022

Conclusion

Germany’s efforts to combat financial crime are ongoing, but the country must continue to address these challenges to maintain its reputation as a leading global economy and ensure that its financial system remains secure against illicit activities.