Germany’s New Federal Office to Combat Financial Crime: A Step in the Right Direction?
As Germany prepares to open its new Federal Office to Combat Financial Crime (BBF) in January 2024, the country is facing a multitude of challenges in its fight against money laundering and terrorist financing. In this article, we’ll examine the creation of the BBF, its main pillars, and the government’s efforts to strengthen anti-financial crime measures.
The Creation of the Federal Office
Announced last year, the creation of the BBF was hailed as a vital weapon in Germany’s battle against growing financial crime risks. The move comes as the European Union prepares to roll out a super-regulator, the Anti-Money-Laundering Authority (AMLA), planned for 2024-2026.
Main Pillars of the Federal Office
The BBF will have three main pillars:
- Central Office for Sanctions Enforcement (Zentralstelle für Sanktionsdurchsetzung): responsible for enforcing sanctions and combating financial crime.
- Central Office for Financial Transaction Investigation (FIU): investigates suspicious financial transactions and reports them to the relevant authorities.
- Office for ML Investigation (Bundesfinanzkriminalamt): conducts investigations into money laundering cases.
Challenges and Criticisms
Germany has been described as a paradise for money launderers, especially organized crime groups from Italy. Cash use is still high in Germany compared to other European countries, making it particularly attractive to money launderers. Critics argue that the new federal authority will lack power to solve Germany’s complex anti-financial crime problems and more needs to be done to tackle the country’s pressing financial crime issues.
Government’s Response
The government has pledged to dedicate and bundle anti-money laundering competencies under the new Federal Office’s umbrella, but some claim this is not enough. German Finance Minister Christian Lindner pledged to create the Federal Office and accelerate digitization and interconnection of property registers and records.
Cost and Estimated Benefits
The creation of the new Federal Office comes at a cost of EUR 700 million over four years, which is nothing compared to the estimated EUR 100 billion laundered in Germany every year. The government hopes that the new reforms will help increase resources for anti-money laundering enforcement and criminal investigations.
A Risk-Based Approach to Money Laundering
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Conclusion
With the creation of the new Federal Office, Germany takes a step towards strengthening its anti-financial crime efforts. However, it remains to be seen whether this will be enough to tackle the country’s pressing financial crime issues and prevent money laundering and terrorist financing. A risk-based approach to money laundering and counter-terrorist financing is critical to solving these challenges, and Moody’s Analytics offers a comprehensive solution to help organizations stay ahead of financial crime risks.