Financial Institutions Face Scrutiny Over Organizational Duties

German Investigation Reveals Widespread Violations of Organizational Duties

A recent review has highlighted a series of violations of organizational duties among financial institutions in Germany. The investigation found that many institutions had failed to implement adequate risk-management processes and procedures, as required by law.

Risk-Management Failures

• The German Banking Act (KWG) requires financial institutions to have an efficient risk-management system in place.
• However, the review found that many institutions were failing to meet these requirements, putting their customers and the financial system at risk.

Sanctions and Appeals Processes

• The German Code of Administrative Offences (OWiG) outlines the process for prosecution and appeal of administrative decisions.
• The investigation found that many institutions were not following these procedures correctly, causing issues with the assessment and collection of sanctions.

Anti-Money Laundering Requirements

• The German Money Laundering Act (GWG) requires all financial institutions and other designated businesses to implement procedures to prevent money laundering and terrorist financing.
• While most obliged entities had implemented adequate measures, there was still room for improvement in monitoring transactions and reporting suspicious activities.

Regulatory Response

• Regulatory authorities have issued warnings to several financial institutions, demanding that they take immediate action to rectify their organizational failures.
• The authorities have emphasized the importance of compliance with anti-money laundering regulations and the need for all financial institutions to prioritize risk management.

Key Findings

• Many financial institutions failed to implement adequate risk-management processes and procedures.
• Institutions were not adequately monitoring transactions or reporting suspicious activities.
• The assessment and collection of sanctions and appeals processes were often incorrect.
• Anti-money laundering measures were inadequate in some cases.

Recommendations

• Financial institutions should prioritize the implementation of efficient risk-management systems.
• Institutions should ensure that they are adequately monitoring transactions and reporting suspicious activities.
• Regulatory authorities should continue to monitor compliance with anti-money laundering regulations and take enforcement action where necessary.
• Financial institutions should review their organizational structures and systems to prevent financial crimes.