How Christian Lindner wants to hunt down money launderers

So far, it has been relatively easy in Germany to launder criminally obtained money, for example from drug trafficking, by investing in cars, real estate or expensive jewellery. According to studies, 100 billion euros are laundered in Germany every year, but only a fraction of them are pursued. The Federal Republic is therefore internationally regarded as a “money laundering paradise”. Lindner now wants to put an end to this dubious reputation with the large-scale reform.

“In order to create dedicated capacities and bundle important competencies for combating money laundering in the business area of ​​the Federal Ministry of Finance, a specialized authority will be established with the Federal Office for Combating Financial Crime (BBF) on January 1, 2024,” says the draft law. A “Money Laundering Investigation Center (EZG)” is to be set up within the Financial Criminal Police Office, a special “unit for criminal investigations into significant cases of international money laundering with a connection to Germany”.

How Lindner wants to fight financial crime

But Lindner doesn’t just want to break up old structures with his mammoth reform. In terms of instruments, too, the law opens up “new ways to increase the clout against financial crime,” according to government circles. According to the draft law, Lindner will allow the reform to cost more than 700 million euros over the next four years. Specifically, he plans the following changes:

• The BBF, based in Cologne, is scheduled to start on January 1, 2024. The previous anti-money laundering unit “Financial Intelligence Unit (FIU)” and the “Central Office for Sanctions Enforcement (ZfS)” are to be merged into this by mid-2025. This will “establish a networked approach to combating money laundering in Germany and overcome the existing fragmentation,” according to government circles.
• The heart of the authority is to be the new “Investigation Center for Money Laundering (EZG)”. “With the EZG, the existing German security architecture will have a gravitational center for criminal investigations into the big fish of money laundering,” government circles said. The investigation center is to focus on illegal financial flows in order to track down criminal structures, networks and professional money launderers.
• The responsibilities of the Federal Criminal Police Office, the customs investigation service and the public prosecutor’s offices of the federal states remain intact. However, the new authority should closely coordinate money laundering supervision for all areas outside the financial sector with the federal states.
• So that the new investigation unit can work better, Lindner wants to introduce an “administrative asset investigation” that also allows asset investigations below the threshold of initial criminal suspicion.
• Lindner also wants to set up a “real estate transaction register” to give all money laundering and law enforcement authorities fully digital access to real estate data. At the same time, he wants to increase the data quality of the existing transparency register. The register provides insight into the list of people behind a company or who have economic influence on a company.

The Minister of Finance is aiming for a kind of mentality change with the conversions. The guiding principle in the fight against financial crime should be: “Follow the money.” So far, money laundering has often been a by-catch, while the investigations were actually directed against other crimes such as drug trafficking. With the Financial Criminal Police Office, they now want to independently “focus on illegal financial flows”.

With the reforms, Lindner wants to close gaps that Germany has been criticized for years. When international experts from the “Financial Action Task Force” examined the efficiency of Germany’s fight against money laundering last year, their judgment was again unflattering.

>> Read here: Why important examiners recommend a cash limit in Germany

In certain areas, “considerable improvements are required”, the auditors warned in their final report. In particular, surveillance of the private sector must become more effective. The anti-money laundering unit FIU receives a relatively large number of suspicious transaction reports from banks, but hardly any from notaries, art and car dealers.

However, the FIU was already overwhelmed with the previous reports. It has repeatedly made negative headlines in recent years.

Last year, for example, it became known that between January 2020 and September 2022, around 100,000 suspected money laundering reports were not processed at the FIU. Management consultants from PwC found out on behalf of the Federal Ministry of Finance that the processing backlogs “remained undetected due to the lack of internal FIU controlling”.

FIU: Again, tens of thousands of cases are threatened

This June, the FIU had only forwarded half of all suspected cases to the responsible authorities, as reported by the Handelsblatt. “Of the 58,288 suspicious activity reports processed by the task force so far, 26,388 have been submitted to the responsible law enforcement authorities,” wrote Finance State Secretary Katja Hessel (FDP) in response to a question from left-wing politician Janine Wissler.

And this year, tens or even hundreds of thousands of new suspicious money laundering reports are in danger of being left behind because employees have only been able to evaluate the reports manually for a few weeks, as the “Wirtschaftswoche” reported at the beginning of the month.

Lindner also wants to solve these problems with the new authority. But that will take some time. The new Federal Financial Criminal Police Office is scheduled to start in 2024. But then the construction will only begin, and the integration of the other authorities will probably not begin until 2025. It will probably take some time before the new office is fully functional.

And during the construction, the President of Lindner’s new Financial Criminal Police Office will face a problem that the FIU has also been struggling with for years: the great shortage of skilled workers. It is extremely difficult to lure top IT staff or forensic scientists into the civil service – also because the pay is often better in the private sector.

More: A Swiss becomes Germany’s top anti-money laundering fighter.