International controllers are calling for Germany to do more in the fight against money laundering

Berlin It was a tricky test for the federal government. For the first time in ten years, international experts spent several months examining how successful Germany is in combating financial crime and money laundering.
This Friday, representatives of the Financial Action Task Force (FATF) discussed their audit results at a meeting in Berlin. And as in the past, the results were unflattering: Germany still has a money laundering problem.

Although the fight against money laundering and terrorist financing has been strengthened in recent years, “significant improvements are required in certain areas,” said the summary of the FATF meeting.
The international auditors complain that the surveillance of the private sector needs to become more effective. The anti-money laundering unit FIU receives a relatively large number of suspicious transaction reports from banks, but only very few from the commercial sector such as notaries, art and car dealers.

In addition, the FATF calls on Germany to provide more information about the beneficial owners of certain assets. The recent enforcement of sanctions against Russia has shown how difficult it can sometimes be to find out who actually owns a property.

For many years, critics have regarded Germany as a “money laundering paradise,” as a high-ranking official put it. In Germany, for example, it is relatively easy to launder criminal money from the drug trade by investing in cars, real estate or expensive watches. The federal government had therefore already expected a rather mixed report from the FATF.

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A total of 14 employees in the Federal Ministry of Finance dealt exclusively with the FATF check, plus other officials in other authorities such as the financial supervisory authority Bafin. Last year, the Federal Ministry of Finance sent a total of 1,778 pages to the Paris-based FATF to document what Germany is doing to combat money laundering.

Nevertheless, the FATF recognizes that Germany has tackled some problems, even if not all of the measures have come into force, as the summary states. The full report is not expected to be published until September.

In a study conducted several years ago, the criminologist Kai Bussmann from the University of Halle-Wittenberg estimated that 50 to 100 billion euros are laundered in Germany every year. Other studies come up with a slightly lower amount. But there is still agreement: Germany has a money laundering problem.

Investigators hope for more pressure

Before the FATF review, money laundering investigators had therefore hoped that the report would be as harsh as possible. “Otherwise nothing ever changes here,” said one. The investigator therefore found it unfortunate that an official from the Federal Ministry of Finance, Marcus Pleyer, has been chairman of the FATF since the beginning of 2020.

“It’s hard for me to believe in coincidences when a top German official becomes President of the FATF in the year of the exam,” said Lisa Paus, then a finance politician for the Greens, when Pleyer was appointed in 2020.
Pleyer, on the other hand, emphasized on Friday after the FATF meeting that he had stayed away from the investigation. The results were therefore also presented by his deputy.

In the 2010 investigation, the FATF’s verdict was much harsher. The conclusion of the inspectors at the time: Germany is “susceptible to money laundering and terrorist financing”. Germany met the requirements for just 29 of the 49 criteria examined, five times it received the worst grade “not met” – for example because the fines were too low.

The results were so disastrous that Germany almost ended up on the blacklist of countries that “pose a risk to the international financial system”. This would have put Germany in the company of countries like Angola, Iran or North Korea.

Many action programs, limited success

The federal government was able to prevent this at the time and promised improvement. Both Wolfgang Schäuble (CDU) and Olaf Scholz (SPD) repeatedly launched various action programs against money laundering in the ten years that followed as Federal Finance Minister. However, with mixed success.

Chancellor Scholz speaks at Financial Action Task Force (FATF)

The FATF is the main international body for combating and preventing money laundering and terrorist financing.

(Photo: dpa)

For example, Scholz wanted to use a program of measures to ensure that authorities, federal states, financial regulators, the Federal Criminal Police Office and the Federal Intelligence Service work more closely together in the fight against undeclared work and financial crime. Reporting regulations for real estate agents, notaries, gold dealers, auction houses and art dealers have also been tightened.

The FATF also recognizes this progress, but many reforms got stuck or turned into a debacle. In 2017, for example, Schäuble transferred the Financial Intelligence Unit (FIU), a special unit for combating money laundering and terrorism, from the Federal Criminal Police Office to customs.

But the few officials there couldn’t keep up with checking the suspected cases that were suddenly pouring in on them. In the meantime, the FIU had a backlog of 50,000 unprocessed cases. There were also technical glitches. The software was not ready for use, temporary workers had to process reports by fax.

The FATF inspectors praise the fact that many authorities in Germany have been better staffed. At the same time, they warn that the FIU must also be further strengthened in information processing. To date, not all positions have been filled at the FIU, which is why the unit has not yet developed the quick-wittedness it once promised.

Other problems were not even addressed. In its 2010 report, the FATF already criticized that notaries had an “insufficient awareness” of money laundering and terrorist financing risks. For example, if someone pays for a house in cash, a notary should be suspicious. However, the FIU hardly ever receives such reports. Of 77,252 reports in 2019, only eight came from notaries.

Another problem from the point of view of money laundering fighters is the lack of a cash limit. While many other countries have such an upper limit, in Germany large sums can also be paid in cash.

Federal Finance Minister Christian Lindner (FDP) promised improvement even before the report was presented. A few weeks ago he announced that he wanted to make the FIU more effective. Lindner could listen to the criticism without a guilty conscience. Responsibility for the conditions fell into the tenure of his two predecessors, Schäuble and Scholz.

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