Germany announces crackdown on money laundering

Berlin, Aug 26: The German government has announced plans to crack down on financial crime in a bid to end what Finance Minister Christian Lindner called Germany's "reputation as a money laundering paradise."

"We have the courage for great success," Lindner said in a statement this week. "With our powerful and effective structures, we will make sure that honest businesspeople will be protected from those who don't stick to the rules."

The "keypoint paper" released by Lindner's ministry on Thursday boiled down to three initiatives: The creation of a new federal authority to fight financial crime, a pledge to train more experts, and a pledge to accelerate the digitalization and interconnection of the relevant property registers and records.

The new Federal Financial Crime Agency, as it is called in the paper, is meant to bundle and develop expertise and focus on what the ministry calls a "follow-the-money approach." This agency, the paper goes on, will be closely integrated with the Financial Intelligence Unit (FIU), where suspicious transactions are first reported.

Michael Findeisen, who spent several years running the Finance Ministry's money laundering division and is now a fellow at Finanzwende, an anti-money-laundering campaign group said that other European countries might have a poorer track record, but Germany had a bigger problem, because of the size of its economy.

"Germany is a powerful economic force, so it is interesting for investors — both legal and illegal investors," he told DW. "There is a lot of illegal Italian money, for example, invested in the German finance sector. That's why the standards need to be stricter in Germany."

Cash still plays a key role in German businessand major purchases, such as buying property, can still be transacted in cash — a gap the government has promised to close. But the German business world still has a cash-based culture. Despite EU efforts, the German Federal Bank was initially against abolishing the €500 note, which was then discontinued two years ago. Germany has also consistently resisted international regulations imposing a €5,000 limit on cash business transactions.

A better Financial Action Task Force report

The announcement of the Finance Ministry's new initiative was timed to coincide with — and perhaps head off criticism arising from — a new evaluation of Germany from the Financial Action Task Force(FATF), an inter-government body that sets international standards for policing money laundering and terrorist financing.

The FATF gave Germany a mixed report card: While the country had made "significant reforms" in the last five years, it was dragging its feet in implementing them: "The transition has been challenging and Germany needs to continue to prioritize the implementation of these reforms at the operational level and continue to enhance the collection, analysis, dissemination, and use of financial intelligence."

"Germany could be more proactive in using the targeted financial sanctions regime as a preventive measure to freeze terrorist assets," the FATF added.

'Symbolic politics'

But campaigners have been much more scathing of the government's latest crackdown efforts. "There's more to a paradigm shift in fighting money laundering than creating a new agency," Konrad Duffy, finance crime specialist at Finanzwende, told DW in a statement. "Apart from powerful authorities, we need more transparency with the value of fortunes, a quick implementation of the promised ban on buying real estate with cash, and better possibilities for confiscating dirty money."

Findeisen had even more drastic words for Lindner's statement, which he dismissed as "symbolic politics."

This, according to Findeisen, is because Lindner's approach does nothing to mitigate Germany's structural problems. "The problem in Germany is that we have a very strong federal system," he said. "All the criminal prosecution is in the hands of the states, while the preventative capacities are run by the federal government, with a few exceptions. And Lindner hasn't even spoken to the states yet."

In other words, Findeisen argues, that all the government is proposing is to bring together the existing federal powers under one roof. "The hard part is to unify the preventative and the repressive approaches," he said. The best quick fix for this, according to Findeisen, would be to shift federal resources to the states so that they can recruit more prosecutors of financial crime.

The other structural problem that the ministry is failing to address is the wage imbalance between the public and private sectors. "It's nonsense what he's written there: That we'll train new financial investigators," said Findeisen. "Our problem is that good financial investigators are very rare. Why? Because they're poorly paid. The good people are all taken by the banks as compliance officers, where they can earn €8,000 to €10,000 a month for the simplest compliance jobs."

In short, Findeisen was scathing: "This is a press statement that was written very quickly but has no substance whatsoever," he said. "If we talk in three years I think we'll see that none of this was implemented.

Source: DW