Berlin. In a decisive move against the shadowy world of financial crime, the Federal Ministry of Finance (BMF) presented its plans as early as August 2022 in a key points paper to get Germany out of the headlines as a supposed “money laundering paradise”. In short, a new higher federal authority called BBF (Bundesoberbehörde zur Bekämpfung von Finanzkriminalität) was created.
Recent developments since then show that the country is keen to be no longer seen as a weak link in the international anti-money laundering community. At the very least, the federal government, led by Federal Finance Minister Lindner, seems determined in its plan: the measures presented, including the establishment of an organised crime-fighting centre for customs in the Customs Criminal Investigation Office (ZKA), are clear signs that Germany takes its obligations seriously and is willing to invest the necessary resources and efforts to fight financial crime effectively.
Money laundering in Germany: Eldorado, Berlin
Berlin’s real estate market recently made headlines with a €10 million scandal involving criminals allegedly involved in money laundering. In Bavaria, a similar scenario involving assets of 50 million euros was uncovered, linked to the infamous “Russian washing machine” corruption case.
Behind these cases lies a bigger problem: the German real estate market as a hotspot for money laundering. While some criminal straw men use traditional methods, others use complex international networks and shell companies to cover their tracks.
One study suggests that the real estate market laundered as much as €4.3 billion in two years. Despite the existing money laundering law, suspicious activity reports remain worryingly low.
Despite its legal security, Germany, of all countries, paradoxically attracts illegally acquired money fuelled by the protective mechanisms of its democracy. Before money laundering can be prosecuted, the predicate criminal offence must be proven – often an issue if it was not committed on German soil.
The media accuse Berlin notaries of looking the other way in suspected money laundering cases. In response, the Berlin Chamber of Notaries stresses the importance of cooperation between notaries, tax offices, banks, and authorities. The chamber calls for better equipment for institutions to uncover illegal money flows more effectively and expose Germany as a “paradise” for money launderers.
Opposition criticises plans for the Federal Financial Criminal Police Office
At a Bundestag’s Finance Committee meeting in early May 2023, the CDU/CSU parliamentary group expressed disappointment with the Federal Ministry of Finance’s plans to fight organised crime and money laundering. Although Finance Minister Christian Lindner presented key points for a planned higher federal authority to fight financial crime (BBF) in August 2022, they have yet to make progress. The Union proposes to bundle the existing search and investigation services in a customs police and to create additional investigative competencies. The federal government stressed the importance of fighting organised crime and money laundering and plans to implement measures by mid-2025, including creating the BBF. Other parliamentary groups such as SPD, Bündnis 90/Die Grünen and FDP welcomed the plans, while the AfD and the Left parliamentary group voiced criticism. But despite all the prophecies of doom from the opposition, things are moving:
Fighting the money launderers
On 31 May 2023, the Parliamentary State Secretary at the Federal Ministry of Finance (BMF), Dr Florian Toncar, visited the Financial Intelligence Unit (FIU) in Cologne. This visit was not only a formal gesture but also an opportunity for the State Secretary to learn first-hand about the challenges and needs of the FIU. At the same time, the project manager for establishing the Federal Bureau of Financial Intelligence (BBF), Dr Marcus Pleyer, visited the FIU’s headquarters in Dresden. These coordinated visits underline the importance the BMF attaches to reorganising the fight against money laundering.
Criticism and reaction: Germany in the focus of the FATF
The International Financial Action Task Force (FATF) has repeatedly accused Germany of severe failures in the fight against money laundering. This criticism was a wake-up call for the German government and an impetus for a thorough review and reform of the existing system. The BMF plans to consolidate anti-money laundering competencies under one higher federal authority. Consolidating these competencies should ensure a clearly defined competence and responsibility in the fight against money laundering, thereby increasing the efficiency and effectiveness of the measures. But despite the planned innovations, there is scepticism about whether they will lead to a more effective fight against money laundering.
The FIU: Reform or Risk?
Since its foundation, the Financial Intelligence Unit (FIU) has been a central body in the fight against money laundering in Germany. As the main reporting point for suspected cases of money laundering and terrorist financing, it plays a decisive role in identifying and prosecuting illegal financial transactions. However, despite its central importance, the FIU has been in the crossfire of criticism for quite some time.
A major point of criticism is the current structure and functioning of the FIU. Its existing rights and duties collide with the principle of informational separation. This principle states that intelligence services and security agencies should act strictly separate from each other to prevent abuse and surveillance. However, in its current form, the FIU is often perceived as a “financial intelligence service” that performs intelligence and security agency functions. This dual role leads to concerns about the FIU’s transparency and accountability.
Criticism of the FIU has yet to be voiced at the national level. International organisations such as the FATF have also raised concerns about the effectiveness and efficiency of the FIU. The repeated criticism has prompted the Federal Ministry of Finance to consider reforming the FIU.
All’s well that ends?
Not at all. But at least the offensive fight against money launderers has finally gained momentum. And yes, a reform of the FIU is therefore to be welcomed both from a European law and a constitutional law perspective. It is not only a matter of finally putting an effective stop to fiance crime, but above all of protecting the fundamental rights of citizens and restoring trust in the institutions.
