On June 14, Olaf Scholz gave a speech to representatives of the Anti-Money Laundering Working Group and the FATF. In this speech, he referred to some key points of the FATF's Mutual Evaluation Report. The report is to be adopted at the end of June and is eagerly awaited. The previous report from 2010 identified some loopholes for money laundering in Germany.
CURENTIS compares the main statements of the speech with the already known results of the FATF report. Where has Germany improved? Where has little happened since 2010? What is the Chancellor's outlook for the future?
The Financial Action Task Force, or FATF, is described by the German Federal Ministry of Finance in its August 2021 monthly report as the "international standard setter for combating money laundering and terrorist financing." As part of this role, the Financial Action Task Force conducts so-called Mutual Evaluation Reports. These reports describe the country's basic policy and legal situation around money laundering and examine whether laws and regulations are being implemented. In addition, the Mutual Evaluation Report provides an assessment of how effective the anti-money laundering methods are in the respective country. The 2010 report adopted for Germany turned out badly from a German perspective, as it revealed several loopholes for money launderers, including the purchase of real estate, jewelry or cars with cash without major hurdles.
The FATF's new Mutual Evaluation Report will not be approved until the end of June. However, some key points of the report have already leaked out to the public.
The report praises the increased attention paid to the issue in politics. It is also positive that, as a result of restructuring, there are now significantly more officials dedicated to combating money laundering. In general, therefore, the fight against money laundering in Germany seems to be getting better. However, there is also criticism from the FATF and this has hardly changed since 2010. It continues to criticize the monitoring of notaries, lawyers and traders. It is still easy to launder cash in Germany by acquiring objects of stable or increasing value.
Olaf Scholz's speech ties in with some of the already known key points of the FATF report and takes a medium-term look at the future of Germany's fight against money laundering.
Last year, he said, around 300,000 suspicious money laundering reports were processed by the German Financial Intelligence Unit and around 45,000 were reported to the police. The German Financial Intelligence Unit is a department of the German Customs Service responsible for combating money laundering. The high number of reports is due, among other things, to the increased staffing of the FIU. Today, the FIU has 600 employees. That is six times as many as 5 years ago. However, not all FIU positions have been filled.
In addition, legal loopholes in the real estate sector have been closed. Notaries and lawyers, for example, would have to comply with stricter reporting requirements and could no longer fall back on strict confidentiality obligations in order to avoid money laundering suspicious activity reports. One statistic from the FIU speaks for the avoidance of these suspicious activity reports by notaries in real estate purchases: of 77,252 reports on cash purchases in 2021, only 8 were brought in by notaries.
The problems in combating money laundering in the real estate sector have been known to the federal government since 2010 at the latest. Unfortunately, the new report also makes it very clear that very little has been done in this area in more than a decade. This is now finally to be made up for by the aforementioned changes in the law.
According to Scholz, monitoring the private sector has been a challenge because of the need to obtain data from many different sources. Now, he said, there would be a centralized repository of information for authorities to track money laundering. This centralization of information is expected to continue in the coming years.
The establishment of a European authority for combating money laundering and terrorist financing is emblematic of the centralization of data. One possible location for this authority is Frankfurt am Main as one of the financial capitals in Europe. According to Scholz, this authority would be a major step forward in the fight against money laundering. Today, investigations into money laundering cases drag on for a long time due to slow, cross-border information flows. A central, European authority would hold the information needed across countries and lead the investigations.
Olaf Scholz's speech describes a positive view of the medium-term future of Germany's anti-money laundering efforts. There are still some construction sites, such as the expansion of the FIU and the monitoring of the real estate sector. This is underlined by the probably again negative Mutual Evaluation Report of the FATF.
However, Olaf Scholz and the FATF agree on one point: Germany has taken up the fight against money launderers. The extent to which the German government will succeed in winning the battle remains to be seen. As things stand, there is still work to be done. Scholz must ask himself why more has not been done in this direction during his tenure as finance minister - greater progress in the fight against money laundering would suit the German bid for the central seat of the European authority for combating money laundering and terrorist financing.