Germany’s measures to combat money laundering and terrorist financing

Germany has made significant reforms over the past five years to strengthen its system for combating money laundering and terrorist financing (AML/CTF). Some of the new measures are already producing results, but Germany needs to continue its reforms and take steps to ensure that it has the resources and prioritisation at the operational level to combat illicit financial flows.

As the fourth-largest economy in the world, the largest in the EU and with a very large globally connected economic network, Germany faces significant money laundering and terrorist financing risks. The German authorities have a good understanding of these risks and engage in constructive cooperation with partners in other countries. However, domestic coordination across Germany’s 16 Länder is a challenge, and coordination and consistency between supervisory and law enforcement authorities need to be strengthened. Priority should also be given to mitigating the risks associated with the high use of cash in the country and the use of informal MVTS.

Asset confiscation is a strong feature of Germany’s AML/CTF regime. The introduction of non-conviction-based confiscation legislation has led to the confiscation of significant amounts of criminal proceeds.

Germany’s move to an administrative financial intelligence unit (FIU) model in 2017 was a positive step towards improving the collection and use of financial intelligence. However, the transition has been challenging, and Germany needs to continue to prioritise these reforms at the operational level and to further strengthen the collection, analysis, dissemination and use of financial intelligence. The authorities also need to do more to proactively and systematically investigate and prosecute ML in line with Germany’s risk profile.

Germany faces significant terrorist financing risks and has a good track record of investigating, prosecuting and disrupting financing activities as part of its comprehensive approach to counter-terrorism. However, Germany could be more proactive in using the targeted financial sanctions regime as a preventive measure to freeze terrorist assets.

Although there is a strong and comprehensive framework for regulating and supervising the financial and non-financial sectors for AML/CFT compliance, greater priority needs to be given to resourcing the more than 300 supervisors and to ensuring a consistent risk-based approach. The introduction of the (electronic) transparency register is positive, but priority must be given to ensuring that it is fully resourced as it moves to full registration in 2022.

The mutual evaluation report on AML/CTF measures in Germany was adopted by the FATF at its plenary meeting in June 2022.

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