germany aml money laundering

Germany is a country with a difficult history, having been shaped, divided, and rebuilt as the result of armed and unarmed conflicts. Since the reunification of West and East Germany in 1990, the nation now boasts the world’s fifth largest economy and the largest in Europe. Although present-day Germany is an economic powerhouse, it is not without its challenges.

In 2010, the Financial Action Task Force (FATF) released a Mutual Evaluation Report that provided an assessment of Germany’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regime. The report found that in spite of the progress made by Germany in strengthening its AML/CFT measures, the country was still susceptible to money laundering and terrorist financing due to its large economy, strategic location, and strong international connections. The preference for using cash over all other forms of payment was also highlighted by the FATF as a factor that increased Germany’s vulnerability to illicit activity.

Three follow-up reports were produced by the FATF in the following four years. The latest report was released in 2014 recognizing Germany’s significant progress in addressing the deficiencies identified in the first report. Among the actions taken by the German government included tougher laws on money laundering and enhanced cooperation between government departments, regulators, and other organizations involved in fighting money laundering and terrorist financing.

However, despite the advances made by Germany in fortifying its AML/CFT framework, problems still remain. In March, a German bank was fined $1.45 billion for failing to comply with U.S. sanctions laws and money laundering regulations. During that same month, BaFin, the German federal financial regulator, imposed a $3.5 million fine against an investment firm for publishing faulty corporate voting rights disclosures. Another German bank was fined $2.5 billion in April by British and American regulators for rigging interest rates. And earlier this month, the New York State Department of Financial Services, renowned for being a tough enforcer, started investigating whether or not $6 billion in trades made by a German bank for Russian clients constituted money laundering.

While these disciplinary actions may not reflect a lacking on the part of German regulators, the financial service industry still has work to do to rebuild its trust with the public. Implementing greater transparency and accountability and establishing stronger regulatory compliance teams could help banks in Germany to repair their reputations.

Do you think that the current German AML/CFT regime is adequate? What can German banks do to change public perception?