Number of suspected money laundering cases in Germany increases

Out-Law News | 27 Aug 2020 | 9:18 am | 2 min. read

The number of suspected money laundering cases in Germany has risen and changes to the law there could lead to a further increase. Companies based in Germany that are subject to the German Money Laundering Act should check their compliance measures, an expert said.

In its recently published annual report for 2019 the German government’s financial intelligence unit (FIU) announced an increase of suspected money laundering cases in Germany of 49% from 2018. The FIU received 114,914 reports of suspected cases of money laundering.

The FIU is a section of the German general customs office that receives and evaluates reports of suspicious financial transactions which might be connected to money laundering or financing of terrorism. Since 2009 there has been a twelvefold increase in the number of reports in Germany, the FIU said, a development "that reflects the continuous raising of awareness of organisations subject to the German Money Laundering Act and also the progressing automation in credit institutions."

All but one per cent of the reports came from the financial sector. Christof Schulte, head of the FIU, said that the number of reports from non-finance sectors was too low. He said that the FIU would continue its efforts to raise awareness of the problem outside of the financial services industry.

The draft law aims to transpose into German law the EU's 2018 directive on combating money laundering. According to the federal ministry of justice, the "complex old provision of money laundering" will be replaced "by a clear new penal provision".

No longer will the conversion of illegally acquired assets into officially registered means of payment only be considered money laundering if the assets originate from a catalogue of 'predicate' offences (Vortat) such as drug trafficking, protection racketing, trafficking in human beings, fraud or embezzlement. Instead, the draft law provides that any assets acquired through criminal activity can be counted as money laundering. This should make it easier to prove money laundering, the ministry of justice said.

"In addition to preventative measures, the government has taken action to make the prosecution of money laundering easier," said Dr. Jochen Pörtge, an expert in white collar crime law at Pinsent Masons, the law firm behind Out-Law. "The ministry of justice and the ministry of finance jointly issued a draft law in August, which would abolish the unintentional commission of money laundering in the German Criminal Code. On the other hand it would no longer provide for a catalogue of predicate offences relevant to money laundering, so that in future any offence could be a predicate offence relevant to money laundering."

"Due to the new law, even more cases of suspected money laundering might be reported in the future," he said. According to Süddeutsche Zeitung, a German newspaper, and Bayrische Rundfunk, a German public service radio station, the authorities are already unable to follow up on all reports adequately and in time.

Nevertheless, the new draft law underlines the intention of the federal government to fulfil the requirements set out by the EU and to battle money laundering more effectively, said Ann-Malin Brune, an expert in white-collar crime law at Pinsent Masons.

In May 2020 the EU Commission announced it would increase efforts to battle money laundering and financing of terrorism with an action plan for the next twelve month.

"Businesses have to check very diligently whether they are subject to the German Money Laundering Act and whether they meet the required compliance measures," Brune said.

Infringements of the German Money Laundering Act can lead to fines of €5 million or 10% of the company's total turnover in the previous financial year.

As well as the financial sector, the German Money Laundering Act also applies to estate agents, traders in goods and gambling companies. If they come across indications of money laundering or terrorist financing, they must report such suspicions to the FIU.