Urgent capacity expansion for financial transaction investigations fails to materialize

The EU member states and the European Parliament have decided that the EU's new anti-money laundering authority "AMLA" will come to Frankfurt. This decision is to be welcomed, as synergies can be created in cooperation with the ECB. In Germany, too, something is happening in the area of combating money laundering, even if it is doubtful that it will bring the hoped-for breakthrough.

A new federal authority is to be created, existing authorities are to be relocated and the coordination of the supervisory authorities of the federal states, which has not worked so far, is to be improved by a new central office in the new federal authority. Why all this actionism?

Weaknesses in the fight against money laundering to be remedied

In 2022, the Financial Action Task Force, an international association for combating money laundering, gave Germany a poor rating in its country report on combating money laundering. The German government responded to this in the fall of 2023 with a draft Financial Crime Prevention Act. This is intended to remedy the weaknesses addressed by the Financial Action Task Force. However, the draft promises more than it delivers.

In essence, the German government is responding with the following measures: On April 1, 2024, a new federal authority is to begin its work, the Federal Office for Fighting Financial Crime. The Money Laundering Investigation Center is to be set up under its umbrella. This is to be given its own responsibility for the prosecution of international money laundering cases involving Germany. The new Money Laundering Investigation Center thus complements the work of the Federal Criminal Police Office, which continues to be responsible for national money laundering cases. The necessary dovetailing of the two areas of activity is to be achieved in particular by the Joint Investigation Group, which is also to be newly established. This strengthening of international investigative work is correct and important, as money laundering has been taking place across borders and in an organized manner for a long time.

Information flow between authorities must be improved

A further strengthening of the fight against money laundering is to be achieved by transferring the Central Office for Financial Transaction Investigations (Financial Intelligence Unit, FIU) and the Central Office for Sanctions Enforcement from the Directorate General of Customs to the Federal Office for Fighting Financial Crime from June 2025. The Financial Intelligence Unit investigates suspicious activity reports under the Money Laundering Act, while the Central Office for Sanctions Enforcement investigates suspicious activity reports under the Sanctions Enforcement Act. Both offices are currently located together under the umbrella of the Directorate General of Customs. Moving them to the new federal office is logical. However, the legislator has failed to strengthen the flow of information between the authorities. As a result, reports of suspected sanction evasion are almost always followed by reports of suspected money laundering. It would be better to merge the reporting portals and ensure joint access.

Finally, a Central Office for Money Laundering Oversight will also be set up within the Federal Office for Fighting Financial Crime. This is intended to coordinate money laundering supervision of the non-financial sector nationwide and provide support for supervisory measures under money laundering law. Ultimately, however, the supervisory authorities remain the responsibility of the federal states, which leads to different interpretations and applications of the Money Laundering Act. For example, almost all federal states allow commercial enterprises that are obliged to identify their customers under the Money Laundering Act to use the video identification procedure. Only in Bavaria is this still not permitted – a nuisance for retailers based there.

Expansion of operational capacities urgently required

However, one major weakness in the German anti-money laundering system remains. The Financial Intelligence Unit receives more than 300,000 suspicious activity reports per year. It has been criticized for years due to tens of thousands of unresolved cases. An expansion of operational capacities is therefore far more important than the creation of an additional authority. It remains a mystery why the legislator has not taken action here.