analysis
As of: 09/29/2021 4:54 p.m.
Money laundering is an international problem, but critics see a lot of catching up to do, especially in Germany. Which countries are already further – and what are they doing better?
By Lilli Hiltscher, tagesschau.de
Experts repeatedly raise allegations against Germany for negligently combating money laundering. It is estimated that up to 100 billion euros are “washed” every year in Germany. Are other countries fighting money laundering more effectively?
Italy is one of the countries that experts say are more successful in combating the obfuscation of criminal money flows. Experts believe that the problem is being tackled much more resolutely there than in Germany. The law enforcement authorities in Italy have recognized that “a successful fight against money laundering is a prerequisite for successfully fighting the Mafia,” says Dirk Peglow, Deputy Federal Chairman of the Federation of German Detective Officers. The well-known Mafia hunter Roberto Scarpinato, on the other hand, considers the Federal Republic to be a “money laundering paradise”. As early as 2010, the Sicilian public prosecutor said that he would invest in Germany as a mafioso.
How does money laundering work?
Money laundering means that income from illegal transactions is channeled into the legal financial and economic cycle. Since the money to be “laundered” comes from corruption, bribery or robbery, extortion, drug trafficking, unauthorized arms trafficking or tax evasion, the origin should be concealed. This works by buying objects of value such as real estate, art, securities, jewelry or cars with the “dirty” money and then selling them on. The transactions cannot be traced back through cash payments, which guarantee the anonymity of the buyer.
Bad grades for Germany
At that time, Germany almost failed the review by the experts of the Financial Action Task Force (FATF). The FATF is affiliated with the Organization for Economic Cooperation and Development (OECD) in Paris and is an important international body for combating money laundering and the financing of terrorism. It regularly reviews its member states for their effectiveness in combating money laundering. It is currently Germany’s turn again, and the result is expected in the coming year. Experts doubt that the situation has improved significantly. The German financial sector is considered to be difficult to understand, and there is also a squabble of competence among the authorities. Supervisory authorities such as the anti-money laundering unit FIU are not very effective, and law enforcement is lagging behind.
Italy, however, repeatedly makes a name for itself with arrests and the collection of large sums of money. One of the main reasons for the success in combating money laundering is the reversal of the burden of proof – an accused citizen has to prove himself that he is not involved in illegal business. “In Italy, for example, a villa can be confiscated, and then the owner has to prove that it was not bought with money from illegal sources,” says Christoph Trautvetter from the Tax Justice Network.
Strict rules when collecting assets
Other countries also have strict rules on asset collection: Great Britain is implementing something similar with the so-called “Unexplained Wealth Order”. British courts can force suspects to reveal their sources of inexplicably high wealth. Assets can be confiscated until the owner explains where the money comes from.
In Germany there are now first attempts to introduce similar procedures. In the meantime, the public prosecutor no longer has to prove the specific criminal offense from which money, for example for a property, originates. “It must be much more implausible that the money comes from legal sources,” said Trautvetter. Since March, every criminal activity has been considered a possible predicate offense to money laundering, because it never happens as the sole crime. However, it remains to be seen to what extent such cases would exist in court.
No system perfect
The USA, too, can repeatedly point to large amounts collected: “Private individuals who help to uncover criminal activities can even keep part of the money and get rich as a result,” says the expert from the Tax Justice Network. And: “The police can also keep some confiscated assets themselves.”
The successes in the USA or Italy are only partially meaningful, believes Dirk Peglow from the Association of German Detectives. “With regard to the Italian judiciary, a distinction has to be made between a provisional confiscation of assets and the necessary judicial confirmation. Unfortunately, the corresponding figures are rarely available.” Ultimately, no system is perfect. “When asked in which country the fight against money laundering is better, I would like to quote the head of the Financial Action Task Force, David Lewis, who basically said that things are going bad everywhere, only less badly in some countries.”
What is the EU doing?
That is why the EU Commission now wants to take stronger action against money laundering in Europe. The Brussels authority is planning a cash limit that will apply across Europe. So far, however, Germany has refused to introduce such an upper limit, so that even larger transactions can still be carried out in cash. Although this is no longer the most important method for money laundering, it is still a low-threshold option that could be stopped with new rules, according to Peglow. Other countries have gone further: In Spain the cash limit is around 2500 euros, in Italy 1000 euros.
In addition, according to the plans of the EU Commission, a new control authority is to be established. “Through agencies like Europol and Eurojust, we have been able to improve international cooperation,” said Peglow. Nevertheless, cooperation between different countries is still too cumbersome, especially when it comes to non-EU countries. Cooperation would be important, because “Money laundering is an international problem that can only be solved together,” says expert Trautvetter.