Money laundering: why the anti-money laundering agency works so badly – economy

The warnings came early, they were as clear as they were numerous, but the weak points in the fight against money laundering in Germany have remained. Since spring 2019, representatives of the 16 federal states have expressed concern in letters and discussions about the poor work of the customs special unit FIU. That authority called the Financial Intelligence Unit, which until recently was only known to connoisseurs. Shortly before the federal election, this authority suddenly and violently hit the headlines after public prosecutors from Osnabrück appeared in the Federal Ministry of Finance and Justice with search warrants. The FIU, which is subordinate to the ministry headed by SPD chancellor candidate Olaf Scholz, is said to have passed on indications of suspected terrorist financing to the investigative authorities too late or not at all. The hitherto unknown officials are suspected of preventing punishment in office. Money laundering as an election issue.

With the Osnabrück criminal proceedings, the dispute over the grievances at the FIU has escalated: a dispute that began with the establishment of the authority in the summer of 2017. It is documented in numerous parliamentary inquiries from the Bundestag opposition, through violent criticism from the state criminal investigation offices, in letters from the ministries involved. Largely unnoticed by the public, the federal and state governments have been discussing failures in the fight against money laundering for years – but they cannot find a solution. According to research by the SZ, the justice ministries of the federal states have long since run out of patience. At a conference of the state ministries of justice in autumn 2020, a state representative is said to have loudly scolded that the “limit of the bearable” had meanwhile been reached.

He was referring to the still inadequate cooperation between the FIU and the investigative authorities of the federal states. At the same time, the FIU still cannot keep up with processing the mass of reports of suspected money laundering. Banks and other parties obliged to do so reported questionable money transfers more than 144,000 times last year. Many cases then got stuck with the FIU. If investigators learn too late about a concrete suspicion, the money is gone in many cases – much to the delight of those in this country who convert dirty money in the billions from criminal transactions such as fraud or drug offenses into supposedly clean assets. “The FIU has and is often submitted very old reports of suspected money laundering to the law enforcement authorities,” explains the Bavarian Ministry of Justice. This concerns processes that were up to two years ago.

Anti-money laundering authorities violate the money laundering law

Germany is under pressure on this issue. The highest international anti-money laundering body, the Financial Action Task Force (FATF), is currently examining the quality of anti-money laundering in this country, and the work of the FIU is also being examined. Experts reckon with a bad grade again, the control result of the previous test in 2010 was catastrophic. For decades, Germany has been a safe haven for criminal gangs who invest their illegally generated assets in real estate and companies. In 2020, the Federal Audit Office found that the FIU “could only inadequately meet the expectations placed in it”.

Since the beginning of 2020, the FIU has been trying to master the situation in consultation with the Federal Ministry of Finance with the so-called “risk-based approach”. According to this, the officials sort money laundering reports according to previously defined risk areas with the help of software. Anything that does not clearly fit these priorities – for example the categories of terrorist financing or organized crime – remains in the authority’s database. In its current annual report, the FIU speaks of a “prioritization of incoming suspicious transaction reports”; only what can be assigned to the main risk areas is analyzed in depth. The Federal Ministry of Finance even wrote the risk-based approach in the Money Laundering Act this summer – against the advice of the federal states.

Because the procedure is illegal in their opinion. In other words: The Federal Anti-Money Laundering Authority itself is violating the Money Laundering Act. The Lower Saxony Ministry of Justice assumes “that reports of suspicion that cannot be assigned to any of the FIU’s internal risk areas will not be forwarded, regardless of their criminal content.” The FIU would be obliged to do exactly this: It should not investigate, but rather forward any possible suspicion to the responsible law enforcement authorities as quickly as possible. The Ministry of Justice of North Rhine-Westphalia criticizes the fact that “an analysis limited according to risk focuses prevents the FIU from obtaining valid and complete information”.

Doubts about the claims of Finance Minister Scholz

The criminal lawyers at the Federal Ministry of Justice, headed by Christine Lambrecht (SPD), apparently see it that way. According to a letter from the Ministry from May 2020, the FIU’s approach is “from a local point of view” incompatible with the requirements of Section 32 (2) of the Money Laundering Act must forward “immediately”.

While Finance Minister Scholz claims, as last Monday, that “more has been achieved in the last three years than in the last 30 years” in the fight against money laundering in Germany, the reality is very different. And it obviously takes many meetings, letters, and appeals to address the issues. An envoy from the Federal Ministry of Justice, in turn, promised the federal states in May 2019 that they would contact the Ministry of Finance on their requests. Christine Lambrecht’s line to fellow party member Scholz should actually be short. But a year passed before the alarming letter from the Justice Department to the Treasury Department.

And so bureaucratic processes also seem to prevent an effective fight against money laundering. After further, sometimes outraged, letters from the justice ministries of the federal states, something actually seems to be happening. The inadequate exchange of information between the FIU and the investigative authorities of the federal states should now be improved by a total of ten “liaison officers” in the state criminal investigation offices. The FIU has also provided a data interface since September. Meanwhile, the Federal Ministries of Finance, Justice and the Interior are taking a closer look at the message backlog. As early as September 2019, 48,229 reports of suspected money laundering had accumulated, said the Bundestag member Fabio De Masi of the Left, citing figures from the Ministry of Finance.

Two months ago, the Ministry of Justice finally informed the federal states that they were sitting together: between the Federal Ministries of Justice, Finance and the Interior, a “complete manual evaluation” of all suspicious transaction reports received in the course of a limited period of time (for example one month) was being considered. With such a test run, the officials want to find out which facts are involved and in particular to what extent references to other criminal offenses “were not recognized and therefore not passed on to the law enforcement authorities” in the automated analysis.

Will reports of suspected money laundering be checked manually again soon?

Instead of relying exclusively on software, people would look at every single suspicious transaction report and, if in doubt, forward it. Time is often short: banks hold suspicious transactions for a maximum of three days when they report suspected money laundering. Then the money flows – if no investigative authority has intervened by then.

The test run now planned by the federal ministries after years of criticism seems like a belated admission that the automatic evaluation of suspicious transaction reports does not work after all. And it shows the large gap between the self-image of the FIU and the expectations of the investigative authorities. The FIU wants to analyze reports and classify them according to urgency, but may and should not evaluate them under criminal law. The police and the judicial authorities fear that they will not find out about a specific suspicion or that they will be informed too late. This is illustrated by the proceedings in Osnabrück, which now led to the searches in Berlin: After the FIU did not forward information about terrorist financing to the prosecutors, the banks reported directly to the public prosecutor’s office. It came far too late for the suspicious transactions over 1.7 million euros in 2018 – and is now instead determining why the customs officials did not forward these reports.

The constant criticism from the federal states as well as from the left, the FDP and the Greens in the Bundestag has meant that the FIU is now working faster. Bavaria’s Ministry of Justice speaks of an “improvement”. Urgent deadline cases are “now usually submitted on time”. So in good time so that the police and public prosecutors can intervene before it is too late and the money is gone. Nevertheless, according to the Bavarian Ministry of Justice, there are always “waves of old processes”. The impression arises that the FIU is repeatedly processing old cases that have not been dealt with for a long time or have only been dealt with in a subordinate manner. This was also evident at Wirecard when, after the bankruptcy of the scandal group in June 2020, the FIU suddenly presented old suspicious transaction reports in series that had remained in place until then.

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