Matthias Dennig/ June 4, 2019/ Uncategorized

At the end of January, the last 500 bank notes were issued in the euro zone. Exempt were Germany and Austria, where the purple notes were used more frequently than elsewhere.  Now both countries followed suit. At the end of April, the grace period for those 500s expired, but the bills in circulation will continue to be valid indefinitely. This stop should make tax fraud, money laundering or terrorist activities more difficult. According to the European Central Bank (ECB), those high denomination notes are particularly popular with criminals, who seem to like Germany as their romping place. But that won’t change with the discontinuation of the 500.

“Germany – a state loses control” headlined the Handelsblatt last year. Everything is lacking: controls, knowledge of crimes and suspects, and primarily anti-money laundering initiatives. Combating money laundering is one of the key elements in the fight against organized crime and terrorism, which should be the responsibility of the Financial Intelligence Unit (FIU). However, the FIU seems more engaged in the analysis of their own problems rather than fulfill their function of analyzing and assessing illegal money transfers to pass to the law enforcement authorities.

The potential volume of money laundered in Germany can’t be estimated seriously. According to various studies, it is between 20 and 100 billion euros annually. But certainly, around 6,000 suspicious cases are received by the FIU every month.

After the reorganization in 2017, the FIU’s affiliation changed from crime commission to the general customs directorate. But this transition didn’t give more power to the FIU.Not enough authority, too much bureaucracy, and way too few employees results in a pile of unprocessed cases. The 2018 newly appointed boss Christof Schulte may indeed increase the authority’s personnel, but new employees must first be hired. A big improvement is not expected anytime soon.

Money laundering scandals of northern European banks are shaking the financial world. They have long been considered stable and profitable. Do German banks also run a similar risk caused by the huge backlog of cases?However, the next challenge already awaits. By 2020, German money laundering systems will again be audited by the global FATF (Financial Action Task Force). Last time in 2010, the inspectors were already extremely dissatisfied. With another bad report Germany as a financial center risks to lose its prestige internationally.

Foto: Tobias Bumm

Matthias Dennig

About Matthias Dennig

Matthias Dennig works as a presales and consulting expert for the product SMARAGD aces360. His area of responsibility includes advising prospective clients and supporting the introduction of the SAP BIS based product SMARAGD aces360. For more than 15 years he has worked as a project manager in the compliance environment for targens GmbH in various major projects in Germany and other countries.