In 2004, the International Monetary Fund (IMF) released its assessment on Germany's compliance with the Financial Action Task Force (FATF) Recommendations on Anti-Money Laundering and Combating the Financing of Terrorism. Accordingly, German legislation meets the general obligations of the FATF's recommendations. This assessment was based on the 2002 methodology for assessing compliance with the FATF recommendations. However, in 2004, the FATF released its revised methodology for assessing compliance with FATF recommendations. Since then, there has been no comprehensive assessment publicly available of Germany's compliance with FATF requirements. A 2007 report by the Institute of International Bankers does indicate that the German authorities were expected to draft legislation to implement the third European Union (EU) Money Laundering Directive by December 2007. According to the 2007 report by the U.S. Department of State, this Directive requires all EU member states to implement the FATF's recommendations. However, there is little subsequent information publicly available as to whether Germany adopted the third EU Money Laundering Directive into legislation. The 2002 Money Laundering Act criminalizes activities related to money laundering. Germany's Financial Intelligence Unit, the Central Office for Suspicious Transaction Reports, was established within the Federal Criminal Police Office (BKA) in 2002. The BKA and Customs authorities are also responsible for investigating money laundering and terrorist financing activities.

General Overview

According to a 2004 Report on the Observance of Standards and Codes by the International Monetary Fund (IMF), which is based on the Financial Action Task Force (FATF) Recommendations, German legislation meets the general obligations of the FATF's 2002 Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Methodology for assessing compliance with the FATF 40 Recommendations, and has taken steps toward meeting the FATF 8 Special Recommendations on CFT. Furthermore, Germany has adopted legislation that is comprehensive, effective, and efficiently implemented. The IMF report nonetheless identified weaknesses regarding cross-border wire transfer rules involving other European Union (EU) members and the criminalization of terrorist financing. Following the IMF's 2004 report, Germany ratified the UN International Convention for the Suppression of the Financing of Terrorism. However, the 2004 IMF assessment was based on the 2002 (old) methodology for assessing compliance with the FATF recommendations. In 2004 the FATF released its revised methodology. Since then, there has been little information publicly available addressing Germany's compliance with the FATF recommendations.

The Money Laundering Act, as amended by the 2002 Act on the Improvement of the Suppression of Money Laundering and Combating the Financing of Terrorism (Geldwäschegesetz, or GwG), criminalizes activities related to money laundering, including narcotics trafficking, fraud, forgery, embezzlement, and terrorist organizations, as noted in a 2007 U.S. Department of State (DoS) International Narcotics Control Strategy report. Under the 2002 GwG, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, or BaFin) has the authority to freeze the assets of EU citizens suspected of terrorism. In 2003, following an amendment to the GwG, the BaFin established a central electronic database to centralize all bank accounts in Germany. According to, the Institute of International Bankers' (IIB) 2007 Global Survey, German authorities transposed the 2006 EC Payer Information Regulation into German legislation and drafted a new law to implement the third EU Money Laundering Directive by December 2007. Per the 2007 U.S. DoS report, the Directive requires all EU member states to implement the FATF's Forty Recommendations and includes provisions on customer due diligence, risk management measures, and suspicious transaction reports (STRs) related to the financing of terrorism. However, there is little subsequent information publicly available as to whether Germany adopted the third EU Money Laundering Directive into legislation.

The BaFin was established on May 1, 2002, within the Ministry of Finance (MoF). It is an integrated financial supervisory authority, consolidating the supervisory agencies for banking (Bundesaufsichtsamt für das Kreditwesen, or BAKred), insurance (Bundesaufsichtsamt für das Versicherungswesen, or BAV), and securities (Bundesaufsichtsamt für den Wertpapierhandel, or BAWe). According to the 2007 U.S. DoS report, banks are required to report money laundering to the Central Office for Suspicious Transaction Reports (Zentralstelle für Verdachtsanzeigen, or FIU) within the Federal Office of Criminal Investigation (Bundeskriminalamt, or BKA), as well as to the State Attorney. The FIU was established in 2002, and cooperates with the Land Criminal Police Offices (Landeskriminalamt, or LKA) of each German state (Länder), as noted in the 2004 IMF report. The BKA and Customs authorities are also responsible for conducting AML/CFT investigations. Per the same report, while the BKA is responsible for supervising international AML/CFT activities, customs authorities monitor cross border money laundering activities. However, all investigations are overseen by the prosecutor's office of the Länder to ensure proper coordination.

Germany is a member of the FATF, and its FIU is part of the Egmont Group. Furthermore, Germany is a party to the 1988 United Nations (UN) Drug Convention, the 1999 UN International Convention for the Suppression of the Financing of Terrorism, and the 2000 UN Convention against Transnational Organized Crime. It has also signed but not yet ratified the 2003 UN Convention against Corruption. Furthermore, Germany has Mutual Legal Assistance Treaties with many countries. According to the 2006 BKA Annual Report, money laundering is mainly related to white collar crimes such as fraud, forgery, and tax evasion. Trafficking in and domestic consumption of narcotics are further forms of money laundering in Germany, according to the 2007 U.S. DoS report. In 2006, per the BKA's 2006 Annual Report, 10,051 STRs were filed pursuant to the 2002 GwG. This represented a 22 percent increase from the previous year.

The Principles

1. Legal Systems and Related Institutional Measures

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Although the IMF assessed Germany's observance of the FATF's recommendations, its assessment was based on the FATF's 2002 methodology. In 2004, the FATF issued a new methodology for assessing country compliance against FATF recommendations. Following the release of the 2004 methodology, there has been little information publicly available addressing Germany's compliance with the recommendations relating to this principle. The 2002 GwG criminalizes activities related to money laundering, including narcotics trafficking, fraud, forgery, embezzlement, and terrorist organizations, as noted in a 2007 U.S. DoS report. In 2003, the BaFin established a central electronic database to centralize all bank accounts in Germany under the 2002 GwG. Furthermore, under a 2003 amendment to the GwG, the BaFin has the authority to freeze assets of EU citizens suspected of terrorism. The BaFin was established on May 1, 2002, as an integrated financial supervisory authority within the MoF, consolidating the BAKred, BAV, and BAWe. In 2006, according to the IIB's 2007 Global Survey, the German authorities transposed the 2006 EC Payer Information Regulation into German legislation, and directed the Interior Ministry to draft new legislation that would implement the third EU Money Laundering Directive by December 2007. Per the 2007 U.S. DoS report, the Directive requires all EU member states to implement the FATF's Forty Recommendations and includes provisions on customer due diligence, risk management measures, and STRs related to the financing of terrorism. However, there is little subsequent information publicly available as to whether Germany adopted the third EU Money Laundering Directive into legislation.

As noted in the 2007 U.S. DoS report, banks are required to report money laundering to the FIU and to the State Attorney. The FIU was established in 2002, and cooperates with each German state's LKA. Furthermore, according to the IMF's 2004 report, the FIU has "access to numerous sources of information, whether financial, administrative, or law enforcement to enable it to adequately undertake its responsibilities" (p. 4). With regards to the criminalization of terrorist financing, the 2004 IMF report stated that provisions in the German Criminal Code only refer to terrorist organizations. The IMF recommended extending the criminalization of terrorist financing to individual terrorists and establishing more comprehensive statistics on confiscation, STRs, prosecution and convictions, and international cooperation. In relation to the freezing and confiscation of funds used for terrorist financing, the IMF reported that a new (at the time) provision in the 1998 Banking Act (Kreditwesengesetz, or KWG) was expected to bring domestic terrorism regulation in line with international standards. However, there is little subsequent information publicly available regarding the effectiveness of this provision. The German system "basically" meets the FATF law-enforcement requirements under the 2002 GwG and the 1998 KWG, according to the IMF's 2004 report. However, German legislation does not contain specific sanctions for the failure to report suspicions of money laundering. The IMF report suggested amending legislation to sanction the non compliance with the identification requirements in case of suspicious transactions.

2. Preventive Measures - Financial Institutions

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he German AML/CFT framework applies to all credit institutions, financial services institutions, insurance companies, and financial enterprises, as noted in the 2004 IMF report. Per the same report, FATF requirements on customer identification were fully met in the banking and insurance sectors. FATF requirements for the continuous monitoring of accounts and transactions were also completely met in the credit, financial services, and insurance sectors. Regarding customer due diligence measures when establishing business relations, the German system was fully in line with the FATF requirements. With regard to record keeping, FATF requirements were fully met in terms of regulation and implementation. STR procedures in the credit, financial services, and insurance sectors were also appropriate. However, the report found that audit and on-site inspections should be more systematic and frequent. Despite this very positive assessment, there is little information publicly available as to Germany's compliance with the recommendations relating to this principle, since the 2004 IMF assessment was based on the FATF's 2002 methodology, which was revised in 2004.

The 2004 IMF report recommended adopting sanctions for noncompliance with STRs and establishing more comprehensive statistics on confiscation, STRs, prosecutions and convictions, and international cooperation. With regard to wire transfer rules, new provisions in the KWG entered into force in 2003, covering cross-border wire transfers with countries outside the EU. The IMF advised extending current provisions to cross-border wire transfers with other EU member states. In its 2007 report, the U.S. DoS also noted that Germany should amend legislation on wire-transfer rules to ensure that "origination information applies to all cross-border transfers."

3. Preventive Measures - Designated non-Financial Business and Professions

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Designated non-Financial Business and Professions, including lawyers, estate agents, notaries, tax consultants, and accountants are subject to the identification and reporting requirements under the 2002 GwG and Second EC Money Laundering Directive No. 2001/97/EC. Nonetheless, there is insufficient information publicly available as to Germany's compliance with the recommendations relating to this principle.

4. Legal Person and Arrangements & Non-Profit Organizations

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Per the 2007 report by the U.S. DoS, subsequent to the 9/11 terrorist attack in the U.S, "Germany increased its law enforcement efforts to prevent misuse of charitable entities." According to the IMF's 2004 report, the requirements regarding beneficial ownership were met after the GwG was amended in 2002. Still, overall, there is insufficient information publicly available as to Germany's compliance with the recommendations relating to this principle.

5. National and International Co-operation

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Germany has Mutual Legal Assistance Treaties with many countries. In its 2004 report, the IMF recommended providing mutual legal assistance despite the absence of dual criminality. It further advised gathering reliable official statistics on mutual legal assistance. The 2002 GwG allows cooperation between the FIU and foreign counterparts, and Germany's FIU has been collaborating with other FIUs within the EU. However, the IMF report noted that Germany's FIU did not "spontaneously" disclose information to other foreign FIUs and recommended addressing this shortcoming through appropriate measures. Germany is a member of the FATF, and its FIU is part of the Egmont Group. Furthermore, Germany is a party to the 1988 UN Drug Convention, the 1999 UN International Convention for the Suppression of the Financing of Terrorism, and the 2000 UN Convention against Transnational Organized Crime. It has also signed but not yet ratified the 2003 UN Convention against Corruption. Nonethelss, overall, there is insufficient information publicly available as to Germany's compliance with the recommendations relating to this principle.