Combating Money Laundering Using an All-Crimes Approach. New Law in Germany Aims to Improve the Fight Against Money Laundering

On February 11, 2021, the German Bundestag adopted a draft bill to support legal sanctions against money laundering (19/24180). This will expand the previous list of predicate offences that apply to money laundering. Under the “all-crimes approach”, anyone who engages in money laundering based on an offence will in future be liable to prosecution.

This law is intended to further improve the fight against money laundering under criminal law and even go beyond the minimum international requirements. The newly formulated money laundering offence (Section 261 of the German Criminal Code) will expand the basis of criminal activity that underpins money laundering (all-crimes approach). This means that anyone who smuggles illegally obtained assets into the legal economy will be liable to prosecution. Dispensing with a selective list of predicate offences and including all criminal acts in the group of predicate offences broadens the scope of the offence and makes it easier to present evidence. From the government’s point of view, this means that money laundering can be penalized more frequently than in the past.

6^th Money Laundering Directive (6AMLD) on the Home Straight

The 6AMLD (6th EU Anti Money Laundering Directive, 2018/1673) on combating money laundering by criminal law was adopted in 2018. The 6AMLD should be implemented by regulated entities within the member states by June 3, 2021. The new law in Germany simultaneously transposes this directive into national law and even goes beyond the requirements. However, payment intermediaries and other observers predict that this will lead to a significant increase in the number of money laundering suspicious activity reports and an enforcement deficit at the Financial Intelligence Unit (FIU).

FATF Audit for Germany in 2020/21 has Begun

The Financial Action Task Force (FATF) is an international institution for combating and preventing money laundering, terrorist financing and proliferation financing. Member states are regularly audited for implementation of the FATF standards. The audit for Germany for 2020/2021 has begun and will include a focus on demonstrating effectiveness. This is why the fight against money laundering and terrorist financing is a priority for the German government.

FATF – Priorities for the Financial Action Task Force (FATF) under the German Presidency

In June 2020, Germany took on the first two-year Presidency of the Financial Action Task Force (FATF). The FATF will prioritize work to tackle some of the great challenges facing societies around the world including the opportunities that new technology offers to strengthen AML/CFT monitoring systems through digital transformation, ethnically or racially motivated terrorism, migrant smuggling, environmental crime and illicit arms trafficking.

Focusing on Digital Transformation of AML/CFT

For many years, the FATF has monitored technological developments in the financial services arena and taken action to address emerging risks, most recently by introducing new standards on virtual assets. The German Presidency intends to build on this work, focusing on the opportunities that technology can offer, by launching an initiative to monitor risks and explore opportunities that the digital transformation of our economies and societies brings to anti-money laundering (AML) and counter-terrorist financing (CFT) efforts.

This FATF Initiative Includes the Following Projects:

• Studying the opportunities and challenges of new technology to make the implementation of AML/CFT measures by the private sector and supervisory bodies more efficient.
• Studying the opportunities and challenges for operational agencies with a view to enhancing the efficiency of systems to detect and investigate money laundering (ML) and terrorist financing (TF) and improve understanding of ML/TF risks.
• Taking stock of data pooling and analysis, with the aim of helping the private sector make better use of artificial intelligence and big data analytics in order to increase the efficiency of regulatory compliance while ensuring high levels of data protection.

What Banks Need to Do Now to Implement the All-Crimes Approach of the New Law:

1. Test monitoring for money laundering against new indicators, scenarios and typologies and expand as necessary.
2. Test screening for effectiveness and efficiency with quality tests.
3. Use machine learning to minimize the number of false positives and focus more resources on clarifying true positives.

BaFin finalized the Interpretation and Application Guidance (AuA) of the Money Laundering Act

In June 2021, BaFin published the final version section of the Application Guidance of the Money Laundering Act for credit institutions.

They apply to all credit institutions under the supervision of BaFin. With these instructions, Bafin is honing its administrative procedures with regard to the special obligations of credit institutions under money laundering law.