Germany tackles money laundering to balance its books

Berlin’s leafy Kurfürstendamm boulevard looks like an upmarket shopping street but is, in fact, Germany’s largest money laundry.

Talk to discreet employees of the high-end jewellery stores here and they tell similar tales about their big-spending customers – often foreign nationals.

“They come just before closing, want to see everything we have, and pay for everything in cash,” said one 26-year-old salesman.

Sales over €10,000 require staff – working late and plying customers with champagne – to ask for an ID and for buyers to fill in a simple form declaring the money is legal income. “People can write in any name they like, to be honest, no one checks,” the salesman reports. “This is German money-laundering prevention in 2022.”

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Unlike most other European countries, Germany has no upper limit on cash payments, meaning wads of high-value notes are used every day to buy jewellery, furs, cars, horses, art, property and even gold bars.

Now federal finance minister Christian Lindner – struggling to balance his balance sheet amid a growing economic crisis – has fixed his gaze on Germany’s thriving money laundry sector.

“We have to follow the money trail rigorously rather than simply settling for uncovering money laundering-related crimes,” said Lindner on Tuesday to Der Spiegel magazine.

No one knows for sure how much money criminals launder via Germany, though a conservative 2016 estimate for the federal finance ministry placed it in the range of €100 billion annually.

Lindner’s plan to get serious about money laundering comes as estimates of the hole in his next federal budget fluctuate between €11 billion and €25 billion.

With the minister facing competing political demands – for a third anti-inflation package and a return to balanced budgets – the time has come to claw back even some of an estimated €14 billion Germany loses to money laundering.

The Lindner plan is for a new centralised federal body for financial crime, promising better communication and centralised oversight of more than 300 different bodies responsible for transactions, across 16 federal states and commercial sectors from luxury goods to horses.

After two decades of media exposés and damning reports from international organisations, Lindner’s interest comes two days before a report on Germany’s lax money-laundering laws by the Financial Action Task Force, an expert body at the Organisation for Economic Co-operation and Development. The last report in 2010 found that Germany fulfilled just 29 of 49 key criteria.

In the years since, as Italy tightened up its money-laundering laws, leading mafia investigators say organised crime families have moved much of their financial activity north: into German property, casinos and restaurants.

Long-time German experts say not enough has happened because enough influential people – in business and politics – are profiting happily from the status quo.

“Property brokers have earned a lot in black market money and with the booming market their profits have risen,” said Gerhard Schick, a former Green Party finance expert and now head of a Berlin think tank, to the Süddeutsche Zeitung daily.

Other experts say Germany’s lack of political will is reflected in the lack of resources, staffing and co-operation between federal and state bodies.

A German Court of Auditors report in 2016 admitted the Financial Intelligence Unit, a subsidiary of the federal customs agency for fighting financial crime, “can only inadequately fulfil the legal expectations placed in it” because it had access neither to tax office nor police databases.

Just how inadequate the unit is became clear in 2020 with the collapse of the Wirecard bank, with a €1.9 billion hole in its accounts.

A second court of auditors report in 2020 said understaffing at state level bodies meant key money-laundering channels – in particular high-end retailers – can “at most reckon with an inspection every 200 years”.

Given the lead competence for pursuing money laundering will remain decentralised in state capitals, many German experts doubt Lindner’s new federal proposals will make a difference.

“We’ve been complaining for years, with good reason, that Germany offers paradise-like conditions for money launderers,” said Sebastian Fiedler, a criminal investigator, on German radio. “Of the estimated €100 billion that is laundered here every year, the authorities don’t get to see even 1 per cent of that.”