Germany steps up efforts to tackle money laundering
By Sara Seddon Kilbinger
German government keen to stamp out money laundering in the real estate sector
The German government is preparing legislation to ban cash transactions in the real estate market in an attempt to fight money laundering and other financial crimes.
Speaking at a recent meeting of the Financial Action Task Force (FATF), Finance Minister Christian Lindner said that more “clearly needed to be done”. Germany currently holds the presidency of the global money laundering and terrorist financing watchdog.
In August, the FATF is expected to publish a report about the German market after scrutinizing how it has fought financial crimes to date. German financial regulator BaFin has been in the spotlight for failing to pick up on problems at payments firm Wirecard AG, which collapsed in 2020.
With more than 200 countries and jurisdictions committed to implementing them, the FATF has developed the FATF Standards, which are designed to ensure a coordinated global response to prevent organised crime, corruption and terrorism. They help authorities go after the money of criminals dealing in illegal drugs, human trafficking and other crimes. The FATF also works to stop funding for weapons of mass destruction.
In May, the German government announced that it was “in close consultation with the states…to create the legal basis by the end of the year for centralized access by public agencies to all data on real estate holdings in Germany in accordance with their respective tasks”, noting that all registers and databases, including tax administration, land registry offices and notaries would be included in this. The aim is to create a unified, transparent, database for land registers, according to the Ministry of Finance.
Pressing need for central asset register in the EU
In April, economist Sebastian Mack at the Hertie School in Berlin published a study in which he argued for a central asset register in the EU. Mack is an expert on EU financial policy and also referred to Italian Prime Minister Mario Draghi's call for an international register of Russian citizens holding more than €10 million, following Russia's invasion of Ukraine. However, Mack argues that the register of assets should not be limited to Russian oligarchs, not least because of the lack of transparency regarding private assets in the EU, which is exacerbating the problem when it comes to collating wealth data in general.
Currently, it is very easy to conceal who actually owns a property in Germany. While property owners are listed in the land register, oligarchs holding a property through a company are able to hide their identity, something that Mack would like to change. Essentially, one effective measure could be to reverse the burden of proof, as Italy has done in the fight against the Mafia. This means that if no owner of a suspicious asset comes forward, it is put into the hands of the state.
Speaking at a European police conference in Berlin in May, Hans-Georg Engelke, Secretary of State for the Interior said that "there is really still room for improvement in the cooperation between the authorities” and that it is "simply intolerable" that it is possible in Germany to conceal property relationships in various ways, including via complex company networks and straw man deals, which obscure who is really behind them. The federal anti-money laundering unit, the Financial Intelligence Unit (FIU) has identified legal entities which, in some cases, have no discernible business activities.
However, identifying the so-called “beneficial owner” of a property can be virtually impossible for the authorities. One example of that is a site in Charlottenburg-Wilmersdorf in Berlin. Lisa Paus, a financial expert for the Green Party in the Bundestag has tried to identify the owner of the planned Ku’damm-Karee “Fürst"project, which changed hands for the seventh time last year at a cost of €1.02 billion. Paus suspected that a Russian oligarch was behind the acquisition but the more she dug, the deeper the web of camouflage appeared to be and it proved impossible to identify the person or people behind it in a way that would stand up in court. In addition, if the owner of a property is unknown, it is impossible to freeze or confiscate their assets, something that Paus has openly criticized.
Others have found themselves on sanctions’ lists. The U.S. has placed 279 individuals and 637 companies on its sanctions list, according to OFAC, the Treasury Department's watchdog agency. The EU has 56 companies and 696 individuals on its list, which has been in place since the annexation of Crimea and is now being continually expanded. President Vladimir Putin and his Foreign Minister Sergei Lavrov are now also on the list.