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Despite a raft of new reporting obligations, tighter registers and a long-overdue cultural shift on financial crime, Germany remains one of the EU’s most fertile grounds for money laundering—with the real estate sector still a preferred vehicle. For institutional investors, the implications are becoming harder to ignore: regulatory friction, compliance risks, price distortion and political stasis are now part of the operating landscape.
A new study from the University of Trier provides rare empirical evidence on how money laundering inflates residential property prices. The researchers found a clear correlation between the volume of suspicious activity reports (SARs) and rising condominium prices in Germany’s top seven cities. In short: where SARs rise, so do prices. The implication is that inflows of laundered capital are distorting pricing, particularly in segments already overheated by limited supply and foreign demand. According to the study, if money laundering in real estate were reduced by just 10%, the average price of a standard 80-square-metre apartment could drop by around 1.9%, saving buyers several thousand euros per transaction.
Yet suspicious activity reports have actually fallen, not risen. In 2024, Germany’s Financial Intelligence Unit (FIU) received just 265,000 SARs, down nearly 18% from 2023. The FIU claims this is due to better training and clearer guidelines on when a report is required, thanks in part to a 2023 key issues paper jointly issued with BaFinand the Anti Financial Crime Alliance. Officials argue that quality has improved even as quantity has declined. Critics are less convinced. The FIU only recently emerged from a prolonged internal crisis, having failed for years to process hundreds of thousands of SARs. A new AI-based analytics tool was brought in after its predecessor collapsed under the weight of false negatives. The agency’s backlog still stood at 160,000 unprocessed reports in early 2024.
New chief has mandate to boost the power of the FIU
Daniel Thelesklaf, a respected Swiss lawyer and anti-money laundering specialist, took over as FIU chief last July. His mandate is to rebuild operational credibility, improve case prioritisation and demonstrate that the FIU can act as a functional node in the anti-laundering network. Much of that credibility depends on the FIU’s ability to work in tandem with the web of transparency and compliance infrastructure now being enforced more rigorously across the real estate sector.
Key elements include the Transparency Register, the Company Register, and the Money Laundering Act (GwG), all of which impose new due diligence and reporting duties on estate agents, developers, notaries and legal entities involved in property transactions. The rules are no longer theoretical. Notaries must refuse to certify a sale if beneficial ownership cannot be verified. GbRs—the previously opaque partnership vehicles so beloved in the real estate trade—must now register, identify their beneficial owners and disclose property holdings. Data from Q4/2024 show that at least 15 real estate firms were fined for registry violations, several for what regulators deemed "deliberate failure" to disclose controlling interests.
At least on paper, the system is beginning to function. Transactions are now routinely screened against sanction lists, and registers increasingly exchange data automatically. Property companies are under pressure to invest in internal AML (anti-money laundering) controls, and compliance consultants report a sharp rise in demand. "Transparency is the biggest enemy of money laundering," says lawyer Harald Feiler of GSK Stockmann.
Collapse of coalition government deals death blow to BBF
The political dimension tells a murkier story. The long-promised creation of a Federal Office for Combating Financial Crime (BBF) has effectively collapsed following the breakup of the traffic-light coalition. Despite public assurances from Finance Minister Christian Lindner that the new body would set the "gold standard" in the EU, the law enabling its creation never passed. Blame for the failure is shared liberally among former coalition partners, though the FDP points the finger at Green resistance. With no consensus in the Bundestag and no timetable for revival, the project is widely assumed to be dead.
This is a setback not just symbolically, but strategically. Germany has a persistent credibility problem on money laundering. The Financial Action Task Force has repeatedly flagged systemic weaknesses, and the country is still regularly described as a laundromat for illicit funds. Recent investigative reporting has tracked flows of drug money from the 'Ndrangheta into German real estate assets. Estimates suggest as much as €100 billion in illicit funds may be integrated annually into the legal economy.
A partial salve comes in the form of the new EU anti-money laundering authority, AMLA, which is due to begin operations from Frankfurt in mid-2025. Its presence is more than symbolic: AMLA will have supervisory oversight of high-risk cross-border transactions and will set enforcement priorities for member states. Germany's successful bid to host AMLA was helped by its commitment to establish the BBF—a commitment now broken.
For institutional investors, the short-term outlook is marked by compliance friction, transaction delays and a patchy enforcement landscape. Reputational risk has become a material consideration, particularly for foreign funds working through local structures or share deals. Withholding tax refunds now take up to 20 months, often due to heightened AML screening. The compliance burden is increasing even as enforcement remains uneven.
There is movement in the right direction—but few illusions. As ever in Germany, change is incremental, unevenly applied, and complicated by the country’s institutional allergy to centralisation. The law has tightened. The registers are working. But the system’s ability to detect, deter and prosecute large-scale laundering remains in doubt. Investors should not assume that reform has brought clarity. The fog has merely shifted.