For Mark Branson, money laundering prevention requires a joint effort. At the beginning of the virtual "Combating money laundering and terrorist financing" symposium on 15 December, BaFin's President stated that in his view, supervisory authorities and money laundering officers at financial services providers are pursuing the same objective. Branson believes that money laundering risks are among the greatest operational risks faced by the financial markets. For a long time, the issue had been underestimated, he told the group of roughly 1,000 participants.

His colleague and Chief Executive Director of Resolution and Prevention of Money Laundering, Birgit Rodolphe, agreed, stating that money laundering prevention is an important issue that is "also personally very close to my heart". For Rodolphe as well, close collaboration with other actors in the field of money laundering prevention is crucial. She named the Financial Intelligence Unit (Zentralstelle für Finanztransaktionsuntersuchungen – FIU) as an example. The collaboration between the FIU and BaFin is enshrined in law and enacted in practice, reported the Chief Executive Director. "We have been working closely together in the fight against money laundering for a long time already", she added.

AFCA sets the pace

Rodolphe also noted the key role played by the AFCA – the Anti Financial Crime Alliance – of which BaFin is a founding member. In this public-private partnership, authorities and representatives from the private sector bolster and coordinate efforts in the fight against money laundering and terrorist financing under the leadership of the FIU. Rodolphe underscored the AFCA's success in bringing the various activities of the public and private sector together under a joint initiative. The AFCA's white papers and other work products offer obliged entities additional tools to combat money laundering. She had a clear message for the money laundering officers participating in the conference: she considers it important that they be familiar with the AFCA's work and that they leverage it in their day-to-day fight against money laundering. Because "only then can these additional tools be effective."

Stepping up efforts in the fight against money laundering

Branson announced BaFin's intention to intensify its money laundering prevention activities, increasing staff and strengthening organisational structures in this area. It is not without reason that BaFin has included the prevention of money laundering in its top medium-term objectives, he added . BaFin must take a proactive approach to anti-money laundering supervision, taking the initiative to act rather than only reacting after cases have been reported. With its division for intensified anti-money laundering supervision, BaFin takes a closer look at those companies which "worry us in particular". In a presentation on experiences in supervisory practice, Michael Thelen from the Directorate for the Prevention of Money Laundering provided additional information on this intensified supervision and how the division is collaborating with the Focus Unit.

"All the instruments in our arsenal"

Branson stressed that – where necessary and appropriate – BaFin would use "all the instruments in our arsenal of anti-money laundering supervision measures". It had already done so in the past. For instance, it had ordered that deficiencies be rectified and, if necessary, also appointed a special commissioner – in 2018 for the first time. Restrictions on growth are also possible.

Furthermore, Branson wants BaFin to examine the key risk drivers and dive deep into new issues such as the money laundering risk of crypto assets. Originally, the conditions here for money launderers were "practically perfect" and the loopholes have not yet been closed off.

Unity in Europe

One issue that is close to Branson's heart: in order to effectively combat money laundering, there have to be harmonized rules throughout Europe. He cites the European Commission's legislative agenda (see info box) as a major step in the right direction. He also welcomed the Commission's plans to establish a European anti-money laundering supervisory authority. Caterina Contini, an advisor on money laundering prevention at BaFin, emphasised in this connection that the proposals would also improve networking among the key players and would also be beneficial to anti-money laundering supervision in Germany. Contini believes that there is still room for improvement as far as data protection rules go. In this area, the European legislator had to be as clear as possible and lay down an unambiguous legal framework.

Andreas Eichelberg, advisor in BaFin’s Directorate for the Prevention of Money Laundering, reported on the latest developments in German law relating to money laundering supervision. Specifically, the FISG, the Act to Strengthen Financial Market Integrity (Gesetz zur Stärkung der Finanzmarktintegrität), which was adopted in the wake of the Wirecard scandal, lends BaFin powers with "more bite" than are available to other supervisory authorities. For instance, going forward, BaFin will be able to issue direct orders to outsourcing service providers, as well as to audit them. Starting in early 2022, BaFin will be able to use mystery shopping, which could become a crucial new money laundering prevention tool.

Focus on suspicious transaction reports

Simone Nischalke and Jan Paulsen, also from the Directorate for the Prevention of Money Laundering, presented on additional topics. Nischalke reported on BaFin's experiences with pooled accounts for payment service providers. Paulsen presented the results of a cross comparison of suspicious transaction reports relating to money laundering, which the undertakings are required to send to the FIU. Suspicious transaction reports were also the subject of a provocative thesis put up for discussion by moderator Bettina Volprecht from the Communications Directorate: "A suspicious transaction report results from risks over which there is insufficient control." 570 of the approximately 1,000 participants voted: 92 percent of them disagreed with the statement and eight percent agreed. Chief Executive Director Rodolphe also initially voted "disagree," but then stated that the issue is multi-faceted. "When suspicious transaction reports are filed, this means that the warning systems are working." However, she added, it is necessary to go a step further. If a bank sends several suspicious transaction reports along the same lines, this raises the question: "Is the business model right, is the institution's risk appetite right, does the obliged entity know its customers sufficiently?" The quality of the suspicious transaction report also matters, she said. "A good suspicious transaction report is an effective anti-money laundering tool." Volprecht’s Co-moderator Dr Jens Fürhoff, from the Directorate for the Prevention of Money Laundering, shared this view. He therefore voted with a resounding "possibly".

Panel discussion: bundled expertise

Suspicious transaction reports were also one of the topics at the panel discussion, which took place under strict protective measures against the spread of the coronavirus. Among the issues addressed was the tension between the principle of legality – according to which investigating authorities must investigate every suspicion of a criminal act – and the risk-oriented approach to money laundering prevention. Martina Mietzner, BayernLB's Money Laundering Officer, reported that balancing the divergent demands and formal requirements of the stakeholder groups poses a challenge in the day-to-day business of money laundering prevention. Dr Thora Funken, Head of Division at the FIU, clarified that the regulations of the current Money Laundering Act are a potent tool. Markus Weimann, head of the Hessian public prosecutor's office specialising in white-collar crime, based in Frankfurt am Main, underscored the importance of the trio of "money laundering officers, FIU and law enforcement." In practice, communication is vital to detecting and prosecuting money laundering. Prof. Dr. Jens Bülte, holder of the Chair of Criminal Law and Criminal Procedure, Criminal Economic and Criminal Tax Law at the University of Mannheim, whose research focuses on money laundering criminal law and money laundering compliance, conveyed his constitutional concerns with regard to the current legal situation.

At the end of the panel discussion, which brought together expertise from practice, FIU, law enforcement and academia, moderator Fürhoff noted that understanding each other's perspective was conducive to the prevention and prosecution of money laundering.