Germany’s authorities and, in particular, the German Customs administration, are taking up the challenge: the fight against IFFs that make use of the facilities provided by financial regulations, and the offshore secrecy system. In Germany, IFFs include various criminal activities, comprising money laundering and terrorist financing as well as other offences related to the cross-border movement of cash and currencies.
The German Customs administration is a very large entity with two main services involved in the fight against IFF related activities:
- the Customs Criminological Office, Zollkriminalamt or ZKA, whose main task is the prosecution and prevention of minor, serious and organized Customs crime;
- the Financial Intelligence Unit (FIU), which receives and evaluates suspicious transaction reports (STRs) dealing with financial transactions that are potentially associated with money laundering or the financing of terrorism.
The ZKA coordinates and manages the investigations carried out by eight regional Customs investigation offices and, in special and significant cases, can carry out investigations itself. In addition, 16 Joint Financial Investigation Groups (Gemeinsame Finanzermittlungsgruppen) composed of police and Customs investigation officers also deal with cases in this area. In cooperation with these 16 joint groups, the Customs investigation offices in particular process:
- analytical reports submitted by the FIU and other relevant information, as well as related reports of suspected money laundering;
- information gathered by Customs officers within the framework of controlling cash and currencies, if there is reason to believe that cash or its equivalent means of payment are transported in cross-border movements for the purposes of money laundering or terrorist financing or the like;
- information with regard to postal shipments, if such shipments contain cash or an equivalent means of payment, which are entered into, transported through or out of the country, and where the means of payment are related to committed or intended crimes or offences;
- cases of trade-based mis-invoicing, including those related to money laundering.
Before June 2017, the German FIU acted under the umbrella of the BKA, the Federal Criminal Police Office. It was restructured and moved under the umbrella of the German Customs administration in June 2017 following the transposition into German law of the EU’s Fourth Anti-Money Laundering Directive. The FIU was re-established as an administrative authority within the Customs administration.
One of the core duties performed by the FIU is to analyse incoming alerts on suspicious financial transactions, pursuant to the Anti-Money Laundering Act and the Fiscal Code. To this end, the German FIU makes use of goAML software, which was developed especially for FIUs by the United Nations Office on Drugs and Crime (UNODC), and which is used by more than 50 FIUs worldwide.
Customs investigation officers need to undertake specific training courses to prepare them for tasks that require specialist know-how, for example in the field of combating money laundering or asset recovery.
As for the FIU, it applies a multidisciplinary approach with regard to recruitment and human resources. Analysts are drawn from different professional backgrounds that are relevant to the analysis of financial flows and transactions in the context of money laundering and terrorist financing. FIU staff are, for example, drawn from Customs, police, supervisory authorities and the tax administration, as well as from the private sector, in particular banks and auditing and consulting firms.
Cross-border movement of cash and currencies
People who carry cash or an equivalent means of payment amounting to 10,000 euro or more into Germany, or who transport such amounts through or out of the country, are obliged to inform officers that they are carrying this amount or more when they are subject to an inspection.
In addition, since 15 June 2007 and the entry into force of a specific EU regulation, every traveller entering or leaving the EU must declare in writing any amount equalling or exceeding 10,000 euro in cash to Customs. Customs control units perform risk-sensitive checks and random checks at borders as well as within Germany’s national territory. When performing their controls, Customs officers have at their disposal several tools such as mobile x-ray equipment and sniffer dogs.
Any infringement of the obligation to report and declare will be deemed an administrative offence, which may also give rise to the suspicion that money laundering may be taking place. Such administrative offences may be punished by a fine of up to one million euros. Once control units discover the suspicious movement of cash, they transfer the case to the ZKA / Customs investigation offices for investigation.
The Customs investigation authorities are also authorized to confiscate an object in order to avert a present threat. Confiscating cash to avert a threat may be considered, in particular, if the cash is intended to be used for the commission of an offence.
Furthermore, a judge can independently order the confiscation of objects that are the result of illegal activities and which were confiscated within the framework of proceedings on the suspicion of an offence, even if the party affected cannot be prosecuted or convicted on the criminal offence, if the court is convinced that the funds cannot have been obtained legally. If confiscation of the object is ordered, ownership of the object or the right of final decision will pass to the State.
Trade-based mis-invoicing
While processing cross-border trade transactions or in the course of undertaking tax audits, Customs officials repeatedly detect cases of trade-based mis-invoicing, which are primarily cases of under-invoicing used to avoid import duties. If it is found that the mis-invoicing scheme put in place is being used for money laundering or terrorist financing purposes, the Customs administration must notify the FIU and the ZKA; the Customs investigation offices will also be involved.
Moreover, analysing STRs for under- or overvaluation is a standard procedure in the FIU. Suspicious cases will be transmitted to the Customs investigation service who will check whether a criminal suspicion can be substantiated and, if necessary, forward the facts to the public prosecutor for the initiation of a judicial investigation.
The active participation of individuals and companies plays an important role in the process of combating money laundering and terrorist financing. The “obliged entities” are subject to money laundering related monitoring and reporting obligations, which, in particular, include the submission of STRs whenever there are indications that illegal financial transactions are being executed. Not only banks and insurance companies, but also parties from the non-financial sector, such as estate agents and traders, are subject to these obligations.
The FIU may suspend the execution of transactions for a period of up to one month if there is reason to assume that the transactions are related to money laundering or the financing of terrorism. This power is applied in order to prevent incriminated funds from being fed into the (legal) flow of money while the FIU concludes its analysis. Subsequently, law enforcement agencies and prosecutors can apply measures on the basis of the provisions of the criminal procedural law to freeze funds.
Depending on the results of the analysis, data is forwarded to the competent prosecution authorities. By forwarding only relevant information, the FIU fulfils its function as a “filter.” This reduces the burden on prosecution authorities in favour of investigating and prosecuting IFFs. To summarize, once the FIU identifies transactions that may be connected to money laundering, terrorist financing activities, or other crimes (drug crimes, tax offences, bankruptcy crimes, etc.), it disseminates its analysis and the relevant information to concerned agencies for further investigation if needed, including to the ZKA.
In addition to the above-mentioned operational analysis related to individual cases, the FIU also prepares strategic analysis across the different cases in order to be able to identify any current risks in the field of IFFs from case patterns and trends. Among other things, the findings are then incorporated into the operational analyses.
To ensure that the operational analysis is effective, the FIU was granted a broad range of rights to obtain information and data from law enforcement agencies, and financial and administrative authorities. However, this is not a “one-way-street.” Conversely, if relevant information is available, the FIU also provides this information to competent authorities.
In addition to the exchange of information on a case-by-case basis, the FIU also maintains constant exchanges of information with national and international authorities. Among other things, findings from strategic evaluations are made available to national and international partners as required.
At the international level, the participation in meetings of the Egmont Group and the Financial Action Task Force (FATF) are also noteworthy. More than 150 FIUs are part of the Egmont Group, which aims, inter alia, at setting uniform standards for a global approach to the fight against money laundering and terrorist financing, and in shaping information exchange in this field as intensively and effectively as possible. Moreover, since the start of its operations in the summer of 2017, the German FIU has cooperated with more than 80 FIUs worldwide.
At the national level, the close working relationship with the regulatory authorities of the obliged entities is worth highlighting. At the same time, the intensive exchange with national law enforcement agencies and prosecutors plays an essential role. This of course includes the two-way communication between the FIU and the German Customs administration, in particular with regard to criminal Customs investigations.
The vast majority of STRs that are filed originate from financial sector entities. The FIU and the supervisory authorities cooperate closely to raise awareness among entities belonging to the non-financial sector on their obligations by, inter alia, organizing information sessions.
As in many other jurisdictions, the volume of STRs has been growing considerably over the last 10 years. This is probably due to increasing awareness on anti-money laundering and the prevention of terrorist financing issues by the financial sector, as well as to the active policy of the supervisory authority in this sector. In 2006, the number of STRs had reached 7,600, while this number had grown to around 46,000 in 2016, and, in 2017, some 60,000 were filed.
Upon receipt, all reports are subject to a preliminary review and assessment by the FIU within one, or at most the next, working day. Depending on the urgency, priority and importance of an underlying case, it is analysed more or less quickly and, if relevant, disseminated to the appropriate authorities.
The high number of filings poses a challenge to the new FIU, which only commenced its operations in mid-2017. Nevertheless, since the start of its operations, all the STRs that have been submitted to the unit have been reviewed and prioritized upon their receipt. To date, analysis of more than 50% of the cases has been finalized, and approximately one third of them have been disseminated to law enforcement agencies and prosecutors. In about 20% of the cases, the FIU has decided not to disseminate the information yet, because the underlying facts were not sufficiently linked to money laundering, terrorist financing, or other crimes. All STRs are monitored for a period of three to five years after being filed, i. e. key information about the cases is matched.
One of the main benefits of the new structure is that the FIU has the power to “filter” the increasing volume of STRs. It disseminates only cases that provide added-value for further investigation by law enforcement agencies. This new approach enables the burden on law enforcement and prosecution authorities to be reduced. As a consequence, resources may be shifted from the processing of STRs to the investigation and prosecution of IFFs.
More information
www.zoll.de/EN/Businesses/Movement-of-goods/Import/Restrictions/Goods/Cash/cash_node.html
www.zoll.de/EN/Private-individuals/Travel/Travel-within-the-EU/Restrictions/Cash/cash_node.html
www.zoll.de/DE/Der-Zoll/FIU/fiu_node.html
