The top official of an international group of 164 financial intelligence units has voiced concern that last week’s unprecedented police raid on Germany’s anti-money laundering body at the behest of state prosecutors could undermine its independence.
The public prosecutor’s office in Osnabruck, in the northwestern state of Lower Saxony, ordered investigators to search the federal FIU’s headquarters in Cologne, in North Rhine-Westphalia, on July 14, amid reports that staff may have obstructed a money-laundering probe by failing to share a handful of suspicious transaction reports, or STRs.
Hennie Verbeek-Kusters, chair of the Egmont Group of FIUs, indicated in a statement to ACAMS moneylaundering.com that the raid potentially runs counter to global standards underpinning the role of FIUs, though she declined to comment on the specifics of the case.
“We have of course also received the news on the action of the public prosecutors and this is of concern,” Verbeek-Kusters, who also leads the Dutch FIU, wrote in the emailed statement.
The prosecutors in Osnabruck were probing claims that employees of the FIU failed to refer for prosecution eight STRs that three German banks filed from mid-2018 to the beginning of this year flagging a dozen accounts suspected of funneling some €1.7 million in ill-gotten gains to lenders across Africa, Der Spiegel reported last week.
The FIU’s alleged failure to forward the filings hampered investigators’ ability to interdict the suspect funds or probe the suspicious activity within an appropriate time frame, the German-language news website said, citing the warrant underpinning the raid.
Financial intelligence units, however, should enjoy “operational independence and autonomy” pursuant to global standards promulgated by the Financial Action Task Force, or FATF, Verbeek-Kusters said, noting that their role is to “add value” to the information they receive through STRs, not to disseminate all reports to law enforcement agencies indiscriminately.
EU anti-money laundering rules also place the onus on FIUs to assess which filings are worthy of further investigation, she said.
In case of legal proceedings or other serious impediments to the functioning of an FIU, the Egmont Group, whose primary role is to facilitate cross-border data-sharing between members, typically makes a determination on whether that FIU’s ability to protect the information it receives from its counterparts may be “compromised,” Verbeek-Kusters added.
“In such a situation, the FIU will be shut off from the encrypted system for information exchange,” she said. “Currently this is not the case for the FIU Germany.”
The Toronto, Canada-based organization temporarily blocked the Vatican’s Financial Information Authority, or AIF, from accessing the platform in November, after investigators searched its offices as part of a probe into the suspect acquisition of high-end real estate in London by Holy See officials.
The Egmont Group lifted the suspension two months later, after AIF officials signed a memorandum of understanding with Vatican prosecutors.
Interagency collaboration is “essential” for any effective AML regime, but can only succeed if authorities “understand and respect the different responsibilities they have,” Verbeek-Kusters said.
Several former senior FIU officials have also condemned the raid on the German agency.
Unless the Osnabruck prosecutors have evidence that employees may have intentionally failed to pass on the intelligence to the police in exchange for bribes, or other such egregious behavior, the lapse is more likely the result of an overworked, understaffed FIU, like any other, said Yehuda Shaffer, former head of Israel’s financial intelligence unit.
“There might have been some mistakes in passing on relevant intelligence,” Shaffer, now an independent consultant based in Tel Aviv, told moneylaundering.com. “But [the raid] goes against the principle of the independence of FIUs.”
Since moving from the federal police unit to the Finance Ministry’s customs branch in June 2017, Germany’s financial intelligence unit has struggled with processing an ever-growing backlog of STRs—which numbered as high as 46,000 in August 2019—amid staff shortages and IT deficiencies, much to the frustration of federal and state officials.
The Finance Ministry did not respond to a request for comment by press time.
Senior state investigators went so far as to call the FIU “a significant danger to domestic security” in a secret report to German lawmakers cited by Der Spiegel in March 2018. Public broadcaster NDR reported last month that the head of the unit, Christof Schulte, is expected to leave his post after only two years.
Last week’s raid risks further undermining the German FIU, as well as increases pressure on the “whole FIU system,” said Elena Scherschneva, former head of Austria’s financial intelligence unit.
“FIUs operate in an environment where mutual trust—especially with police and law enforcement agencies—is key,” Scherschneva, now an independent AML consultant in Vienna, wrote in an email to moneylaundering.com. “Once this trust is seriously damaged, it takes a lot of time and efforts to rebuild.”
FATF is due to assess the effectiveness of Germany’s AML regime later this year.
Source: ACAMS (28 July 2020)