FATF AML Deficiency List
US Dept of State Money Laundering assessment
Germany is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
At its June 2014 meeting, the FATF Plenary recognised that Germany had made sufficient progress in addressing the deficiencies identified in its 2010 mutual evaluation report, and could be removed from the regular follow-up process.
In February 2010, Germany was placed in the regular follow-up process as a result of a partially compliant rating for certain key and core Recommendations in its mutual evaluation report. Since then, Germany has reported back to the FATF Plenary about the progress it has made in correcting these deficiencies.
The June 2014 follow-up report contains a detailed description and analysis of the actions taken by Germany in respect of all of the Recommendations rated partially compliant and non-compliant.
Significant measures taken in respect of the key and core Recommendations are :
Amendments of the Criminal Code by including insider trading and market manipulation as well as counterfeiting and piracy of products as predicate offences to money laundering.
Amendments of the AML Law to ensure that verification of beneficial ownership is required in all cases and that in cases of low risk, a minimum level of due diligence is still carried out. Germany has also adopted a much broader definition regarding the beneficial owner in the context of a trust arrangement.
Amendments to a number of other laws to strengthen the overall AML/CFT framework.
Enhanced cooperation between relevant ministries, regulatory and supervisory authorities as well as other bodies involved in combating money laundering and terrorist financing.
Some shortcomings in the implementation of the technical requirements of the key and core Recommendations concerning the freezing of terrorist assets still remain. Overall, the level of progress achieved by Germany was considered sufficient to be removed from the regular follow-up process.
US Department of State Money Laundering assessment (INCSR)
Germany was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
While not an offshore financial center, Germany is one of the largest financial centers in Europe. Germany is a member of the Eurozone, thus making it attractive to organized criminals and tax evaders. Many indicators suggest Germany is susceptible to money laundering and terrorist financing because of its large economy, advanced financial institutions, and strong international linkages. Although not a major drug producing country, Germany continues to be a consumer and a major transit hub for narcotics. Germany allows the use of shell companies, trusts, holdings, and foundations that can help obscure the source of assets and cash.
Terrorists have carried out terrorist acts in Germany and in other nations after being based in Germany. Germany is estimated to have a large informal financial sector. Informal value transfer systems, such as hawala, are reportedly used by immigrant populations accustomed to such systems in their home countries and among refugees paying for their travel to Europe/Germany. There is little official data on the scale of this activity.
Trends in money laundering include a decrease in cases involving financial agents, i.e., persons who are solicited to make their private accounts available for money laundering transactions. Digital and cybercrime continue to challenge law enforcement. There are increasing cases of tax evasion, transnational collusive agreements and manipulations, and corruption and money laundering involving global financial institutions and corporations. Bulk cash smuggling by organized crime elements is prevalent in Germany, especially illicit drug proceeds arriving in Germany from the Netherlands. The use of cash transactions is high. Free zones exist in Bremerhaven, Cuxhaven, and Hamburg. Unfenced inland ports are located in Deggendorf and Duisburg.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 80
World Governance Indicator – Control of Corruption 95
Corruption is not an obstacle for businesses in Germany, and companies are unlikely to encounter bribery or other corrupt practices. Fraud and corruption risks are most prevalent in the construction and health sectors, as well as in public procurement. The German Criminal Code applies to individuals – not companies – and makes it illegal to offer, pay or accept a bribe. Companies can be held civilly liable under the Administrative Offences Act, with fines up to EUR 10 million and confiscation of all economic advantages obtained through bribery. Facilitation payments are prohibited, and small-value gifts and hospitality may be considered illegal depending on the intent, benefit and value. Germany has strong institutional and legal frameworks. Enforcement of foreign bribery has increased significantly in recent years, and a large number of prominent German companies and individuals from businesses have been successfully prosecuted. For further information - GAN Integrity Business Anti-Corruption Portal
The German economy - the fifth largest economy in the world in PPP terms and Europe's largest - is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labour force. Like its Western European neighbours, Germany faces significant demographic challenges to sustained long-term growth. Low fertility rates and a large increase in net immigration are increasing pressure on the country's social welfare system and necessitate structural reforms.
Reforms launched by the government of Chancellor Gerhard SCHROEDER (1998-2005), deemed necessary to address chronically high unemployment and low average growth, contributed to strong growth and falling unemployment. These advances, as well as a government subsidized, reduced working hour scheme, help explain the relatively modest increase in unemployment during the 2008-09 recession - the deepest since World War II. The new German Government introduced a minimum wage of about $11.60 (8.50 euros) per hour that took effect in 2015.
Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts introduced in Chancellor Angela MERKEL's second term increased Germany's total budget deficit - including federal, state, and municipal - to 4.1% in 2010, but slower spending and higher tax revenues reduced the deficit to 0.8% in 2011 and in 2015 Germany reached a budget surplus of 0.9%. A constitutional amendment approved in 2009 limits the federal government to structural deficits of no more than 0.35% of GDP per annum as of 2016, though the target was already reached in 2012.
The German economy suffers from low levels of investment, and a government plan to invest 15 billion euros during 2016-18, largely in infrastructure, is intended to spur needed private investment. Following the March 2011 Fukushima nuclear disaster, Chancellor Angela MERKEL announced in May 2011 that eight of the country's 17 nuclear reactors would be shut down immediately and the remaining plants would close by 2022. Germany plans to replace nuclear power largely with renewable energy, which accounted for 27.8% of gross electricity consumption in 2014, up from 9% in 2000. Before the shutdown of the eight reactors, Germany relied on nuclear power for 23% of its electricity generating capacity and 46% of its base-load electricity production. Domestic consumption, bolstered by low energy prices and a weak euro, are likely to drive German GDP growth again in 2016.
Agriculture - products:
potatoes, wheat, barley, sugar beets, fruit, cabbages; milk products; cattle, pigs, poultry
among the world's largest and most technologically advanced producers of iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, automobiles, food and beverages, shipbuilding, textiles
Exports - commodities:
motor vehicles, machinery, chemicals, computer and electronic products, electrical equipment, pharmaceuticals, metals, transport equipment, foodstuffs, textiles, rubber and plastic products
Exports - partners:
US 9.6%, France 8.6%, UK 7.5%, Netherlands 6.6%, China 6%, Italy 4.9%, Austria 4.8%, Poland 4.4%, Switzerland 4.2% (2015)
Imports - commodities:
machinery, data processing equipment, vehicles, chemicals, oil and gas, metals, electric equipment, pharmaceuticals, foodstuffs, agricultural products
Imports - partners:
Netherlands 13.7%, France 7.6%, China 7.3%, Belgium 6%, Italy 5.2%, Poland 5%, US 4.7%, Czech Republic 4.5%, UK 4.2%, Austria 4.2%, Switzerland 4.2% (2015)
Investment Climate - US State Department
As the largest market in Europe, Germany is a major destination for foreign direct investment; consequently, a vast FDI stock has accumulated over time. The United States is the leading source of non-EU inward investment to Germany. Germany is consistently ranked as one of the most attractive destinations for FDI, thanks to reliable infrastructure, a highly skilled workforce, a positive social climate, a stable legal environment, and world-class research and development.
In the last ten years, FDI stocks in Germany doubled. While this FDI mainly originated from other European countries, the United States, and Japan, FDI from emerging economies, and in particular China, has grown substantially since 2005, even if from a low level.
The German legal, regulatory and accounting systems can be complex, but are transparent and consistent with international norms. Businesses enjoy considerable freedom within a well regulated environment. Foreign and domestic investors are treated equally when it comes to investment incentives, and the establishment and protection of real and intellectual property. Foreign investors can fully rely on the legal system, which is efficient and sophisticated. At the same time, this system requires investors to pay attention to their legal obligations. First-time investors will need to ensure that they have the necessary legal expertise, either in-house or outside consul, to meet all requirements.
Germany has effective capital markets and relies heavily on its modern banking system. State-owned-enterprises are generally limited to public utilities: municipal water, energy, and national rail transportation. The primary objectives of government policy are to create jobs and foster economic growth. Labor unions play a constructive role in collective bargaining agreements, as well as on companies’ work councils.
Germany continues efforts to fight money laundering and corruption. Medium-sized companies are increasingly aware of the due-diligence approach to responsible business conduct. Despite the fact that Germany has 129 investment protection agreements in force, the ongoing negotiations of the Transatlantic Trade and Investment Partnership (T-TIP) have triggered an intense public debate on certain issues, including investor-State dispute settlement (ISDS) mechanisms.
Other Useful Links