Germany a paradise for money laundering?

Germany a paradise for money laundering?

The money laundered in Germany every year comes to roughly a hundred billion euros and investigators can trace less than one per cent of this amount. Each year billions of euros are laundered by selling and buying property. Germany boasts a huge real estate sector that's worth around 15 trillion euros, making the investments of large sums in the sector barely noticeable.

ECONOMY FEBRUARY 14. 2023 13:44

The fight against money laundering in Germany is one area that’s been neglected in the past five years, says Dirk Peglow, chairman of the German Criminal Investigators Association. He notes that the source of the problem dates back to five years ago when the Financial Intelligence Unit (FIU) was put in charge of investigating such cases. Since then, reports about the agency’s troubles keep accumulating. The authority is chronically understaffed and is unable of reducing its backlog of processing cases, Mr Peglow points out. He also highlights another major factor, saying

officials at FIU who are supposed to uncover money laundering offences committed in the Federal Republic of Germany are not criminal investigators and often lack access to police databases.

In essence, this is as if the Federal Transport Authority were in charge of processing car thefts: they have neither the appropriate competence and authorisation, nor the ability to do so. This makes Germany even more of a „paradise” for money laundering and organised crime. No one can tell exactly how much money is laundered in the country every year. Serious estimates, however, assume that the amount is around 100 billion euros. This is roughly a quarter of this year’s federal budget, meaning this is how much Germany is to spend on infrastructure, education and defence this year.

At first glance, it looks great to see 100 billion euros flowing into Germany’s economy. Cars, houses and jewellery are being sold while cash is flowing in, all of which strengthens the economy and creates jobs. However, the aforementioned 100 billion euros have been earned by criminals engaging in drugs or weapons trade. They purchase real estate, jewellery or cars on this criminally earned money in Germany. This is how the money is laundered, explains Markus Zydra, a journalist at Suddeutsche Zeitung, who has been studying the subject of money laundering intensively for years.

The phenomenon is not unique to Germany: money laundering is a problem in all Western democracies, Mr Zydra said.

„It’s extreme in Germany merely because cash plays such a big role here and nobody wants to restrict cash payments. That’s why you can still make big investments in cash in this country,”

the expert says. The real estate sector, in particular, is considered to be vulnerable to money laundering. Transparency International estimates that several billion euros are laundered every year, and not just in the housing market. The sector is huge: real estate wealth in Germany amounts to around 15 trillion euros, so even the most staggering investments will go unnoticed here. Often, the real buyers won’t even show up. The exact effect that demand from organised crime has on prices cannot be measured. But: „it is obvious that there is an effect.” This particularly affects those looking to buy or rent a flat in a big city. “It means that people with an average income can no longer afford to live in a city,” Mr Zydra said.

The government is aware of the problem. Last November, Nancy Faeser presented a series of draft measures aimed at reducing the damage. These include launching a national property register and setting a ceiling on cash payments of 10,000 euros. The idea of capping cash payments is not new in Europe: it already exists in Italy, where the cap is 5,000 euros, in Greece, where the upper limit is 500 euros, and in France and Spain, where it is 1000 euros.

ECONOMY

Tags:

crime, germany, money laundering