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The German Bundestag has passed a reform “to strengthen the fight against money laundering by means of criminal law”. The overarching goal of the reform is a considerable tightening of the criminal law on money laundering in Germany and the financial drying up of organised crime. For money launderers, is Germany now “Paradise Lost”?
Allegedly, Germany was and can still be considered a “money laundering paradise”, as the chairman of the Association of German Criminal Police Officers recently remarked. According to estimates, the volume of money laundering in Germany amounts to up to €100 billion annually. Only about 1% of these activities becomes known to the responsible authorities and is prosecuted by them. During the last few years, however, legislators and authorities have noticeably intensified their measures against money laundering. As a result, for example, the number of reports on money laundering suspicious activity by German banks has risen from around 26,000 in 2014 to approximately 115,000 in 2019.
On 11 February 2021, the German Bundestag approved a further significant tightening of money laundering criminal law. The background of this reform is Directive (EU) 2018/1673, also known as the EU’s sixth money laundering directive or, in short, “MLD6”. The Directive necessitated a reform of money laundering criminal law, as certain predicate offences for money laundering included in the Directive were previously not covered by German law. For example, theft, fraud, embezzlement and insider trading were only covered if committed in the course of commercial activity or by organised groups of offenders. With the reform, the German legislator has clearly gone beyond what was required by the Directive. It is therefore not surprising that the reform has been viewed as quite controversial by professionals: some practitioners see the reform as an urgently needed step in the fight against money laundering, whereas, according to others, the legislator is overshooting the mark by also focussing on minor and less serious forms of crime.
All in all, the reform will result in a substantial extension of criminal liability for money laundering. Three areas are particularly noteworthy:
Whereas until now in Germany criminal liability for money laundering could only be incurred in the case of certain serious predicate offences which were enumerated in a “catalogue” (and therefore unofficially referred to as “catalogue offences”), the legislator has now abolished this “catalogue”. In future, any criminal offence will be a potential predicate offence for money laundering, i.e. the legislator now follows the so-called “all crimes” approach. This approach, which is also practised in numerous other jurisdictions (e.g. in France and the UK), had been heavily criticised in legal literature previously, but without success. Some of the experts who had been consulted by the Bundestag had pointed out that the reform would lead to a massive additional burden on the judiciary. The representatives of the judiciary and the police, on the other hand, had expressed positive views and welcomed the facilitation of law enforcement, although they also pointed to the increasing caseload. The latter is in line with the legislator’s expectations that the number of proceedings will at least double.
The new approach is intended to avoid issues of proof, since proving a “catalogue offence” had often caused difficulties in practice. Contrary to the original plan, there will also be no exceptions for negligence offences – in this context, again, it was argued that proving intent versus gross negligence was often difficult.
In the course of reforming the offence of money laundering, the legislator has also expanded the possibilities for confiscation of assets on the basis of suspicion of money laundering (so-called non-conviction based confiscation). According to this concept, it is possible to confiscate assets if there is only a suspicion of a certain “catalogue offence” and if the court is convinced that the assets originate from any offence (which is usually not known in detail). Therefore, the new “all crimes” approach expands the possibilities for confiscation, since suspicion of money laundering is now more likely to be affirmed. A previously discussed restriction of this form of confiscation, which would affect serious cases of money laundering (for example, in the event of particularly serious predicate offences as well as professional and gang-related crimes) was dropped in the course of the legislative process.
Finally, for certain selected predicate offences committed abroad, the principle of double criminality, i.e. the necessity to establish criminal liability for that predicate offence in Germany and, additionally, the relevant foreign jurisdiction, will no longer apply directly in all cases. Instead, it is sufficient that the relevant EU regulations oblige the respective Member State to provide for a corresponding criminal liability, regardless of whether implementation has actually already taken place. This amendment concerns particular predicate offences for money laundering, for example, certain cases of corruption, including in the private sector, and offences related to terrorism. In this regard, the German legislator has decided to make only the changes to the law required by the Directive and not to implement any further-reaching regulations.
It is expected that the reform will lead to a considerable increase in the number of money laundering cases. However, many cases of money laundering have not been effectively prosecuted so far and the corresponding proceedings have often been dropped. Against this background, it remains to be seen how law enforcement practice will deal with the expected substantial increase in the number of money laundering cases in the future and whether this will actually lead to a more effective prosecution of money laundering. In any case, it must be recognised that the legislator has taken another important step to prevent any “paradisiac conditions” for money laundering in Germany.