Germany and the Netherlands both came under the scrutiny of the Financial Action Task Force (FATF) in two separate reports issued over the last week outlining particular measures they should take to up their game over anti-money laundering and terrorist financing.
On 25 August, FATF said that while Germany had implemented significant reforms in the last five years to strengthen its system and some of these new measures were already delivering results, Germany still needed to continue to implement reforms and take steps to make sure that there is resourcing and prioritisation at the operational level to combat illicit financial flows.
"As the 4th largest economy in the world, the largest in the EU, and with a high number of global interconnections, Germany faces significant money laundering and terrorist financing risks.
"German authorities have a good understanding of these risks and provide constructive cooperation with counterparts in other countries. However, domestic coordination across Germany's 16 states (Länder) is a challenge and coordination and consistency between the different supervisory and law enforcement authorities should be enhanced. Priority should also be given to mitigating the risks associated with the high use of cash in the country and the use of informal MVTS services", FATF said.
The global money laundering and terrorist financing watchdog also said asset confiscation was a strong feature of Germany's regime.
"The introduction of non-conviction based asset confiscation laws has resulted in the confiscation of significant amounts of criminal proceeds.
"Germany's transition in 2017 to an administrative FIU model has been a positive step towards improving the collection and use of financial intelligence. However, the transition has been challenging and Germany needs to continue to prioritize the implementation of these reforms at the operational level and continue to enhance the collection, analysis, dissemination and use of financial intelligence.
"Authorities also need to do more to proactively and systematically investigate and prosecute ML activity in line with Germany's risk profile."
FATF concluded: "Germany faces significant terrorist financing risks and has a good track record of investigating, prosecuting and disrupting financing activity as part of a holistic approach to combating terrorism. However, Germany could be more proactive in using the targeted financial sanctions regime as a preventive measure to freeze terrorist assets.
"While there is a robust and comprehensive framework in place for regulating and supervising the financial and non-financial sector for compliance with AML/CFT, more priority needs to be given to resourcing the over 300 supervisors and ensuring there is a consistent risk-based approach taken. "The introduction of a Transparency Register has been positive but priority needs to be given to ensuring it is adequately resourced when it transitions to a full register in 2022."
On 24 August FATF issued a separate notice on the Netherlands which it said was "delivering good results, but the country needs to do more to prevent legal persons from being used for criminal purposes, strengthen risk-based supervision, and ensure sanctions for money laundering and terrorist financing offences are proportionate and dissuasive".
"The Netherlands' main money laundering risks are related to fraud and drug related offences, which represent 90% of all Dutch proceeds of crime. The country faces terrorist financing risks from religious extremism such as ISIL and other UN designated groups, but also from extreme right-wing terrorism. The Netherlands has a good understanding of the risks it faces and has developed robust risk-based policies and strategies to address them, but it needs to address some outstanding technical deficiencies such as the regulation of virtual asset service providers."
FATF continued: "Domestic inter-agency coordination and public-private partnerships are a key feature of the Dutch anti-money laundering and countering terrorist financing system. There is strong cooperation between the Dutch financial intelligence unit (FIU-NL) and law enforcement agencies, who regularly use high quality financial intelligence from FIU-NL, datahubs and cooperation platforms in the course of their investigations.
"The Netherlands is also particularly effective in cooperating with its international partners. However, it should increase resources to improve risk-based supervision, including to address unlicensed activity and ensure proportionate and dissuasive sanctions for non-compliance with preventive measures.
It added: "The Netherlands pursues confiscation of criminal assets as a strategic priority. But the country must do more to prevent legal persons from being used for criminal purposes and to ensure there is access to adequate, accurate and current beneficial ownership information.
"Dutch authorities have also successfully detected, investigated and prosecuted terrorist financing, primarily involving the funding of foreign terrorist fighters. The Netherlands proactively engages with the non-profit sector to avoid their abuse for terrorist financing and prevent de-risking. However, authorities should focus more on the reporting and supervision of the timely implementation of targeted financial sanctions for terrorist financing or proliferation financing."
