Terrorists slipping through net thanks to anti-money laundering unit delays

By Jan Keuchel

It took a second glance to confirm what the officer was seeing and it was still unbelievable. The list of people suspected of money laundering at a bank included a member of Al Qaeda. The policeman, based in northern Germany, called it a “security catastrophe.”

Unfortunately that wasn’t the only problem. It had taken more than six months for the list to reach the officer’s desk. He blames the national Financial Intelligence Unit (FIU). The relatively new unit is endangering the lives of German citizens, in his view.

That was not an isolated incident. The anti-money laundering agency has a backlog of tens of thousands of reports, is woefully understaffed, and so risks missing important leads about terrorism, according to Handelsblatt’s research.

As one senior prosecutor in North Rhine-Westphalia commented: “I wouldn’t want to be in their shoes if there is an attack and it turns out there was an explicit tip in their files.”

Dozens of interviews with state criminal authorities confirmed that tips about possible terrorist activity take months to reach their desks. They all blame the FIU, set up a year ago by former Finance Minister Wolfgang Schäuble after calls for a centralized system to uncover money-laundering.

‘A significant danger for domestic security’

In a secret report to the parliamentary finance committee, the state criminal authority in Thuringia labeled the FIU “a significant danger to domestic security.” The agency described one incident where a report from the Islamic KT Bank in Frankfurt in early February 2018 showed an account that received €18,000 from several different people in a short space of time. Then the funds were transferred to the Netherlands. But the report didn’t reach the police until April.

Dusseldorf senior public prosecutor, Andreas Stueve, who focuses on money laundering cases, called this dangerous, because millions of dollars aren’t needed to carry out terror. “The smallest sums can produce the biggest dangers,” he points out.

It won’t be easy to fix this problem, though many call on the new finance minister, Olaf Scholz, do so. The FIU suffers from fundamental deficiencies in both conception and execution, say critics.

The unit was originally moved from the Federal Criminal Police Office to the Central Customs Authority but without the original staff. The job of the FIU is to identify and forward any suspicions of money laundering associated with terrorists or criminals. That needs time and care, though only two of the 101 full-time members of staff have a law enforcement background. Many came from the employment agency and a further 220 part-timers and students help out.

The FIU does not see this as a problem, but said it needs 475 more members of staff. New employees are currently being trained, the agency said.

A further problem is the FIU lacks access to law enforcement databases to cross-check suspicious activity, so cases aren’t processed from a law enforcement perspective. By the time reports reach police, months on, they have to be processed all over again.

‘FIU an out-and-out failure’

The opposition parties want Mr. Scholz to step in immediately. “The relaunch of the FIU seems to have been an out-and-out failure,” said Lisa Paus, financial policy spokeswoman for the Greens. She said the finance ministry now has to prove it can get the situation under control.

Mr. Scholz did fire Andreas Bardong, the director of the FIU last month, but critics say more is needed. The FIU has a backlog of 20,000 reports to review. These need to be passed on if there is any indication of crime or terror. More than 70,000 new reports will follow this year. They are likely to contain important tips as €50 billion ($59 billion) worth of dirty money moves through Germany every year, according to experts.

There’s also a stash of worrying files at the finance ministry. Of 20,000 cases that are outstanding, 12,000 were put aside for “further monitoring.” That means the FIU decided they weren’t too urgent so stored them in a database. But no other agencies receive information about those cases, not the police, prosecutors or even whoever reported the suspicion in the first place.

The FIU concedes mistakes but said the agency is moving faster to forward reports indicating potential terror activity, both to the police and the counterintelligence agency. The finance ministry told Handelsblatt that backlogs should be cleared by the end of this month, though that seems unrealistic given the deadline has been postponed several times in the past.

And the problem is growing as lawmakers note that Germany’s booming real estate market is a prime channel for money laundering from Russia and Italy. Concerns are raised almost only by banks, as real estate agents, lawyers and notaries don’t know where to report suspicions. In the future, the number of tip offs is likely to increase exponentially.