Advertisement

An analysis of anti-money laundering in the German non-financial sector

  • Christian Friedrich
  • Reiner QuickEmail author
Article

Abstract

European anti-money laundering (AML) law obliges both financial and non-financial private companies to contribute to combatting money laundering. Since the financial sector has implemented largely effective AML in the meantime, money launderers are increasingly moving their activities to the non-financial sector (non-FS). This study examines how AML obligations are implemented in the German non-FS. We intend to systemize different implementations of these obligations to provide a basis for improving future AML implementations, guidance, and research in the non-FS. The German setting is especially suited for this research, because its AML law is stricter than European AML law with respect to non-FS obligations, and because Germany has a large and interconnected economy. We use Grounded Theory to collect and analyze rich data from semi-structured interviews with 13 managers from eight multinational companies. Our result is a theory which systemizes the identified AML implementations. This helps explain how these various AML approaches emerge, and identifies ways in which the identified non-compliance and unaddressed AML risks can be mitigated. Another key observation is that guidance by the regulatory authorities is lacking. For both practice and regulators, the findings imply that the non-FS should follow a systematic AML process and that the regulatory authorities should support this approach through additional guidance. We also close some gaps in the literature, which has largely neglected the non-FS and rarely collected original data of actual AML implementation. The developed theory contributes to a better understanding of how AML effectiveness can be assessed and enhanced.

Keywords

Money laundering AML Directive Grounded Theory Non-financial sector Designated non-financial businesses and professions (DNFBP) 

Notes

Acknowledgements

We thank Christopher Humphrey, Charles Bailey and Participants of the 4th Transatlantic Conference of Accounting, Auditing, Financial Control and Cost Control in Lyon, France for their valuable feedback on earlier versions of this paper.

Compliance with Ethical Standards

Conflict of Interest

The authors declare that they have no conflict of interest.

Ethical approval

This article does not contain any studies with human participants or animals performed by any of the authors.

References

  1. Abel, A. S., & MacKay, I. A. (2016). Money laundering: Combating a global threat. Journal of Accountancy, 222(3), 45–49.Google Scholar
  2. an der Brügge, B. (2012). Friseur wegen Geldwäsche zu vier Jahren Haft verurteilt. (2012, Westdeutsche Allgemeine Zeitung.Google Scholar
  3. Asia/Pacific Group on Money Laundering (2012). APG typology report on trade based money laundering. http://www.fatf-gafi.org/media/fatf/documents/reports/Trade_Based_ML_APGReport.pdf. Accessed August 3, 2018.
  4. Basel Institute on Governance (2016). Basel AML index 2016 report. https://index.baselgovernance.org/sites/index/documents/Basel_AML_Index_Report_2016.pdf. Accessed August 3, 2018.
  5. Bausch, O., & Voller, T. (2014). Geldwäsche-Compliance für Güterhändler. Wiesbaden: Springer Fachmedien.Google Scholar
  6. Braithwaite, J. (2013). Flipping markets to virtue with qui tam and restorative justice. Accounting, Organizations and Society, 38(6–7), 458–468.Google Scholar
  7. Bundeskriminalamt (2014). Jahresbericht 2014 Financial Intelligence Unit (FIU) Deutschland. https://www.bka.de/SharedDocs/Downloads/DE/Publikationen/JahresberichteUndLagebilder/FIU/Jahresberichte/fiuJahresbericht2014.html?nn=28276. Accessed August 3, 2018.
  8. Bundesrat (2012). Drucksache 701/1/12 - Empfehlungen der Ausschüsse Fz - Wi zu Punkt ….. der 904. Sitzung des Bundesrates am 14. Dezember 2012 Gesetz zur Ergänzung des Geldwäschegesetzes (GwGErgG). http://www.bundesrat.de/SharedDocs/drucksachen/2012/0701-0800/701-1-12.pdf?__blob=publicationFile&v=1. Accessed July 6, 2018.
  9. Bussmann, K. -D. (2015). Dark figure study on the prevalence of money laundering in Germany and the risks of money laundering in individual economic sectors: Summary. https://www.schleswig-holstein.de/DE/Fachinhalte/M/marktueberwachung/Downloads/Geldwaesche/dunkelfeldstudie_geldwaesche_Dtld.pdf?__blob=publicationFile&v=1. Accessed August 3, 2018.
  10. Bussmann, K.-D., Nestler, C., & Salvenmoser, S. (2016). Wirtschaftskriminalität in der analogen und digitalen Wirtschaft 2016 PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft. Halle: Martin-Luther-Universität Halle-Wittenberg.Google Scholar
  11. Bussmann, K.-D., & Vockrodt, M. (2016). Geldwäsche-Compliance im Nicht-Finanzsektor: Ergebnisse aus einer Dunkelfeldstudie. Compliance-Berater, 5, 138–143.Google Scholar
  12. Camdessus, M. (1998). Money laundering: The importance of international countermeasures. http://www.imf.org/external/np/speeches/1998/021098.htm. Accessed August 3, 2018.
  13. Cappel, A. (2017). Prävention gegen Geldwäsche ausgeweitet. (2017, 04/08/2017). Frankfurt: Börsen-Zeitung.Google Scholar
  14. Charmaz, K. (2014). Constructing Grounded Theory (2nd ed.). London: Sage.Google Scholar
  15. Chong, A., & Lopez-De-Silanes, F. (2015). Money laundering and its regulation. Economics and Politics, 27(1), 78–123.Google Scholar
  16. Choo, K.-K. R. (2013). New payment methods: A review of 2010-2012 FATF mutual evaluation reports. Computers & Security, 36, 12–26.Google Scholar
  17. Choo, K.-K. R. (2014). Designated non-financial businesses and professionals: A review and analysis of recent financial action task force on money laundering mutual evaluation reports. Security Journal, 27(1), 1–26.Google Scholar
  18. Committee of Sponsoring Organizations of the Treadway Commission. (2004). Enterprise risk management: Integrated framework—executive summary. Montvale: Committee of Sponsoring Organizations of the Treadway Commission.Google Scholar
  19. Committee of Sponsoring Organizations of the Treadway Commission. (2017). enterprise risk management: Integrating with strategy and performance—executive summary. Montvale: Committee of Sponsoring Organizations of the Treadway Commission.Google Scholar
  20. Corbin, J., & Strauss, A. (2015). Basics of qualitative research (4th ed.). Los Angeles: Sage.Google Scholar
  21. Dalla Pellegrina, L., & Masciandaro, D. (2009). The risk-based approach in the New European anti-money laundering legislation: A law and economics view. Review of Law & Economics, 5(2), 931–952.Google Scholar
  22. Davies, M. (2017). DA Will Lay criminal charges against SAP, Gupta-linked CAD house amid R100 M Kickback Claims. (2017, 17/07/2017). New York City: Huffington Post.Google Scholar
  23. Delston, R. S., & Walls, S. C. (2012). Strengthening our security: A new international standard on trade-based money laundering is needed now. Case Western Reserve Journal of International Law, 44(3), 737–746.Google Scholar
  24. Demetis, D. S. (2018). Fighting money laundering with technology: A case study of Bank X in the UK. Decision Support Systems, 105, 96–107.Google Scholar
  25. Department of the Treasury (2015). National Money Laundering Risk Assessment 2015. https://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/National%20Money%20Laundering%20Risk%20Assessment%20%E2%80%93%2006-12-2015.pdf. Accessed August 3, 2018.
  26. Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.Google Scholar
  27. Federal Financial Supervisory Authority (BaFin, 2017). Prevention of money laundering. https://www.bafin.de/EN/Aufsicht/Uebergreifend/Geldwaeschebekaempfung/geldwaeschebekaempfung_node_en.html;jsessionid=5CD6C92A8F9525D831FE1AD488248FE2.1_cid381. Accessed August 3, 2018.
  28. Ferwerda, J. (2009). The economics of crime and money laundering: Does anti-money laundering policy reduce crime? Review of Law & Economics, 5(2), 903–929.Google Scholar
  29. Ferwerda, J., Kattenberg, M., Chang, H.-H., Unger, B., Groot, L., & Bikker, J. A. (2013). Gravity models of trade-based money laundering. Applied Economics, 45(22), 3170–3182.Google Scholar
  30. Financial Action Task Force (FATF) (2006). Trade Based Money Laundering. http://www.fatf-gafi.org/media/fatf/documents/reports/Trade%20Based%20Money%20Laundering.pdf. Accessed August 3, 2018.
  31. Financial Action Task Force (FATF) (2012). International standards on combating money laundering and the financing of terrorism & proliferation: The FATF recommendations. http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF_Recommendations.pdf. Accessed August 3, 2018.
  32. Financial Action Task Force (FATF) (2015). Mutual evaluations: Mutual Evaluation Germany. http://www.fatf-gafi.org/topics/mutualevaluations/documents/mutualevaluationofgermany.html. Accessed August 3, 2018.
  33. Gelemerova, L. (2009). On the frontline against money-laundering: The regulatory minefield. Crime, Law and Social Change, 52(1), 33–55.Google Scholar
  34. German Banking Industry Committee (2014). Auslegungs- und Anwendungshinweise der DK zur Verhinderung von Geldwäsche, Terrorismusfinanzierung und “sonstigen strafbaren Handlungen”. https://die-dk.de/media/files/DK-HinweiseStand_Februar2014.pdf. Accessed August 3, 2018.
  35. Gilmour, N. (2016). Understanding the practices behind money laundering: A rational choice interpretation. International Journal of Law, Crime and Justice, 44, 1–13.Google Scholar
  36. Glaser, B. G., & Strauss, A. L. (1967). The discovery of grounded theory: Strategies for qualitative research. New York: Aldine.Google Scholar
  37. Gregor, S. (2006). The nature of theory in information systems. MIS Quarterly, 30(3), 611–642.Google Scholar
  38. Herzog, F. (2014). Einleitung. In F. Herzog & O. Achtelik (Eds.), Geldwäschegesetz (2nd ed.). Munich: Beck.Google Scholar
  39. Horton, J., Macve, R., & Struyven, G. (2004). Qualitative research: Experiences in using semi-structured interviews. In C. Humphrey & B. Lee (Eds.), The real life guide to accounting research: A behind-the-scenes view of using qualitative research methods (pp. 339–357). Oxford: Elsevier.Google Scholar
  40. Joint Committee of the European Supervisory Authorities (2017). Joint opinion on the risks of money laundering and terrorist financing affecting the Union’s financial sector. https://www.eba.europa.eu/documents/10180/1759750/ESAS+Joint+Opinion+on+the+risks+of+money+laundering+and+terrorist+financing+affecting+the+Union%E2%80%99s+financial+sector+%28JC-2017-07%29.pdf. Accessed August 3, 2018.
  41. Keesoony, S. (2016). International anti-money laundering laws: The problems with enforcement. Journal of Money Laundering Control, 19(2), 130–147.Google Scholar
  42. Kirk, N., & van Staden, C. (2001). The use of grounded theory in accounting research. Meditari Accounting Research, 9(1), 175–197.Google Scholar
  43. McCarthy, K. J., van Santen, P., & Fiedler, I. (2015). Modeling the money launderer: Microtheoretical arguments on anti-money laundering policy. International Review of Law and Economics, 43, 148–155.Google Scholar
  44. Naheem, M. A. (2018). Illicit financial flows: HSBC case study. Journal of Money Laundering Control, 21(2), 231–246.Google Scholar
  45. OECD (2009). Money laundering awareness handbook for tax examiners and tax auditors. http://www.oecd-ilibrary.org/docserver/download/2309141e.pdf?expires=1511518072&id=id&accname=oid016923&checksum=40829091C9B2A78EF4183AB92074D9FE. Accessed August 3, 2018.
  46. Omar, N., Johari, R. J., Azam, M. A. M., & Hakim, N. O. (2015). Mitigating money laundering: The role of designated non-financial businesses and professions in Southeast Asian Countries. In H. G. Djajadikerta & Z. Zhang (Eds.), A new paradigm for international business (pp. 285–294). Singapore: Springer.Google Scholar
  47. Pol, R. F. (2018). Anti-money laundering effectiveness: Assessing outcomes or ticking boxes? Journal of Money Laundering Control, 21(2), 215–230.Google Scholar
  48. Prinsloo, L. (2017). U.S. Authorities Probe Germany’s SAP as Gupta Scandal Escalates. (2017, 10/26/2017). New York City: Bloomberg.Google Scholar
  49. Quedenfeld, R. (2017). Grundlagen der Geldwäschebekämpfung. In R. Quedenfeld (Ed.), Handbuch Bekämpfung der Geldwäsche und Wirtschaftskriminalität (4th ed., pp. 19–60). Berlin: Erich Schmidt Verlag.Google Scholar
  50. Stralau, M. (2017). Autohändler muss ins Gefängnis. (2017, 08/23/2017). Frankfurt: Märkische Oderzeitung.Google Scholar
  51. Turner, S., & Bainbridge, J. (2018). An anti-money laundering timeline and the relentless regulatory response. The Journal of Criminal Law, 82(3), 215–231.Google Scholar
  52. Unger, B., & den Hertog, J. (2012). Water always finds its way: Identifying new forms of money laundering. Crime, Law and Social Change, 57(3), 287–304.Google Scholar
  53. Unger, B., Siegel, M., Ferwerda, J., de Kruijf, W., Busuioic, M., Wokke, K., et al. (2006). The amounts and the effects of money laundering. http://www.ftm.nl/wp-content/uploads/2014/02/witwassen-in-nederland-onderzoek-naar-criminele-geldstromen.pdf. Accessed August 3, 2018.
  54. United Nations Office on Drugs and Crime (UNODC) (2018). Money-laundering and globalization. https://www.unodc.org/unodc/en/money-laundering/globalization.html. Accessed August 3, 2018.
  55. United States Department of State (2016). International narcotics control strategy report: Volume II—money laundering and financial crimes. https://www.state.gov/documents/organization/253983.pdf. Accessed August 3, 2018.

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Accounting and AuditingDarmstadt University of TechnologyDarmstadtGermany

Personalised recommendations