A Guide to Anti-Money Laundering for Crypto Firms
A thousand police and special forces officers carried out raids across Germany this week targeting an international network suspected of laundering more than 140m EUR from criminal activities and financing terror activities in Syria.
Officers raided businesses and homes at 80 different locations in Bremen, Lower Saxony, and North Rhine-Westphalia, collecting evidence of money laundering and seizing illegal assets. At least 11 people were arrested, including two suspects who had previously been classified as Islamist threats.
Police say the operation was months in the making and targeted 67 members of a crime network – the majority of them Syrian nationals – which had been operating internationally since 2016. It is believed around 140m EUR in laundered money was mainly transferred to Turkey and Syria.
The news comes after Germany’s Financial Intelligence Unit came under the spotlight last month when prosecutors raided its offices as part of an investigation into whether it was told to ignore warnings of suspect payments to Africa.
News organization WDR says the money laundering investigation was triggered by chance after customs officers came to the aid of a car driven into a ditch near the German-Dutch border. The two men inside the car refused help, and a search uncovered a bag containing 300,000 EUR. One of the two was Syrian national Halid A, who is suspected of supporting Islamic State fighters in Syria.
Officers believe the money came from the Netherlands and was to be transferred using the hawala transfer network. Hawala activities – where money brokers move cash informally, outside of traditional banking systems – are illegal in Germany. Its Payment Services Act (ZAG) forbids services similar to a bank being offered without a license, with a prison term of up to five years for infringements.
Hawala is however a legal money transfer system in some parts of the world and is often used by migrants sending money back to their country of origin. In 2019, German authorities took down an illegal Hawala banking ring suspected of transferring millions of Euros to Turkey.
Money laundering and terrorist financing
The huge transaction volume uncovered in this investigation, and the fact that Syria, a high-risk country, was named as the destination for some of the funds, raises questions for AML compliance processes. It also highlights the challenging intersection between money laundering and terrorist financing, and the need for additional customer due diligence when clients are dealing in high cash values or volumes.
Terrorist financing is difficult to spot, meaning compliance teams should be looking not just for a single anomaly, but for a series of irregular activities that help to paint a bigger picture of a customer’s activities. Looking for a pattern or network, and building a connection between these activities, should be combined with any network analysis that can be built up to provide more intelligence.
Earlier this year Germany also rewrote its money laundering laws, removing the need to connect money laundering to a predefined criminal offense. The tightening of Section 261 of the German Criminal Code means that money laundering only has to originate from any ‘unlawful act’ for the offense to have been committed. This move goes beyond the requirements set out in the EU’s AMLDs.
Originally published October 14, 2021, updated November 18, 2021
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