Money laundering poses a serious threat to the stability and integrity of the financial system. The German Federal Financial Supervisory Authority (BaFin) emphasises that the risk of financial institutions being misused for money laundering or terrorist financing remains high—particularly in the context of international payments. Complex product and transaction structures further exacerbate this risk. In its 2024 Annual Report, BaFin outlines how it identifies, regulates, and monitors such risks to effectively prevent abuse in the financial sector.
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Enhanced Preventive Supervision
In response to these challenges, BaFin has significantly intensified its supervisory activities. Both routine and event-driven special audits were conducted, with a particular focus on high-risk products and transactions. As in previous years, the banking sector saw increased attention to IT monitoring and risk analysis. Supervisory reviews also closely examined customer data update processes and the reporting of suspicious activity.
In the non-banking financial sector, audits focused on compliance with customer due diligence requirements and risk management. BaFin has also increased on-site inspections of agents acting on behalf of one or more foreign payment institutions.
Combating terrorist financing, a growing priority amid geopolitical instability, was another key focus area. Additionally, the general section of the interpretative guidance on the German Anti-Money Laundering Act (GwG) was updated to provide legal clarity and guidance. At the European level, the adoption of a comprehensive Anti-Money Laundering Package in April 2024 has set new standards. BaFin is actively involved in the preparation and implementation of this new regulatory framework.
To foster timely and sustainable remediation of deficiencies, BaFin has increasingly issued orders backed by administrative coercion and appointed audit firms as special commissioners for monitoring compliance.
BaFin’s Risk-Based Supervisory Approach
BaFin follows a risk-based approach to effectively combat money laundering and terrorist financing. This approach includes three central steps:
1. Risk Identification
BaFin continuously monitors developments in the financial sector, analysing structural vulnerabilities, emerging business models, and geopolitical trends. Key risk areas highlighted in 2024 include:
- International payments: Highly susceptible to money laundering due to cross-border transactions.
- Complex products and business models: Especially involving crypto assets or intricate corporate structures.
- High-risk sectors and jurisdictions: Focus on regions with political instability or weak regulatory regimes.
2. Development of Regulatory Standards in 2024
- Updated interpretative guidance on the Anti-Money Laundering Act (AuA AT).
- Joint guidance by the Financial Intelligence Unit (FIU) and BaFin on the concepts of “immediacy” and “completeness” in suspicious transaction reports under Section 43 GwG.
- Adoption of the European Anti-Money Laundering Package on 24 April 2024, featuring the central AML Regulation.
- Continuous updates and new guidance by BaFin to reduce risks under the GwG.
- Application of the Funds Transfer Regulation (EU) 2023/1113 since 30 December 2024.
- Amendments to the German Anti-Money Laundering Act as part of the Financial Market Digitalisation Act, reflecting the full applicability of EU Regulations 2023/1114 (MiCA) and 2023/1113 (Funds Transfer Regulation).
3. Supervision and Monitoring
BaFin employs various supervisory tools, including:
- Regular and event-driven special audits across banking and non-banking sectors.
- Reviews of internal control systems, risk management, and compliance structures.
- Supervisory meetings and on-site inspections.
- Enforcement actions and sanctioning procedures.
Conclusion
In its annual report “Risks in Focus of BaFin,” the supervisory authority outlines the greatest threats to the integrity and stability of Germany’s financial system. In 2024, BaFin sharpened its focus on preventive supervision, particularly targeting high-risk areas. Through national measures, international cooperation, and preparation for the new AML framework, a foundation for even more risk-sensitive supervision has been established. Nevertheless, anti-money laundering remains a long-term task, requiring constant vigilance, adaptability to emerging threats, and a robust regulatory framework—essential for a secure and trustworthy financial system.
