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

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.