BALANCING ANTI-MONEY LAUNDERING REQUIREMENTS AND FINANCIAL INCLUSION FOR MIGRANTS

What is it about?

Given the sudden rise in the numbers of refugees who should be integrated into society and the labour market as quickly as possible, Germany’s Federal Financial Supervisory Authority, Bafin, created transitional provisions, to enable refugees to have comprehensive access to a bank account. These provisions will apply until an identity verification regulation in accordance with section 4 (4) sentence 2 of the Money Laundering Act (Geldwäschegesetz – GwG) comes into force, probably next year. This paper seeks to determine whether or not the measures adopted by BaFin can effectively combat money laundering and terrorist financing while promoting financial inclusion?

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Why is it important?

Vast numbers of migrants have made their way across the Mediterranean to Europe in 2015, sparking a crisis as countries struggle to cope with the influx, and creating division in the European Union over how best to deal with resettling people. In the community of Fulda in south-central Germany, the pace of account openings by refugees has risen rapidly in recent months, stretching some savings banks to their limits. In August, Bafin issued temporary guidelines facilitating account openings by refugees, many who arrive without documentation such as passports and birth certificates. That has made it difficult for banks to comply with anti-money laundering measures that require them to verify account-holders' identities. The above measures seek to ease the path for hundreds of thousands of people granted asylum in the country to set up bank accounts, while ensuring anti-money laundering measures remain in place. The challenge has always been finding the right balance. This paper critically analyses the anti-money laundering/counter-terrorist financing measures adopted by Germany for migrants. Its aim is to determine whether or not such measures can effectively combat money laundering and terrorist financing while promoting financial inclusion? Although the Financial Action Task Force has issued several guidelines on financial inclusion, none of those guidelines addressed the issue of the migrant crisis.