Olaf Scholz grilled over Germany’s anti-money laundering unit

Newsletter: Europe Express

German finance minister Olaf Scholz, the frontrunner to succeed Angela Merkel as chancellor, was grilled by MPs on Monday over irregularities at Germany’s anti-money laundering agency in an affair that could cost him valuable support in Sunday’s election.

Scholz, the left-of-centre Social Democrats’ candidate for chancellor, was questioned by the Bundestag’s finance committee over an investigation into suspected obstruction of justice at the Financial Intelligence Unit, Germany’s main body for fighting money-laundering.

The FIU, which is overseen by Scholz’s finance ministry, is alleged by prosecutors to have failed to pass on evidence of suspected money-laundering to the German police. Banks believed some of the money flagged in the suspicious activity reports that they sent to the FIU was being used to finance terrorism, as well as arms and drugs trafficking.

Earlier this month, prosecutors carried out searches at Scholz’s finance ministry as part of the investigation.

Armin Laschet, chancellor candidate for the centre-right CDU/CSU, seized on the raids to attack Scholz’s stewardship of the finance ministry, blaming him for failures in the fight against money laundering and in the scandal surrounding Wirecard, the digital payments company that collapsed into insolvency last year.

Germany’s financial regulator BaFin, which is also overseen by Scholz’s ministry, was strongly criticised for failing to foresee Wirecard’s collapse and for going after journalists and short-sellers who highlighted problems with the company’s balance sheet.

But so far, Laschet’s attacks have had no appreciable impact on Scholz’s approval ratings. His SPD party continues to enjoy a commanding lead in opinion polls with less than a week to go until election day.

Scholz, who had a number of campaign appearances planned in the south of Germany this week, had intended to appear before MPs by video link. But after criticism from opposition parties he attended in person.

Some MPs were unconvinced by his performance in the closed-door session. “Once again, Scholz as finance minister rejected all responsibility for the chaos at the . . . FIU and the fight against money-laundering,” said Lisa Paus, the Greens’ spokeswoman on finance policy.

Scholz defended his record, telling reporters after Monday’s hearing that staffing levels at the FIU had increased on his watch from 160 to 500 and it had been equipped with state of the art technology.

He said laws had been changed to allow the FIU to search databases held by police and prosecutors, and to require more professionals, such as public notaries, to report suspicious transactions to the agency.

Scholz said that since under his stewardship “we have grown from a volume of 50,000 [suspicious activity] reports to 150,000, and my forecast is that we will probably double that in a short period”.

This line of defence was challenged by Florian Toncar of the Free Democrats, who noted that prior to Monday’s hearings Scholz had never met the FIU’s head, Christof Schulte, “let alone ever visited this agency, which is supposedly so important to him”.

“Germany remains a . . . paradise for organised crime,” said Fabio De Masi, an MP with the hard-left Die Linke. ”

Hans Michelbach of the CDU/CSU, said the investigation into the FIU had underscored problems at the agency that had emerged during the parliamentary probe into the fall of Wirecard.

He told reporters that prosecutors had “made clear that of 34 cases of money-laundering at Wirecard . . . [the FIU] failed to deal with 32 of them”, he said. He accused Scholz in his questioning of “playing down everything or even denying there were any problems at all”.

Jens Zimmermann, an SPD MP and Scholz ally, said that when it came to Germany’s anti-money laundering capabilities the minister had inherited a “shambles” from his predecessor, Wolfgang Schäuble.

He also dismissed Monday’s questioning as driven by the election campaign. “Anything else would have been a surprise,” he said.

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