Running Head: CRIMINAL GANGS ACTIVITY

CRIMINAL GANGS ACTIVITY

 2
CRIMINAL GANGS ACTIVITY

Table of Contents

1. Description of the criminal-gang activity....................................................................................3

2. Research Question.......................................................................................................................5

3. Research on the problem.............................................................................................................6

3.1 Concept..................................................................................................................................6

3.2 Objectives...............................................................................................................................6

3.3 Literature Review...................................................................................................................7

3.3.1 Reason behind an increase in money laundering in Germany........................................7

3.3.2 Strict anti-money laundering regulations and anti-gang policies in Germany for

curbing money laundering........................................................................................................7

3.4 Findings..................................................................................................................................9

4. Social-scientific argument.........................................................................................................11

Bibliography..................................................................................................................................16
 3
CRIMINAL GANGS ACTIVITY

1. Description of the criminal-gang activity

Money laundering has become highly prevalent in Germany, as the criminal gangs

have increasingly become involved in organized crimes. In Germany, international money-

laundering gangs have been arrested recently for raking approximately 27 million euros

through certificates (Dw.com, 2021). The legal loopholes in the country are encouraging

criminal gangs to launder huge amounts of money despite the presence of anti-money

laundering policies in German criminal policy frameworks. German financial institutions and

banks have reported an increase of 50% in money-laundering activities in Germany. In 2019,

there were approximately 355,000 suspicious transactions in the financial institutions of this

country. Criminal gangs, including the "Italian Mafia," managed to take advantage of the

loopholes in the existing anti-gang policies of Germany and laundered a substantial amount

of money through German illegal properties. Most of the amount from criminal gang

activities in Germany was invested in illegal real estate.

A huge number of organized criminal groups are still operating in this country, and in

most cases, they are involved in money laundering through illegal properties. However, some

amendments have been made to the money-laundering laws of this country to prevent

criminal gangs from getting involved in this type of activity. In 2020, there was a slight

decrease in the number of money-laundering activities in this country. The country has

planned to perform a mutual evaluation of money laundering activities and the effectiveness

of the regulations in preventing such activities. The reform in the legislation related to money

laundering is expected to prevent organized money laundering in this country. The

Government of this country has prioritized the prevention of money-laundering activities.

However, lack of adequate focus on reducing compliance burdens on organized criminal

gangs. Due to this, the gangs exploit the opportunity to perform money laundering in
 4
CRIMINAL GANGS ACTIVITY

financial institutions and banks. A series of regulations have been enacted to prevent money

laundering in the country. For example, “Section 261” of the “Money Laundering Act” for

preventing the criminal activities involving concealing financial benefits obtained from

unlawful conduct. As cited by Chitimira & Ncube (2021), it is vital to implement and enact

robust “Anti Money Laundering Acts” along with proper prevention measures such as

detection technologies for curbing as well as detecting money-laundering activities in

countries. Currently, the German Government has included a risk-based concept within the

anti-money laundering agenda for evaluating risks associated with money laundering by

criminal gangs.

Advanced financial institutions, a large economy along with strong international

linkage are the factors that have encouraged criminal gangs to launder money to gain huge

financial benefits. The international criminal gangs are exploiting the country's financial

system for laundering illegal money to fund their terrorist activities. Moreover, the absence of

proper measures for ensuring compliance with the regulations has made it possible for the

gangs to keep involved in these activities. In 2020, a total of 8942 cases had been reported in

Germany, and the financial-intelligence unit of this country has suspected a substantial

number of money-laundering cases as terrorist financing has increased to a significant extent

(Statista, 2021). Non-compliance to the regulatory requirements and obligations in relation to

the prevention of money laundering by the financial institutions and banks of this country has

given rise to these types of criminal activities in Germany in recent years.

2. Research Question

The major research question based upon money laundering and anti-gang policies for

the prevention of Money-laundering in Germany could be:

 5
CRIMINAL GANGS ACTIVITY

What impact does the present anti-gang legal policy framework have in preventing and

curbing money laundering in Germany?

Anti-gang policies in Germany aim to prevent money laundering in this country;

however, the absence of a proper framework for curbing the activities has made it quite

challenging to alleviate the risks of these activities in Germany. The Federal Government of

Germany has come up with a draft regulation for the proper prosecution of the laundering of

money. This is expected to implement legislative changes in the country's regulatory

framework. As opined by Vitvitskiy et al. (2021), the development of an effective

information system to prevent money laundering in several money-laundering cases has

gained huge momentum in recent years. The Government of the country is required to focus

on monitoring the money-laundering activities in Germany to curb these types of issues in

Germany. Section-261 of the German Money-laundering legislation has focused on

preventing money laundering in the country.

However, the country is still being considered a money-laundering paradise, as the

concerned institutions in this country are not complying with the regulatory requirements and

principles due to a lack of proper control measures implemented by the Government. Thus, it

is vital to reinforce the legislation and regulatory principles in this country to prevent and

curb criminal gang activities related to money laundering. Terrorist financing is generally

done through the internal people of the financial institutions to satisfy their individual

financial interests. This is due to the lack of proper control within the institutions and the lack

of regulatory control of the Federal Government to keep track of the issues and curb the

crimes. It calls for the implementation of a stringent regulatory framework within the country

for ensuring effective alleviation of the criminal gang activities in the country.
 6
CRIMINAL GANGS ACTIVITY

3. Research the problem

3.1 Concept

Money laundering refers to a process through which the criminal gangs attempt to

change a huge amount of money that they obtain from various criminal activities, including

human trafficking, drug trafficking and terrorist funding. In Germany, the system encourages

the gangs to perform money laundering activities. The country is often considered a paradise

for money laundering due to the lack of a proper governance framework for preventing such

activities. The Government has developed anti-gang policies for preventing these crimes. One

of these is the German Criminal Code, which aims to prevent criminal activities, including

human trafficking, terrorism, and money laundering (Yakovleva & Shamne, 2018). However,

the country has still experienced failure in preventing the issue due to improper enforcement

of the code and associated policies.

3.2 Objectives

● To determine the factors causing an increase in the number of money-laundering

activities in Germany.

● To analyze the effectiveness of the current regulatory framework and anti-gang

policies of the country to prevent or curb money-laundering

● To provide recommendations on the changes and restructuring of the existing policies

for achieving the anti-money-laundering prevention objectives.

 7
CRIMINAL GANGS ACTIVITY

3.3 Literature Review

3.3.1 Reason behind an increase in money laundering in Germany

The major factors that are leading to a surge in money-laundering activities in this

country include the large economy, unorganized financial institutions with a lack of proper

control mechanisms etc. Apart from these, a high level of corruption throughout has also been

one of the major reasons behind the surge in money laundering in this country. The number

of organized criminal activities and smuggling is increasing rapidly in the country, having a

significant impact on the increase of money laundering in this country. According to Lyeonov

et al. (2019), money-laundering issues have intensified in the past few years due to an

increase in mobile account management, mobile transactions or electronic payment systems

and mobile fund regulation. The lack of proper control of the financial institutions in

implementing proper governance frameworks for the prevention of these issues has resulted

in significant failure in the prevention of the criminal-gang activities associated with money

laundering in the country.

3.3.2 Strict anti-money laundering regulations and anti-gang policies in Germany for

curbing money laundering

The Federal Government of this country has implemented various stringent regulatory

measures for reducing the risks associated with money laundering through the country's

financial institutions. For example, the country has come up with AML/CFT regulations for

ensuring compliance of the financial institutions with the country's anti-money laundering

framework. Further, several amendments have been made to the German criminal code for

counterfeiting piracy of international products, which is one of the predicate offences of

money laundering. Some amendments have also been made to the AML/CFT regulation to

ensure effective verification and validation of beneficial ownership in all the cases (Paziuk et
 8
CRIMINAL GANGS ACTIVITY

al., 2020). Further, in cases involving low risks, it ensures that the employees of the financial

institutions and banks are aware of the importance of ensuring minimum due diligence for the

prevention of money laundering by unauthorized parties or groups.

The Government of this country has also aimed at increasing cooperation amongst

supervisory authorities, regulatory authorities, and relevant ministries engaged in terrorist

financing and money laundering. Anti-money-laundering programs are also implemented to

prevent this activity in Germany by engaging the financial institutions and banks to

understand how they can prevent their staff from getting involved in money-laundering

activities or building networks with the criminal gangs for their financial gains.

Figure 1: Decreased number of money-laundering in Germany

(Source: Statista, 2021)

These measures have been beneficial for preventing money laundering by the criminal

gangs in this country. Figure 1 shows that, in 2020, the number of money-laundering

activities decreased, while in 2019, there was a significant increase in the number of criminal

gang activities (Statista, 2021). However, there still exists a requirement for the Government
 9
CRIMINAL GANGS ACTIVITY

of this country to implement effective reinforcement measures for strengthening the

regulations.

3.4 Findings

Theme 1: Effectiveness of the existing measures for preventing money-laundering

An increased number of money-laundering cases has led to an increase in other

criminal-gang activities such as terrorism. The Government of Germany has already

implemented a number of different regulations and anti-gang policies for preventing

criminal-gang activities in this country. For example, the German Government has enacted

the "German Criminal Code" for effective prevention of criminal gang activities such as

money laundering through financial institutions and real estate. “Section 232” of this code is

aimed at preventing money laundering through human trafficking in Germany (Schumann,

2020). Moreover, the regulation has not been capable of preventing the activities in this

country as proper governance frameworks have not been implemented yet in the existing

control framework of this country. The German Government has also implemented

AML/CFT regulations for preventing the organizational employees from encouraging

criminal gangs to launder money. These regulations cover financial-service providers,

Government and agencies in this country for preventing money laundering. “Federal

Financial Services Authority” is responsible for ensuring that all the financial institutions

and banks are complying with the AML/CFT regulations. Further, it is also responsible for

conducting investigations in case an institution is found to have violated AML/CFT or any of

the employees of an organization has encouraged criminal gangs to perform money

laundering. Moreover, in most cases, these cases are unreported due to improper frameworks

for adopting corrective measures in cases of non-adherence to the AML/CFT legislation of

the German Government.

 10
CRIMINAL GANGS ACTIVITY

Theme 2: Requirement for reframing the policies within the existing framework

Penalties and enforcement actions are to be considered within the regulatory

framework of principles for the financial institutions or banks to prevent and curb money

laundering in Germany. Penalties should be imposed on the financial institutions if any of the

institutions' employees are found to encourage money laundering by supporting criminal

gangs in Germany. Further, enforcement actions should be implemented in case of non-

adherence to the anti-money laundering legislation.

4. Social-scientific argument

The anti-gang policies of Germany have been beneficial for the prevention of money

laundering and human trafficking. However, the lack of proper measures for developing an

appropriate governance framework for the prevention of such activities via the financial

institutions is still impeding the process of curbing money laundering activities in this

country. This is having a significant negative impact on society. A socio-scientific approach

has been considered in alleviating money-laundering activities in German society. For

instance, the Federal Government of this country has implemented AML/CFT techniques by

drawing some of the ideas from science (Jaffery & Mughal, 2020). Through this, the

Government has implemented a systematic approach to the prevention of money laundering

through the development of a group of different regulatory systems and standards for

preventing the terrorist groups from getting involved in money-laundering activities through

different financial networks and banking systems. This aims to enhance the effectiveness of

the counter-terrorist financing measures and prevent money laundering.

However, despite adopting this approach, the Government of this country is still

facing maximum problems in enhancing its resilience to the prevention of money-laundering

activities within the country. The country's financial institutions are highly corrupt, and this is
 11
CRIMINAL GANGS ACTIVITY

having a significant negative influence on the achievement of the objective of curbing

money-laundering crimes in the nation. AML compliance techniques have been implemented

to prevent the potential violators of banking and other financial institutions from getting

engaged in money laundering.

Still, in some cases, the country's financial institutions end up building networks with

the criminal gangs for their individual gains and most of the time, the cases get unreported. In

this context, “Theory of Crying Wolf” could be explained to determine the negative socio-

economic impact of money laundering and the ways proper scientific approach by the

German Government can ensure mitigation of problems associated with money laundering

vial the agencies, financial institutions or banks in the country (Dalla Pellegrina et al. 2021).

As stated earlier, the cases of money laundering through the banks are often left unreported,

and for this, the concerned parties get encouraged to commit the crime repeatedly. On the

other hand, it is to be noted that excessive reporting is also responsible for diluting the major

transaction information in financial institutions, which also enhances the risks of money

laundering. Crying-wolf theory asserts that this is the major shortcoming within the existing

AML framework of the German Government, as the Government has already developed an

institution for constant monitoring of transaction reporting of the institutions and banks.

German Government has adopted a risk-based approach instead of adopting a rule-based

approach that has reduced the efficiency of its governance frameworks and AML policies in

reducing the money-laundering activities within this country.

According to the amended laws in the AML/CFT framework of the German

Government, the financial intermediaries of the country must report all the activities of

money laundering to the Financial Intelligence unit of the country to ensure their adherence

to the anti-money-laundering framework. However, this strict criteria or rule in the

governance framework has resulted in significant wastage of organizational resources as most

 12
CRIMINAL GANGS ACTIVITY

of the institutions in the banking and financial services industry of the nation have started

showing false reports of their transactions to the concerned authority due to which many of

the money-laundering cases are left unreported in the country.

Thus, the present strict risk-based approach of the Government for preventing the

activity is not effective enough for ensuring the elimination of the threat to the society. Thus,

a proper approach is necessary to curb this issue in German society and enhance the

Government's efficiency in preventing the gangs from performing these activities. Further

“Model of Econometric Gravity” could also be applied to determine the impact of money

laundering and the reasons behind the performance of money laundering by the criminal

gangs in Germany (Ferwerda et al. 2020). Through the application of this model, it could be

seen that in most cases, the financial institutions and banks of the country are engaged in

money-laundering activities by building a strong network with international money-

laundering gangs such as the "Italian Mafia" for gaining offshore financial benefits.

This model provides a proper understanding of the flows of money-laundering cases

across different parts of the country and aids in determining the major factors influencing this

activity. Some of the factors include increased corruption at all levels, terrorism, lack of

control over managing or preventing human trafficking, etc. In most cases, cross-border

ownership connections between the companies of two or more two countries often enhance

risks associated with money-laundering as it includes the provision of illicit motivation

(Aziani et al. 2020). Thus, the country's Federal Government needs to focus on preventing

illegal cross-border ownership connections to prevent money laundering in this country.

Further, it is also essential to provide the country's financial institutions with a proper

understanding of the negative effects that they can be vulnerable to in case they build illegal

networks with unauthorized gangs for their temporary financial gains.

 13
CRIMINAL GANGS ACTIVITY

Figure 2: Cross-border ownership connections in money-laundering activities

(Source: Aziani et al. 2020)

They should be made aware of the socio-economic implications of money laundering

with the international gangs of Germany. This will have a motivational influence on the

institutions or agencies that are likely to get involved in these activities. Further, “Corruption

Theory” posits that many methods and techniques are used for money laundering that

requires the countries' governments to focus on enhancing their understanding of the factors

and implementing specific policies to eliminate those factors. This requires an enhancement

in financial-intelligence information for effective alleviation of the issue by adopting a rule-

based approach instead of a risk-based approach. Most importantly, the Government of this

country needs to focus on enhancing the resilience of the AML/CFT framework for

preventing the criminal gangs of the country from involving in the activities while ensuring

adherence of the financial institutions to the anti-money laundering regulations.

This will not be possible through the adoption of a risk-based framework. Instead of a

risk-based approach, the Government must focus on implementing scientific techniques

within the existing policies to enhance the effectiveness of the governance framework to

prevent money laundering by the criminal gangs. Thus, proper scientific measures should
 14
CRIMINAL GANGS ACTIVITY

have been implemented to the reduction of the impact of money laundering in society, and in

this regard, the Government of Germany needs to consider adopting techniques including

synthetic data generation and machine learning to the prevention of the activities in Germany.

For this, the Government can consider encouraging the Financial-intelligence council to

implement an IoT-based information system for effective real-time monitoring of the

financial transactions by the banks and other financial institutions of the country (Leonov et

al. 2019). This will aid in the adoption of a flexible yet effective approach for proper

monitoring and governance of financial transactions to determine the anomalies at the very

beginning for taking corrective actions at the earliest. Further, the Government needs to keep

on engaging the financial institutions and banks in anti-money-laundering programs to

prevent and curb the money-laundering activities.

 15
CRIMINAL GANGS ACTIVITY

Bibliography

Aziani, A., Ferwerda, J., & Riccardi, M. (2020). Who are our owners? Exploring the

ownership links of businesses to identify illicit financial flows. European Journal of

Criminology, 1477370820980368. Retrieved from

https://journals.sagepub.com/doi/pdf/10.1177/1477370820980368

Chitimira, H., & Ncube, M. (2021). Towards Ingenious Technology and the Robust

Enforcement of Financial Markets Laws to Curb Money Laundering in Zimbabwe.

Potchefstroom Electronic Law Journal (PELJ), 24(1), 1-47. Retrieved from

http://www.scielo.org.za/scielo.php?pid=S1727-

37812021000100034&script=sci_arttext&tlng=es

Dalla Pellegrina, L., Di Maio, G., Masciandaro, D., & Saraceno, M. (2021). Are Bankers"

Crying Wolf"? The Risk-Based Approach to Money-Laundering Regulation and its

Effects (No. 444). Retrieved from https://www.researchgate.net/profile/Giorgio-Di-

Maio-2/publication/342156675_Are_Bankers_Crying_Wolf_The_Risk-

Based_Approach_in_Money_Laundering_Regulation_and_its_Effects/links/

603e2a95299bf1e0784d61bb/Are-Bankers-Crying-Wolf-The-Risk-Based-Approach-

in-Money-Laundering-Regulation-and-its-Effects.pdf

Dw.com (2021). German police raid money-laundering gangs, bikers. Retrieved on 17th April

2022 from https://www.dw.com/en/german-police-raid-money-laundering-gangs-

bikers/a-59906849
 16
CRIMINAL GANGS ACTIVITY

Ferwerda, J., van Saase, A., Unger, B., & Getzner, M. (2020). Estimating money laundering

flows with a gravity model-based simulation. Scientific reports, 10(1), 1-11. Retrieved

from https://www.nature.com/articles/s41598-020-75653-x

Ilahi, A. H. A., & Widowaty, Y. (2021). The Optimization of Corruption Deterrence during

the Covid-19 Pandemic. Padjadjaran Journal of Law, 8(1), 71-91.Retrieved from

https://journal.unpad.ac.id/pjih/article/viewFile/31207/15294

Jaffery, I. H., & Mughal, R. A. L. (2020). Money-laundering risk and preventive measures in

Pakistan. Journal of Money Laundering Control. Retrieved from

http://docs.szabist.edu.pk/websites/Research-Papers/Money-laundering%20risk

%20and%20preventive%20measures.pdf

Leonov, S., Yarovenko, H., Boiko, A., & Dotsenko, T. (2019). Prototyping of information

system for monitoring banking transactions related to money laundering. In SHS Web

of Conferences (Vol. 65, p. 04013). EDP Sciences. Retrieved from https://www.shs-

conferences.org/articles/shsconf/pdf/2019/06/shsconf_m3e22019_04013.pdf

Lyeonov, S., Кuzmenko, О., Yarovenko, H., & Dotsenko, T. (2019). The innovative

approach to increasing cybersecurity of transactions through counteraction to money

laundering. Marketing, (3), 309. Retrieved from

https://web.archive.org/web/20220123190658id_/https://mmi.fem.sumdu.edu.ua/

sites/default/files/24_.pdf

Paziuk, A. V., Nevara, L. M., Derkach, E. M., Paziuk, M. A., & Yefimenko, Y. O. (2020).

Regulation of Offshore Jurisdictions’ Activities: a Practical Aspect. International

Journal of Management (IJM), 11(3), 612-623. Retrieved from

 17
CRIMINAL GANGS ACTIVITY

https://www.academia.edu/download/62790253/IJM_11_03_06320200403-119512-

1uavkdm.pdf

Schumann, S. (2020). Corporate Criminal Liability on Human Trafficking. The Palgrave

International Handbook of Human Trafficking, 1651-1669. Retrieved from

https://link.springer.com/content/pdf/10.1007/978-3-319-63058-8_10.pdf

Statista (2021). Number of recorded money laundering cases in Germany from 2009 to 2020,

Retrieved on 17th April 2022 from

https://www.statista.com/statistics/1268493/money-laundering-cases-recorded-

number-germany/

Vitvitskiy, S. S., Kurakin, O. N., Pokataev, P. S., Skriabin, O. M., & Sanakoiev, D. B.

(2021). Formation of a new paradigm of anti-money laundering: The experience of

Ukraine. Problems and Perspectives in Management, 19(1), 354-363. Retrieved from

https://www.businessperspectives.org/images/pdf/applications/publishing/templates/

article/assets/14826/PPM_2021_01_Vitvitskiy.pdf

Yakovleva, O., & Shamne, A. (2018). Circumstances Precluding Wrongfulness in Russian

and German Criminal Law. In SHS Web of Conferences (Vol. 50, p. 01160). EDP

Sciences. Retrieved from

https://www.shs-conferences.org/articles/shsconf/pdf/2018/11/shsconf_cildiah2018_0

1160.pdf