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Stand:updated on 19.04.2022 BaFin's other functions

BaFin has the task of preventing money laundering and terrorist financing. Collective consumer protection is also part of its work, as this is one of its supervisory objectives. In addition, BaFin ensures that banking, financial services and insurance businesses are not being conducted without official authorisation. It is responsible for enforcement relating to unauthorised business, too.

Note

You can find more information on BaFin’s cross-sectoral supervisory activities by clicking on Prevention of money laundering and terrorist financing, Cross-sectoral issues or Consumers.

Advice, warnings and other useful information for consumers can be found under Consumers on BaFin’s website. There you can also find information on the various ways to submit a complaint.

Prevention of money laundering and terrorist financing

All companies in the financial sector are expected to have proper business policies to prevent transactions with a criminal background and to work towards detecting and combating such transactions. This applies particularly to transactions relating to money laundering or terrorist financing. Money-laundering activities may not only threaten the soundness of an institution that is abused for these purposes, but may also endanger the integrity and stability of the whole financial market.

For this reason, the First EEC Money Laundering Directive of 1991 was directed not only at credit institutions but also at financial services institutions and insurance undertakings. The Second EC Money Laundering Directive of 2001 and the Third EC Money Laundering Directive, which was adopted in 2005, further extended the scope to other professions such as insurance intermediaries.

The risks arising from abuse for the purposes of money laundering exist equally for involvement in terrorist financing or fraudulent activities, so it is particularly important for the institutions and undertakings of the financial sector to combat and prevent these crimes.

The main aim is to ensure transparency in business relationships and financial transactions on a risk-oriented basis. This includes what is known as customer due diligence. In addition to establishing the identity of the customer and any other beneficial owners, customer due diligence comprises the general monitoring of the ongoing business relationship – the so-called "know your customer" principle. These measures enable money flows to be tracked and checked for plausibility.

Moreover, institutions and insurance undertakings subject to money laundering provisions are required to make checks on unusual transactions. If there is reason to suspect criminal money-laundering or terrorist-financing activities, such suspicions must be notified to the responsible law enforcement agencies and a copy sent to the Financial Intelligence Unit (FIU) of the Federal Criminal Police Office (Bundeskriminalamt – BKA).

BaFin’s role in preventing money laundering

BaFin seeks to prevent any misuse of the financial system for the purposes of money laundering, terrorist financing and fraudulent activities to the detriment of institutions. It also ensures that the institutions and insurance undertakings under its supervision fulfil their obligations under money laundering legislation. To this end, since 2003 BaFin has grouped all responsibilities relating to these tasks in one department, the Department for the Prevention of Money Laundering. This department has been part of the Banking Supervision Directorate since the beginning of 2016.

It carries out money laundering supervision of all institutions and insurance undertakings subject to the German Money Laundering Act (Geldwäschegesetz – GwG) and its supervision. It is also responsible for the ongoing technical supervision of companies engaged in financial transfer services, dealing in foreign banknotes and coins, and credit card business, due to the increased risk of money laundering connected with such businesses.

A further focus is on representing BaFin's supervisory interests in various international bodies, in particular the Financial Action Task Force on Money Laundering (FATF). The department is also responsible for automated account information access pursuant to section 24c of the German Banking Act (Kreditwesengesetz – KWG), which allows for the accounts of suspected terrorists or other criminals with credit institutions registered in Germany to be identified.

VBS – Consumer Protection

BaFin wants to provide adequate protection for consumers as a whole. Its Consumer Protection Directorate, which specialises in this field, deals with the wide range of consumer protection issues that lie within BaFin’s remit. The Directorate is grouped under BaFin's Securities Supervision Sector.

In principle, consumers should be able to make informed decisions independently and without feeling patronised. BaFin therefore strives to ensure that the range of financial products, insurance products and financial services on offer is transparent and understandable.

BaFin provides information to consumers and, by so doing, strengthens its financial literacy. It thus helps people to better understand questions of finance and enables them to make decisions independently. In the area of consumer education, BaFin specifically addresses various target groups.

BaFin monitors the financial market in order to identify at an early stage developments of relevance to consumers and that could lead to risks or irregularities. Its objective is to not only react in the face of suspicious circumstances but to pre-emptively initiate appropriate countermeasures. To do this, BaFin records, analyses and assesses information on market activity from internal and external sources. In addition, it carries out consumer and market surveys.

By conducting mystery shopping, BaFin gains an impression of how companies behave towards their customers and whether, for example, they are meeting their statutory obligations when offering advice on and selling products.

Anyone having trouble particularly with a credit institution or insurance company can file a complaint with BaFin. These complaints provide BaFin with important information about which issues and problems are of concern to consumers. Furthermore, complaints about the business practices of a supervised company can reveal flaws in the company’s organisational arrangements that affect the collective interests of consumers. Complaints therefore also provide important impetus for identifying and rectifying irregularities.

BaFin’s Consumer Protection Directorate checks that credit institutions or insurance companies comply with the rules of conduct in their dealings with customers when offering their products and services. Besides active market monitoring and complaints processing, supervisory visits and company inspections in particular serve as important sources of information for preventing or rectifying irregularities if this appears advisable in the interests of consumer protection.

In serious cases, BaFin may even restrict or altogether prohibit the distribution of products or certain distribution practices.

BaFin’s Consumer Protection Directorate also maintains contact with the market monitoring and financial markets team at The Federation of German Consumer Organisations (Verbraucherzentrale Bundesverband – vzbv) , and is point of contact for The German Centre for Protection Against Unfair Competition (Wettbewerbszentrale), a self-regulatory industry organisation, established to enforce laws against unfair competition.

For BaFin, consumer protection is not a purely national concern. Germany’s financial supervisor is actively involved in various European and international committees, working groups and forums. This is an opportunity for BaFin to contribute to further developing the international standards of collective consumer protection.

BaFin’s consumer helpline is open Monday to Friday from 8.00 a.m. to 6.00 p.m. and can be reached by dialling 0 800 2 100 500 or +49 (0) 228 299 70 299 (from outside Germany).

EVG – Authorisation Requirement and Enforcement relating to Unauthorised Business

The department EVG, which is based in the Directorate for Internal Administration and Legal Affairs, is responsible for the assessment of the authorisation requirement and enforcement relating to unauthorised business.

In Germany, banking, financial services and insurance businesses may not be operated without official authorisation. BaFin monitors this prohibition and possesses far-reaching powers of investigation and intervention for this purpose. If the facts justify the assumption that a company is operating such business without authorisation, it becomes subject to wide-ranging obligations to supply information and provide documentation. Moreover, BaFin can conduct an on-site inspection, including an unannounced one, of the company under suspicion. If necessary, it can search the business premises. This is possible without a court order in the event of imminent risk. BaFin secures incriminating material at the scene for use as evidence. The powers of investigation are not only directed at the company under suspicion. BaFin can also investigate any other company where the assumption is warranted that it is involved in initiating, concluding or settling unauthorised business.

If BaFin finds that unauthorised business is being operated, it has extensive powers to ensure that said business is ceased and settled without delay. These powers, too, can be exercised vis-à-vis any other company involved in the initiation, conclusion or settlement of the unauthorised business.

Since companies involved in illegal investment schemes increasingly operate internationally, BaFin cooperates with supervisory and prosecuting authorities of other signatories to the Agreement on the European Economic Area (EEA) and other countries in its enforcement activities relating to unauthorised business, as well as with the Federal Criminal Police Office and the criminal police offices of the federal states.

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