*annually amounts the volume of money laundering according to an analysis by the German Federal Ministry of Finance

The fight against money laundering: a financial and societal problem

Every year, around €100 billions of money generated by criminal activities is laundered in Germany. Laundered money not only disguises criminal acts, but it also rewards them monetarily. Money that has already been laundered can be reused, allowing criminal circles to grow to the point of infiltrating the national economy. As the volume of incriminated money increases, legally operating companies are hampered in their competitiveness. In the real estate market, for example, money laundering drives prices in an uncontrollable direction through underestimation and overestimation, thus creating asymmetries and a shortage of affordable housing. At the same time, the dependence of criminal organizations on existing systems to launder money is growing. Consequently, controlling this dependence prompts representatives of criminal organizations to infiltrate financial institutions and other corresponding enterprises. Whenever such infiltration is uncovered and becomes public, it weakens the trust of citizens and causes significant reputational damage to affected companies, such as credit institutions, for which, however, public trust is critical to success.
Uncertainty about the volume of incriminated money makes it difficult for central banks to take monetary policy measures and weakens their impact. The enormous capital flows of money laundering affect economic variables such as interest rates and yields, which makes their development much more difficult. In addition to the tax evasion already being carried out, money laundering increases this volume. As a result, there is a shortage of money for the provision of public goods, which in turn has a negative impact on welfare.

Money laundering knows no national borders

In most cases, money is laundered across national borders to exploit legal loopholes or incorrect interpretations of laws in other countries. This can impoverish nations and damage the economic logic that prevails there. Large sums of money are required to bring prosecutions against money launderers and to ensure public safety. This increases the financial burden on the financial system, which must be borne at the expense of society.

We make KYC easy, so that money laundering becomes difficult

The high volume of laundered money in Germany and the immense costs of prosecuting money launderers underlie the complex and complicated implementation. At the same time, hardly any use is made of digitization options during implementation.
Our goal is to make money laundering and terrorist financing more difficult, to detect it, and to reduce costs in the process. The KYC process, which is used to detect money laundering and terrorist financing risks, can already be mapped and solved today in an automated, electronic and machine-readable form via the KYCnow platform. At the same time, the platform provides information on the due diligence obligations to be complied with and on risk aspects.

Our goal: A KYC standard for all obligor groups

In order to save an immense amount of costs, the data that has already been collected and checked by obligated party A could be stored on the KYCnow platform. Obligated party B, which would like to enter into a business relationship with the same customer and thus has a legitimate interest, can now obtain the data from the platform. In addition to exchanging the data already collected, it is possible to keep the data in the platform up to date on a daily basis. The obligated parties will be informed in case of relevant updates, such as change of master data, change of management, change of beneficial owner, and many more. This leads to a renewed meaningful review of the risks. In this context, the “regular review” (Art. 14 (5) 4th EU AML Directive) can be replaced by an “event-driven review”. The logical consequence of this would be that obligated parties and supervisory authorities agree on a “KYC standard”. This makes it easier for obligated parties to comply with the interpretation and application guidance of the supervisory authorities. It also makes it easier for the supervisory authority to audit the obligated parties. The next step could now additionally be to simplify the reporting process to the FIU, the Central Financial Transaction Investigation Unit, and to provide information that has already been collected. It would now be conceivable for the results of the reporting cases to be played back to the platform. In this way, an indication could be given to the obligated parties, taking into account the facts of the case. At the same time, it would be possible to learn automatically from these already processed reports and to intelligently forecast future money laundering and terrorist financing risks.