Germany's Brash New Import: Dirty MoneyIgor Reichlin
Think of a German banker, and what comes to mind? A fastidious financier who's the very model of respectability? Think again. Germany is fast becoming the new mecca for global narcotics funds. It's now the biggest European financial center where money-laundering isn't a crime.
Germany won that distinction last year when Switzerland, the traditional magnet for illicit profits, tightened its disclosure policies. Since then, German authorities estimate that up to $50 billion, much of it from Colombian, Turkish, and Italian drug cartels, has flowed in. The funds are plunged into securities or gold or, in a new twist, are used to buy real estate and companies in eastern Germany and Eastern Europe. "Germany has become a playground of international money-laundering syndicates," says Hagen Saberschinsky, a top official at the Federal Criminal Office, Germany's equivalent of the Federal Bureau of Investigation.
History complicates matters. Bitter memories linger of Gestapo agents arbitrarily seizing property during the Nazi years. Consequently, German lawmakers have been reluctant to draft rules on taking property even if criminal activity is involved. What's more, by custom, Germans prefer dealing in cash.
As a result, German curbs on money laundering are loose, at best. Customs officials at German airports, for example, may not seize, even temporarily, the suitcases and duffle bags full of cash from South America, Europe, or South Asia that parade by every day. Before they can act, they need proof that the cash came from drug deals. And if a courier shows up in a German bank with boodles of cash, the bank will accept the deposit, no questions asked.
NO FISHING. Police are hamstrung, too. To obtain information from banks about questionable deposits, they must provide a court with the specific numbers of banknotes that changed hands during a drug sale. Says Hans Korner, a chief of the money-laundering unit at the Hessen District Attorney's Office: "Our bankers become extremely uncooperative with the police when they're dealing with very large deposits." Yet an official with the German Banking Assn. insists that bankers are "always ready to help when the police show sufficient proof."
Investigators are turning up more and more links between German banks and international drug operators. According to an account in the German magazine Der Spiegel, the manager of a Commerzbank branch near Hanover allegedly opened several accounts for members of the Medellin cocaine cartel. The banker, whose wife is related to cartel members, handled hundreds of thousands of dollars in Medellin transactions. A Commerzbank official, while denying any wrongdoing by the bank, confirms the press report and says that the manager was fired for his unauthorized actions.
Der Spiegel also claims that Luxembourg subsidiaries of three major German banks accepted deposits several years ago totaling millions of dollars from dummy corporations controlled by Gonzalo Rodriguez Gacha, a now-deceased Colombian drug lord. Dresdner Bank, one of the trio, has confirmed that the corporate accounts noted by Der Spiegel did, in fact, exist. Deutsche Bank, also cited in the accounts, says Luxembourg's bank secrecy laws prevent it from getting information from the subsidiary. Frankfurt-based Bank fur Gemeinwirtschaft declined comment.
What's more, drug money is flowing from a new source: Eastern Europe. Police say that Poland now is the source of some 20% of the illegal amphetamines in the European Community. They suspect that German chemical companies are supplying Poles with the needed materials and are getting paid through Polish banks. The money is transferred back to Germany where it is very hard to trace.
Pressure to change is coming from the EC and the U.S. Drug Enforcement Agency. Last June, the EC issued directives to prod members to adopt money-laundering laws by 1993. This convinced Chancellor Helmut Kohl that Germany must play ball. His Cabinet has approved laws to make money-laundering a crime and require disclosure of large cash deposits. But banks--and some politicians--oppose the measures, arguing that any erosion of secrecy could scare away customers by exposing them to tax authorities. If the lobbyists succeed, the world's drug dealers will continue to find friendly bankers in Germany.