Money laundering and fraud: the Achilles heel of Angela Merkels possible successor

Within minutes, the second German election debate was already thrown on the table: the raid at the Ministry of Finance last week in a money laundering investigation.

It is the department over which Olaf Scholz is in charge, the SPD politician who, according to the latest polls, has the highest chance of becoming the new Chancellor.

The two main opponents of Scholz, Annalena Bearbock of the Greens and especially Armin Laschet of the CDU/CSU have the chance to get stuck in the Achilles heel of their opponent due to the raid. Namely: three fraud and money laundering cases that they can relate to Scholz. What do they revolve around?

Suspicious money flows to Africa

The raid stems from an investigation into arms and drug trafficking, and terrorist financing in Africa. At first, the ministry has nothing to do with that, but an organization covered by the ministry does play a role.

In Germany, as in the Netherlands, financial institutions are obliged to report transactions with which something might be wrong to the so-called Financial Intelligence Unit (FIU). It must pass these reports to police and justice so that they can be intervened. But in this case, a bank notification has not been passed, or late. That would have happened more often.

The question is why that went and who is responsible for it. Is that just the FIU officials who did not pass the reports, or are they their executives? And if the latter is the case, is Scholz something to blame? For the last few years, the FIU has been under the Ministry of Finance, where Scholz is the legal minister.

The Wirecard Scandal

โ€œIf this was the first case, โ€œLaschet continued in the debate. He points to the scandal surrounding Wirecard, the German payment tech company that served as a success story for many years.

But the reality turned out to be less attractive: the books had EUR 1.9 billion in invented profits, the company went bankrupt and murmured the remaining money.

This was all done under the supervision of the BaFin, similar to the AFM in the Netherlands. And that BaFin is again under the Treasury Department, where Scholz has been in charge since 2018. Much of what went wrong at Wirecard did happen before, but it was only last year that the authorities intervened when Scholz was already a reigner.

Dividend jamming

And then there‘s the dividend fraud in what has become known as the CumEx scandal. This meant that banks and large investors worked together in an ingenious way, so that they could reclaim large amounts of taxpayer money while they were not entitled to it.

One of those banks was the Warburg Bank in Hamburg. When the fraud was discovered, the bank had to repay tens of millions of euros. Nevertheless, the Hamburg tax authorities were willing to forfeit the amount. Mayor in Hamburg at the time: Olaf Scholz.

It is questionable if he was involved in that waiver at the time. Ultimately, the bank has repaid the money and Scholz’s involvement has not been established so far.

Scholz most convincing

Scholz himself says he was not responsible for any of these abuses. It is not clear whether or how he was involved in these cases, both Baerbock and Laschet agree. But it‘s about the broader picture.

โ€œIf you were to take responsibility on one point,โ€ Laschet urged him. โ€œI can’t judge what‘s going on,โ€ Baerbock said, โ€œThat’s what we have justice for. But I can say that corona now requires us a lot of money. And money laundering and fraud makes 50 billion euros slip through the fingers of the state every year.โ€

Or the voters think Scholz is something to blame? An initial survey after the debate does not point out yet. He came out of the bus in the eyes of viewers as โ€œmost convincingโ€.