Olaf Scholz and the consequences of a raid

His in-person appearance surprised even those demanding he show up. Olaf Scholz, who hopes to be Germany's next chancellor, spent three hours on Monday with the parliamentary finance committee defending his current job performance as finance minister. He first said he would attend virtually, due to a campaign event six days before the election.

Opposition parties requested that the committee convene. Angela Merkel's conservative Union bloc, which governs with Social Democrat support but is now fighting them to stay in power, didn't stand in the way. On the agenda: The Sept. 9 search of the finance and justice ministries, both in Social Democrat hands, over allegations that they ignored a report of possible money laundering.

"I used the opportunity to once again explain that the last three years have probably been the best years for beefing up our capabilities in regards to fighting money laundering and terrorist financing," Scholz told reporters after the meeting in the Bundestag, the German parliament.

Critics were not convinced, accusing Scholz of lacking accountability and evading the committee's questions.

"Once again, Scholz as finance minister has denied all responsibility for the chaos at the anti-money laundering authority," Lisa Paus, a parliamentary member with the Green party, said. "Olaf Scholz has not done enough to combat money laundering."

Her conservative colleague on the committee, Hans Michelbach, said the "failure is widespread."

  

A raid and its interpretation

The accusations have a number of implications. They stem from an investigation by public prosecutors in the city of Osnabrück into the Cologne-based Financial Intelligence Unit (FIU), which isresponsible for rooting out money laundering and terrorist financing. It has been often cited for lacking the personnel and resources it needs to handle an increasing caseload.

In 2020, the FIU received 144,000 reports of suspicious financial transactions from banks. It forwarded just 17% of them onto police or public prosecutors.

The FIU is a branch of the customs authority, which falls under the Finance Ministry. That makes Scholz the FIU's legal supervisor, responsible for ensuring that it complies with its mandate. Its operations are independent of the ministry, however.

The Osnabrück prosecutors have been investigating employees of the FIU for obstruction of justice since February 2020. That's when an Osnabrück bank reported suspicious money transfers to locations in Africa totaling 1.7 million euros ($2 million), but the FIU is reported to have failed to act.

Their search of the federal ministries earlier this month was to obtain emails between the FIU and the finance ministry, according to the prosecution office, and the names of the responsible people in the FIU.

The public prosecutor's office has come under fire for issuing a news release that gave the impression that Olaf Scholz was under investigation.

"Among other things, it will be investigated whether and, if so, to what extent the management, as well as those responsible for the ministries and superior departments, were involved in the decisions of the FIU."

The goal of the search, according to the statement, was to clarify a suspected criminal offense and who might be responsible for it.

So far, investigators have not been able to identify specific suspects. The intention of the raid earlier this month was to secure emails between the FIU and the finance ministry, to obtain the names of the responsible people in the FIU. This is also stated in the search warrant.

However, when the raid was conducted the Osnabrück public prosecutor's office issued a press release that gave the impression that Olaf Scholz was also being investigated. According to the media statement, the goal of the raids was to further clarify a suspected criminal offense and in particular individual responsibilities, and further: "Among other things, it will be investigated whether and, if so, to what extent the management, as well as those responsible for the ministries, as well as superior departments, were involved in the decisions of the FIU."

Was the raid politically motivated?

For the SPD, the matter is clear. The party assumes the raid is part of a conspiracy and accuses the CDU of a political smear campaign ahead of the general election, in which opinion polls see Olaf Scholz ahead of his conservative rival, Armin Laschet.

They point to the fact that the head of the Osnabrück public prosecutor's office was once a CDU-chairperson in a town in Lower Saxony and office manager of the CDU-run justice ministry in Lower Saxony at the time. This person remains active in politics today, as a vice president in Lower Saxony's state parliament.

Scholz's state secretary at the finance ministry, Wolfgang Schmidt, is now under investigation for tweeting part of the search warrant, which is supposed to be confidential. Schmidt said the tweet, which has since been deleted, was meant to show discrepancies between the warrant and the news release. 

SPD co-chair Saskia Esken has defended Schmidt. Publishing the warrant was "necessary because the press release by the public prosecutor was grossly negligent," she said in a radio interview. The investigations were not directed against Finance Minister Olaf Scholz, she said and argued that the press release had created a "false impression."

Esken criticized the raid as "inappropriate." Several media and legal experts are of the opinion that the public prosecutor's approach was not proportionate to the matter. The prosecutors could have also obtained the information they sought by phone or online, according to critics.

"That much trust we don't have — to believe they would give us everything voluntarily," a prosecution spokesperson told the German magazine, Der Spiegel, following the search.

Heated discussions are taking place under the hashtag #CDUgate suggesting the raid could backfire on the CDU — instead of damaging Scholz and the SPD — if it turns out that it's timing close to the election was more than coincidental.

Showdown in the finance committee?

Scholz is not new to facing an angry finance committee and accusations that the finance ministry has dropped the ball on his watch. A special inquiry report into the collapse of Wirecard called him "politically responsible"for one of the biggest corporate frauds in German history.

"Scholz does not have his portfolio under control," said Florian Toncar, a committee member from the liberal Free Democrats (FDP). "(It's) embarrassing for someone who wants to become chancellor."

This article was translated from German. It was first published on Sunday, September 19, but has been updated to reflect the latest developments.

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