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POLITICS

Why Austria is a paradise for money laundering

The country's connections to Russia, high property prices and lenient rules make it a haven for criminals looking to clean illicit money

Published: 11 July 2024 15:57 CEST
Updated: 14 July 2024 08:24 CEST
Why Austria is a paradise for money laundering
A teller displays US dollars and Euros at a money exchange market (Photo by SIMON MAINA / AFP)

Austria is about to undergo a major audit by the Financial Action Task Force (FATF), a Paris-based international institution that monitors countries’ actions in the fight against the financing of terrorism and money laundering. And things are not looking good for the Alpine Republic.

A list from the Ministry of Justice on money laundering proceedings reveals how slow Austria is in implementing measures and even investigating money laundering cases, according to a Die Presse report. 

Last year, 1,509 investigations were carried out (101 of which were against unknown perpetrators), and in only 157 cases went to trial. A similar ratio has been reflected in previous years. 

READ ALSO: Why is Austria so wealthy?

The number of unreported money laundering cases is likely significantly higher, as investigations are usually only carried out through victim or bank reports.

The International Monetary Fund recently made it clear in its report on Austria that the country needs to get better at combating money laundering.

“While measures to combat money laundering are being strengthened, there is still a risk that foreign corruption money will be laundered,” the report said.

Why is it so easy to launder money here?

It’s a combination of factors. The most common method for money laundering here is buying an expensive property in Austria with dirty foreign money and then selling it again. This is made easy in Austria. 

The country’s expensive property market ensures that very high amounts of money can be “made legal” in one fast transaction. Russian aristocrats have been doing it for decades.

And the money’s origin, even if it appears to come from “thousands of Panamanian companies”, is “hardly ever checked”, Die Presse explained. 

“Despite substantiated applications and provable criminal offences, crucial aspects, particularly regarding the origin of the funds, were simply ignored,” lawyer Pilar Mayer-Koukol from Paulitsch Law told the report, criticising the lack of action by Austrian authorities. 

Investigations are slow, and Austrian laws make it easy for criminals to enjoy their stolen money, according to lawyer Gregor Müller, who was interviewed for a separate Die Presse report. He represents a Russian client whose company was hollowed out by a director. The man then bought a luxury property in Vienna, sold it later and left with millions of euros. 

READ ALSO: Austria’s Raiffeisen Bank scraps controversial Russia deal

Müller’s client now wants to join the money laundering proceedings as an interested party in Austria to get some of that money back, but Austrian prosecutors refuse to let him. According to them, the Russian client cannot be a party in the money laundering case because he was not harmed by the purchase of the property or by the money laundering. The crime that he was a victim of, the theft, happened in Russia, not in Austria.

This logic means that if offences took place abroad, but money was laundered in Austria, victims have no chance of compensation because Austrian law sees them only as victims of a crime in a foreign land. 

Müller said this “unlawful interpretation of the law” contradicts European principles for efficiently combating money laundering. He points to countries like Germany or Switzerland, where victims are protected and can claim compensation in criminal proceedings. 

What does the government say?

Not much. Justice Minister Alma Zadic (Greens) was asked about the lack of protection for victims, but said only that “the Victim Protection Directive has been fully implemented in Austria”, without giving further details. 

Austria did recently adopt some measures to counter money laundering, including “the promotion and intensification of public-private partnership initiatives as well as the improvement and intensification of risk-based supervision.”

The October 2023 strategy also included plans to increase cooperation between different administrative bodies and automate processes to improve the reporting system for suspicious activity, according to the document. But many of the measures cited in the report, such as “further intensification of inter-ministerial cooperation and collaboration” are very broad. And there are no mention of investment values or cash earmarked for improvements.

The Financial Action Task Force (FATF) ‘s next audit is scheduled for autumn this year and should last until February 2026.

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CULTURE

Right-wing ‘Schnitzel bonus’ rewards ‘traditional’ Austrian eateries

Staples of Austrian cooking such as schnitzel, roast pork lung and boiled beef have proved particularly vital for Gasthaus Stich, a restaurant in the village of Pfoesing, in rural Austria.

Published: 24 July 2024 10:06 CEST
Right-wing 'Schnitzel bonus' rewards 'traditional' Austrian eateries

They have helped the struggling business to survive by earning it a subsidy from right-wing state authorities in a controversial programme that benefits only traditional Austrian cuisine.

The subsidy for restaurants that serve regional and “traditional food” has been derided in the media and by opposition parties as a “Schnitzel bonus”.

It excludes restaurants serving less overtly authentic Austrian fare, such as kebabs or pizza, for example.

As a typical Austrian staple, schnitzel — a boneless piece of meat that has been pounded thin to make it more tender and then coated and fried — qualifies for the cash.

“They gave us €10,000,” or $ 11,000, said Michael Stich, the 39-year-old owner of the family business in Pfoesing, population 300, in the state of Lower Austria.

The village’s last surviving restaurant is an institution, “like the church, town hall or fire station”, he told AFP.

“If this place didn’t exist, it would be difficult for the entire community.”

Austria’s conservative Chancellor Karl Nehammer has said he wants to defend the country’s “Leitkultur,” or “dominant culture”, as he seeks to bolster support ahead of September elections.

Campaigning on an anti-immigration platform, he has evoked the concept, born in Germany in the 1990s, as polls indicate the far right will come out on top for the first time in the Alpine nation.

‘Discriminatory’ 

Lower Austria — governed by the conservatives and the far right — introduced the “Schnitzel bonus” this year for owners who open a restaurant in a town without one or take over an existing one.

“The subsidy was very important for us,” said Michael Stich’s father, Hermann Stich, 62.

He continues to help out after his son became the third generation to run the business at the beginning of the year.

As he taps beer served over a large wooden counter, he notes the impact of energy and labour costs on the restaurant, which sports hunting antlers and a crucifix on the walls.

Since 2000, one in three restaurants in the state of Lower Austria, around Vienna, have closed, partly due to a rural exodus, with the coronavirus pandemic and resulting lockdown also taking their toll.

So far, 20 restaurants have received the bonus.

But critics have denounced the measure as discriminatory — an accusation rejected by the conservative People’s Party (OeVP) state parliament member Kurt Hackl.

“Village restaurants in Lower Austria are dying out, and we want to support them,” he said, calling them “special”.

Kitchen chef Eva Leimer poses with a plate of prepared Schnitzel meat at the inn ‘Gasthaus Stich’ in Pfoesing, Weinviertel, Lower Austria, north of Vienna, on July 2, 2024. (Photo by Alex HALADA / AFP)

‘Our values’ 

At Gasthaus Stich — which also features regional wines and seasonal dishes such as chanterelles with dumplings — clubs from the community regularly hold their meetings there, and guests play cards on wooden tables.

“In small communities, the tavern is the centre of social life. People celebrate, laugh and cry there together,” said Oliver Fritz at the Austrian Institute of Economic Research (WIFO).

However, Fritz considers the €10,000 subsidy as just a “drop in the ocean”.

He also warns of possible “windfall effects” for restaurant owners who do not really require the support.

He also questioned why restaurants that offer pizza or kebabs should be excluded.

“The social function works even if it is an Italian restaurant,” he told AFP.

“If demand evolves and younger generations prefer to eat something else, then it’s better to adjust because countering a trend is extremely difficult,” he said.

Meanwhile, at the national level, Nehammer has tasked his integration minister with defining what “Leitkultur” means for the country of nine million people, which like the rest of the EU has seen an influx of migrants and asylum seekers.

Under his “plan for Austria” launched early this year, Nehammer said that “Anyone who wants to live permanently in Austria must represent our values, accept our culture and adapt to our way of life”.

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