German chancellor candidate quizzed in fraud probe

Frankfurt

GERMAN lawmakers on Monday grilled Finance Minister Olaf Scholz, the frontrunner to succeed Angela Merkel in national elections this weekend, over a high-stakes money-laundering probe that could shake up the race.

Local media speculated that the scandal had unsettled allies in his centre-left Social Democratic Party (SPD), with less than a week to go before the Sept 26 vote.

The candidate unexpectedly turned up in person to the closed-door hearing in Berlin before the parliament's finance committee, after he was initially expected to take part by video link.

Mr Scholz was called in front of MPs after the finance and justice ministries were raided by prosecutors on Sept 9 as part of a probe into the Cologne-based Financial Intelligence Unit (FIU).

The body, part of Germany's customs authority tasked with tackling money laundering, is suspected of failing to report potential wrongdoing to the relevant authorities.

Speaking after the hearing, Mr Scholz said his ministry had taken steps to "continually improve" how the FIU works so that "potential offenders do not go undiscovered".

In a statement to the committee, he said that no minister could solve all problems "at the click of a finger", sources inside the room told AFP.

Ahead of the meeting, opposition parties and the SPD's coalition partners, the conservative CDU-CSU alliance, accused Mr Scholz of failures in the fight against money laundering.

CSU committee member Hans Michelbach described a "wide range of failures" that the finance minister would need to answer for.

Dr Merkel's conservative bloc has seen a steady decline in opinion polls under unpopular candidate Armin Laschet, allowing Mr Scholz's SPD to move into first place.

"Nerves at the SPD are shredded" at the prospect that the scandal could have an impact on the party's poll ratings, according to German weekly Der Spiegel, though prosecutors are also under scrutiny for the timing of the raids.

In a televised election debate on Sunday, Mr Laschet once again seized on the opportunity to reproach Mr Scholz over the FIU controversy. Mr Laschet called the investigation the latest example of the minister falling short of his oversight duties in a series of recent financial scandals.

Mr Scholz sharply rejected the accusation, saying he had introduced a series of reforms to fight money laundering and corporate fraud.

Mr Scholz has previously been criticised for the failure of his ministry to heed early warning signs from the payments company Wirecard, which collapsed last year after acknowledging a 1.9-billion-euro (S$3 billion) hole in its accounts.

The finance minister and vice chancellor appeared in front of a parliamentary inquiry into Wirecard earlier this year, where he denied responsibility for the collapse of the company.

On the campaign trail, Mr Scholz has defended his response to Wirecard, saying he has led an effort to strengthen Germany's financial watchdog in the aftermath.

Mr Scholz has also come under fire over Germany's "cum-ex" tax fraud saga, a complicated share dividend scam that went on for years and is estimated to have cost the state some 5.5 billion euros.

The former mayor of Hamburg has denied putting pressure on the city's tax authorities after meeting with the owner of a bank implicated in the scandal in 2016. AFP