The German Foreign Ministry wants Saudi Arabia, Qatar, Kuwait and other Gulf states to register any donations or state subsidies intended for mosques in Germany.
According to daily Süddeutsche Zeitung and German broadcasters WDR and NDR, the government has involved both the domestic and foreign intelligence services to monitor who sends the money and who receives it.
The Gulf states are also required to alert German authorities if a religious group from Germany seeks support or advice in their country.
The new practice, which the report says has already been in place since the spring, follows on from Interior Minister Horst Seehofer's comments at Germany's Islam conference in November, where he pledged to reduce "foreign influence" on Germany's mosques.
The report says that cooperation with Kuwait, in particular, on this issue is already bearing fruit. Other states are apparently more hesitant.
Mosque tax floated
One controversial idea that has been floated in the last few weeks is to introduce a mosque tax that – similar to the German church tax that members of the Protestant and Catholic churches have to pay – would make mosques more financially independent and thus minimize the risk of radicalization fueled by money from rich Muslim-majority states.
Based on reports from Germany's Joint Counter-terrorism Center (GTAZ), the government has been surveilling "Salafist missionary activities from the Arab Gulf states" since 2015, when tens of thousands of refugees came to Germany.
Read more: Germany to slash funding for Islamic organization DITIB
The GTAZ says countries like Saudi Arabia have "long-term strategies" to influence radical groups of Islam, which Riyadh has denied. German intelligence also suggests that "missionary groups" from the Gulf states are increasingly interlinked with Salafists in Germany and Europe.
The report published by German broadcasters points out that there are no reliable figures on exactly how much money has been transferred to radical groups in Germany from the Gulf states.