Across the European Union (“EU”), the enforcement of restrictive measures has long been characterized by fragmentation. While sanctions are adopted at Union level, their implementation and enforcement remain the responsibility of Member States — resulting in a patchwork of divergent penalties, investigative approaches and ‘levels’ of enforcement.

Indeed, in some jurisdictions, breaches are treated merely as administrative violations; in others, they are prosecuted as criminal offences, often entailing imprisonment and/or corporate liability. This lack of uniformity has raised persistent concerns in Brussels, primarily because it encourages forum shopping by economic operators attempting to seek jurisdictions with softer enforcement. In this context, many called for deeper harmonisation, advocating for shared investigative standards and stronger cross-border coordination to close enforcement gaps.

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For companies, this means significantly increased liability risks. In addition, there is an urgent need to overhaul compliance systems. The amendments will come into force immediately after their expected publication in the Federal Law Gazette.

1. Background

The amendments adopted in the German government's draft bill "on the adjustment of criminal offences and sanctions for violations of restrictive measures of the European Union" (21/2508) are intended to transpose the EU requirements of Directive (EU) 2024/1226 on the definition of criminal offences and sanctions for violations of restrictive measures of the European Union into national law. 

The aim of the EU Directive is to harmonise and standardise the enforcement of sanctions, which has varied significantly between Member States to date, by aligning the criminal law definitions and consequences for offenders who violate EU sanctions. Although the EU itself can issue binding sanctions regulations, the responsibility for criminal prosecution (criminal jurisdiction) of violations remains with the respective Member States. 

Although the German Foreign Trade and Payments Act (Aussenwirtschaftsgesetz, AWG) already went beyond the minimum requirements of the EU, the directive requires further additions to the criminal offences (e.g. circumvention, reporting obligations, reckless dual-use violations) as well as specific sanction frameworks for legal entities.

2. Key criminal law changes in the AWG

In order to implement the requirements of the directive, the Foreign Trade Act is being amended, primarily. This primarily affects the key criminal and administrative offence provisions of Sections 18 and 19 AWG as well as consequential amendments to Section 82 of the Foreign Trade Ordinance (Außenwirtschaftsverordnung, AWV). Further amendments concern the Customs Investigation Service Act (Zollfahndungsdienstgesetz) and the Residence Act (Aufenthaltsgesetz), which will not be discussed here.

2.1 Sanctions violations, particularly in the financial sector, become criminal offences

One of the most significant changes is the upgrading of numerous offences from administrative offences to criminal offences. Violations that could previously only be prosecuted as administrative offences are now subject to mandatory penalties if committed intentionally. This applies in particular to intentional violations of certain transaction bans, financial services and payment bans, circumvention activities and, beyond the requirements of the directive, investment bans. These include, among other things, the acts previously listed in Section 82 (9) Nos. 4, 6, 7 and 9 AWV, such as the purchase, trading or listing of Russian securities and money market instruments issued after 9 March 2022. Violations may in future be punished with prison sentences of between 3 months and 5 years.

Similarly, a violation of the so-called duty to report – the duty to report information, in particular about possible sanctions violations, to the competent authorities – is no longer punishable as an administrative offence, but as a criminal offence with a prison sentence of up to 1 year or a fine, provided that the information was obtained in the exercise of a professional duty and concerns funds or economic resources to be frozen. The legal profession is exempt from criminal liability if the information was entrusted to them in their professional capacity or disclosed to them. 

A particularly critical aspect is that the existing possibility of avoiding fines for a large number of negligent violations by means of voluntary disclosure pursuant to Section 22 (4) AWG will no longer apply in future due to the reclassification of administrative offences as criminal offences. This increases the pressure on companies to take action against preventive sanctions violations, as it will be much more difficult to limit the damage retrospectively.

2.2 Criminal circumvention of EU sanctions

A new separate criminal offence has been introduced in Section 18 (1) No. 3 AWG with regard to certain acts intended to circumvent EU sanctions. This makes any use of frozen funds and resources a criminal offence if it is done with the intention of concealment. In addition, the dissemination of false, misleading or incomplete information with the intention of concealing the sanctioned ownership or possession of funds or economic resources will in future be punishable by imprisonment of between three months and five years.

2.3 Tougher penalties for violations of goods-related sanctions 

The tightening of goods-related sanctions is particularly relevant in practice. Here, new risks arise in particular in the trade in goods that can be used for both civilian and military purposes (so-called dual-use goods). Until now, reckless behaviour was only punishable in the case of certain violations of arms embargoes involving goods listed on the EU Military Goods List. However, reckless violations of certain prohibitions relating to goods listed on the EU dual-use goods list were only punishable as administrative offences. In future, reckless conduct in the export of dual-use goods will also be prosecuted as a criminal offence for the first time and punished with imprisonment of up to three years or a fine. 

A particularly serious case with prison sentences of 6 months to 10 years is introduced in Section 18 (6a) AWG. This is the case for example, if, in the context of a goods trading transaction, incomplete or incorrect information is provided to public authorities about the end use, transport route, recipient, consignor, origin, buyer, seller, quantity, value or nature of the goods in order to conceal a violation of EU sanctions. The use of a third-country company to conceal such a violation is also punishable if the perpetrator exercises a controlling or decisive influence over that company.

2.4 Significant increase in corporate fines

The new law brings with it a significant tightening of the rules for legal entities and associations of persons. The upper limit of the penalty portion of a corporate fine under Section 30 of the Administrative Offences Act (OWiG) will be quadrupled from the current EUR 10 million to EUR 40 million for underlying sanctionable offences committed by managers. This also applies to breaches of supervisory duties under Section 130 of the Administrative Offences Act (OWiG). However, no use was made of the option provided for in the EU Directive to impose fines of up to 5% of global annual turnover.

2.5 Elimination of relief measures for the timely implementation of new sanctions 

The grounds for exemption from punishment in Section 18(11) AWG, according to which no punishment was previously imposed on anyone who committed the offence by the end of the second working day after publication of the legal act in the Official Journal of the European Union, has been deleted. In practice, this particularly affects the inclusion of new natural or legal persons on the EU sanctions list and the associated business prohibitions. For companies, this effectively means that they are forced to implement new sanctions requirements almost immediately. 

2.6 Trust administration for Russian subsidiaries

New are explicit regulations that allow for public-law trust administration for European subsidiaries of Russian parent companies in the event of a concrete threat to public security and Germany's foreign interests. At the request of the company, a share custodian can also be appointed by the court to exercise the administrative rights arising from the shareholder position. This is intended to strike a balance between preventing circumvention or violations of the EU sanctions packages against Russia on the one hand and preserving jobs and safeguarding creditor interests on the other.

3. Relevance of the new regulations? 

The reform of criminal sanctions law leads to a significant increase in liability risk for companies and their managers. The risk landscape in the area of sanctions is shifting significantly to the detriment of companies. Almost all intentional violations of EU sanctions regulations will be punishable by law, in some cases supplemented by reckless offences, and the upper limit for fines for companies will rise to up to EUR 40 million. This increases both the financial risks and the personal liability risk for executives and compliance officers, especially since typical organisational deficits (e.g. missing or insufficient sanctions list checks, incomplete documentation, inadequate training) can now quickly become relevant under criminal law. The elimination of the grace period forces companies to record changes in the EU sanctions situation on a daily basis and to implement them immediately in their operations; delays in IT systems, processes or internal communication can now directly result in criminal liability risks. 

4. What should be done?

Against this backdrop, companies should comprehensively review and refine their sanctions compliance systems. This includes, in particular, a risk-based approach with systematic risk analysis along the entire value chain, robust sanctions list screenings (customers, suppliers, business partners, beneficial owners), clear process responsibilities and complete documentation of checks and decisions. In the area of dual-use goods in particular, technical classification, end-use and end-user checks, and the monitoring of re-exports and transit trade relationships with third-country companies are essential in order to counter the new circumvention and recklessness provisions. 

Companies should also design reporting processes for frozen assets and other sanction-related information in such a way that deadlines are met and responsibilities are clearly assigned. Finally, in view of the stricter penalties, regular training of sales, export control, finance, procurement, logistics and management staff is essential in order to raise awareness of the increased personal and corporate responsibility under sanctions law.

How we can support you

ADVANT Beiten's tax and white-collar crime practice specialises in the prevention, support and resolution of tax and criminal law risks in the financial sector. As a highly specialised unit with many years of industry experience in the financial sector, we combine expertise in criminal law with in depth tax law and regulatory know-how.

We provide advice on tax and commercial criminal law, tax controversy, anti-financial crime financial sanctions, and all related compliance issues, as well as the conduct of internal investigations.

In addition to preventive advice, we provide comprehensive defence for companies and individuals in tax and white-collar crime cases and represent them before financial and specialist authorities (e.g. BaFin). All lawyers in the team are also qualified as Certified AML & Anti Fraud Officers.

Our team provides comprehensive support and advice on all aspects of criminal law law, including representation and defence in cases of sanctions violations. We also offer individual legal advice on embargo law issues, and assistance with the drafting, operational review and adaptation of your sanctions compliance programme (SCP).

Martin Seevers, LL.M. Tax (USA)
Guido Storck

welcome to the June issue of ADVANT Beiten's International Briefing.

Germany remains one of the world’s most attractive destinations for foreign direct investments. This reputation is well-deserved, as the country offers a stable legal environment, a highly skilled workforce, and a dynamic industrial landscape, all of which create a robust foundation for successful business ventures. In ADVANT Beiten's newly released guide "Investing in Germany" our experts provide a comprehensive overview of the legal framework for foreign investments in Germany - practical, understandable and with extensive experience in the field of foreign direct investments.

This year our Beijing office proudly celebrates its 30^th anniversary. We are delighted to share with you an insightful interview with our Beijing team of Susanne Rademacher, Dr Jenna Wang-Metzner, and Lelu Li, highlighting their dedication and three decades expertise in the field of the inbound and outbound investments in China.

In this issue we will also highlight interesting developments in the European and German legal landscape, invite you to meet us at international events, and tell you about our recent deals.

You can find the newsletter by clicking here.

Kind regards,

Dr Barbara Mayer
Prof. Dr Hans-Josef Vogel
Dr Christian von Wistinghausen
Moritz Kopp

The Corruption Directive-D is intended to overcome obstacles that have been identified in cooperation between the authorities of the various Member States. The existing instruments, i.e. the Council Framework Decision 2003/568/JHA and the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, are not comprehensive enough in the opinion of the Council, as corruption is prosecuted differently from Member State to Member State. The recitals of the Corruption Directive-D state, among other things, that:

[…] These instruments are, however, not sufficiently comprehensive, and the current criminalisation of corruption varies across Member States hampering a coherent and effective response across the Union.

"[…] Corruption is a transnational phenomenon that affects all societies and economies. Measures adopted at national or Union level, should recognise this international dimension. […]"

In Chapter 2 "Corruption Offences", the Corruption Directive-D provides for minimum standards for

• offences (see 1),
• penalties and measures for natural persons and/or legal persons (see 2), and
• a catalogue of mitigating circumstances (see 3).

1. Offences under the Corruption Directive-D

The following offences are proposed:

• Bribery in the public sector, Art. 7 Corruption Directive-D,
• Bribery in the private sector, Art. 8,
• Misappropriation, Art. 9,
• Trading in influence, Art. 10,
• Abuse of functions, Art. 11,
• Obstruction of justice, Art. 12, and
• Enrichment from corruption offences, Art. 13. 

Articles 7 to 9, Article 12 and Article 13 define minimum standards for offences already contained in the German Criminal Code (Sections 331 et seq., 299, 266, 246 (2), 240 and 261 of the German Criminal Code). In this respect, adjustments may need to be made at most. Necessary adjustments with regard to the definition of advantage (see 1.1) and the effects of the definition of "public official" (see 1.2) are to be emphasised.

Articles 10 and 11, on the other hand, define minimum standards for criminal offences that are not yet known in this form in German criminal law and would therefore have to be newly introduced. Of particular note here is the trading in influence (Art. 10) (see 1.3). Unlike the European Commission's proposal of 03 May 2023, the Corruption Directive-D does not provide for attempted criminal liability (see 1.4).

1.1 The "undue" advantage 

Art. 7 defines advantage differently from Sections 299 and 331 et seq. German Criminal Code. While any advantage is sufficient for criminal liability under Sections 299 and 331 et seq. German Criminal Code, Art. 7 requires an undue advantage. The German Criminal Code already recognises this addition from Sections 108e and 108f German Criminal Code. According to the explanatory memorandum to Section 108e German Criminal Code, it is intended to take account of the special nature of bribery of members of parliament, as there are benefits in the political arena that appear to be permissible under general parliamentary practice. However, it is doubtful whether this principle can also be applied to the other corruption offences under the German Criminal Code. 

1.2 The definition of "public official"

The term "public official" is used throughout Art. 7 et seq. and is legally defined in Art. 2 para. 2. Public officials are accordingly Union or national officials of a Member State or a third country as well as persons who have been entrusted with public functions under national law and carry out such functions or persons who have been entrusted with public functions for an international organisation or international court and carry out such functions.

The term ‘national official’ according to Art. 2 para. 2 lit. a) ii) covers any person holding an executive, administrative, or judicial office at national, regional or local level. Thus, the Corruption Directive-D assimilates any person holding a legislative office to a national official. According to these guidelines, the German legislator would have to abandon the current differing criminal law treatment of elected representatives and public officials and establish a harmonised system.

1.3 Trading in influence, Art. 10

Art. 10 criminalises the so-called trading in influence. In contrast to the bribery offences under the German Criminal Code, an offence is to be introduced in which the advantage is not promised or granted to a public official. The advantage is promised to a person who "exerts illicit influence over a decision or measure to be taken by a public official in the exercise of that official’s functions" with a view to obtaining an undue advantage from that public official. As a result, a preparatory act in a tripartite constellation of persons is criminalised, which the German Criminal Code has known for the first time since the introduction of Section 108f German Criminal Code and which we have already examined here.

1.4 Attempted misappropriation

Unlike the Proposal for a Directive of the European Commission on combating corruption dated 03 May 2023, the Corruption Directive-D does not provide for attempted criminal liability. The reason for this could be the criticism of the introduction of attempted misappropriation.

2. Penalties and measures for natural and legal persons

For natural persons, Art. 15 provides for minimum standards for a maximum term of imprisonment (at least two years to four years as a maximum). In addition, it will be possible under Article 15 para. 4 to impose further sanctions such as fines, the removal, suspension and reassignment from a public office, or withdrawal of permits and authorisations to pursue activities that resulted in or enabled the relevant offence.

For legal persons, the turnover-related fine (Art. 17 para. 3) is to be emphasised in particular. According to this, the maximum level of such fines should not exceed 3% or 5% of the total worldwide turnover of the previous financial year of the legal person, or alternatively at least EUR 24 million or EUR 40 million, depending on the offence.

3. Mitigating circumstances

Art. 18a contains a catalogue of mitigating circumstances that can be transposed into national law. This includes, in particular,

• the implementation of internal controls and compliance programmes to prevent corruption (both prior to or after the commission of the offence), and
• the voluntary self-disclosure and the initiation of remedial measures.

In particular, the consideration of compliance programmes in the assessment of fines now corresponds to established case law. 

4. Outlook for companies

As a result, companies are likely to face higher sanctions in cases of corruption. Companies should monitor further developments in order to be able to adapt their compliance requirements in good time if necessary. 

Dr Oliver Ofosu-Ayeh