Criminal law relating to embargoes and sanctions has recently been significantly tightened by the new German Act on the Adaptation of Criminal Offences and Penalties for the Violation of Restrictive Measures of the European Union (Gesetz zur Anpassung von Straftatbeständen und Sanktionen bei Verstößen gegen restriktive Maßnahmen der Europäischen Union). This implements Directive (EU) 2024/1226 of the European Parliament and of the Council of 24 April 2024 on the definition of criminal offences and penalties for the violation of Union restrictive measures and amending Directive (EU) 2018/1673, and leads to EU-wide harmonized prosecution of violations of embargo rules.
With regard to German law, this results in a marked tightening. Above all, it leads to a great many more offences being incorporated into the law. The new Section 18 of the Foreign Trade and Payments Act (AWG, Außenwirtschaftsgesetz) essentially mirrors all the prohibitions and obligations to act that have been incorporated into the European embargo rules in recent months and years.
Three criminal offences should be singled out because they are important for your day-to-day practice:
New is a penalty for the violation of the obligation applicable to everyone, that is, an obligation, in certain defined cases, to notify the authorities. By way of explanation: in embargo law we have two different obligations applicable to everyone. On the one hand, there is the obligation for everyone to report frozen assets, which primarily affects professionals subject to a duty of confidentiality or companies such as banks. Such professionals and bankers are obliged to report when they have knowledge of frozen asset positions.
The second obligation applicable to everyone is that under Article 6b of the EU Russia Sanctions Regulation (Council Regulation (EU) No 833/2014). It primarily affects employees of companies when they have knowledge that a market participant has violated embargo provisions.The new criminal law is aimed primarily at the first obligation applicable to everyone, that is, the duty to report frozen assets. In the event of a violation of the second obligation applicable to everyone, that is, the obligation to report that embargo rules have been violated, the matter remains an administrative offence, albeit one carrying a high threat of fines.
Only a few professional groups are exempt from this notification duty, namely those professionals entitled to confidentiality: attorneys, auditors, and tax advisors. Not exempt, and therefore subject to the notification duty, are all other advisors, that is, all management consultants, customs and foreign trade advisors, employees of chambers of commerce or banks, and generally anyone else with whom you might discuss questions relating to embargoes. For these persons, there is in principle a separate notification duty if they obtain knowledge that an embargo has been violated.
Also noteworthy is the elimination of the two-day grace period. This is particularly relevant in the area of asset-freezing (listing-based) embargoes targeting designated persons. Previously, it was the rule that new designations of listed persons had to be implemented on the day following their publication in the Official Journal of the EU. However, a two-day grace period also applied: violations occurring within the first two days after the change were not punishable. This period has now been abolished. The banks in particular made very intensive efforts to have this two-day period retained in the law. In a certain sense this is consistent, since the regulations always take effect on the following day. A two-day period in criminal law makes little sense, and it is also not provided for in the EU directive. There are other means of achieving a mitigation of punishment for violations occurring shortly after a change in the law: if a rule is implemented only a few days late, this constitutes merely slight negligence and must have a substantial mitigating effect on the sentence. As criminal defense attorneys we can also confirm that accusations arising from a delayed implementation of a few weeks (e.g., due to the Christmas holidays) have led to very lenient conclusions of proceedings. Nevertheless, the fact that the two-day period has been abolished means that, in practice, all parties involved must make considerably greater efforts to implement embargo rules promptly and without delay. Bear in mind that they always take effect on the following day.
The third change to the criminal law will, in my view, have the greatest impact on companies. Going forward, it will be a criminal offence, and no longer merely an administrative offence, to recklessly violate licensing requirements or prohibitions involving dual-use items. Reckless does not mean intentional, but rather grossly negligent. In essence, this concerns cases of non-compliance, that is, cases in which a party has, through gross negligence, failed to put in place arrangements for dealing with licensing requirements or prohibitions relating to dual-use items. This new regulation is directed above all at those parties who continue to handle embargo provisions rather laxly. Even without intent, a violation of licensing requirements or prohibitions can now result in punishment of up to 3 years’ imprisonment where the violation is reckless, that is, grossly negligent.
Incidentally, the level of sentencing in Germany remains essentially unchanged. It was already very high, with a minimum sentence of three months’ imprisonment, and will remain at this level going forward. A criminal fine is, in most cases, not provided for. However, a low custodial sentence can be converted into a criminal fine, which also happens in practice. In the area of administrative offences, the fines change considerably. The maximum amount of a fine rises from 500,000 to 40,000,000 and is to be based on the company’s turnover. Here too, the legislator is once again clearly targeting those companies that do not have an adequate compliance management system in place.
The legislator’s clear aim is a stronger sanctioning of breaches of supervisory duties. These will in future be punished considerably more severely. This is also a task for everyone involved in import and export: care must be taken to ensure that the rules arising from sanctions and embargoes are implemented more quickly and effectively, and appropriately, going forward. But there is no cause for panic. What is required is a risk analysis and appropriate measures. These can be determined by the company at its own discretion. If a company considers a certain level of compliance measures to be appropriate, that is not objectionable. If, however, measures are omitted entirely, if risks are disregarded, that is precisely what the legislator is targeting with the new, significantly stricter sanctions criminal law.
Accordingly, take a look at your processes, ensure there is structure, documentation, and occasional internal review, or have them reviewed externally if appropriate. With our evaluation system, we offer a good way to review and optimize customs and foreign trade processes within the company, using questionnaires and workshops with employees. If you have any questions, please feel free to get in touch!
