Criminal Sanctions Law: Stricter Rules for Companies

Recent legislative amendments in German foreign trade law have substantially tightened the legal framework for companies engaged in international trade activities. In particular, the expansion of the catalogue of criminal offences under Art. 18 of the Foreign Trade and Payments Act (AWG) aims at more stringent enforcement of violations of export control restrictions. The key changes and their implications are outlined below.

1. Expansion and reclassification of the catalogue of criminal offences

A key element of the reform is the significant expansion of the catalogue of criminal offences, in particular by reclassifying certain administrative offenses as criminal offenses. This affects not only violations of investment or transaction prohibitions, but also breaches of reporting obligations in the context of embargoes, which were previously subject only to administrative fines. Particular focus is placed on the so-called “general obligations” (Jedermannpflichten) relating to frozen assets. The criminalization of these matters has far-reaching consequences: the possibility of penalty-free voluntary disclosure under Art. 22 (4) AWG is restricted, as the threshold between administrative offenses and criminal conduct has been redefined. Generally, such disclosures are only available for certain administrative offences – but never for criminal offences. This means that companies and individuals must now expect criminal sanctions for breaches of reporting obligations.

2. Criminalization of circumvention activities

Another key focus is the explicit criminalization of so-called circumvention activities. Particularly in the context of financial sanctions, it is now clearly stipulated that attempts to circumvent sanctions are punishable. The new offense covers, in particular, the concealment of payment flows intended to bypass sanctions, and the provision of misleading information in this context.

These provisions significantly strengthen the effectiveness of embargo regimes, as they ensure comprehensive liability.

3. Negligent embargo violations in connection with dual-use goods

A further new development is the criminalization of negligent embargo violations in the context of trade in dual-use goods. The legislative amendments make clear that criminal liability may arise even in the absence of intent. Companies should therefore place even greater emphasis on implementing effective compliance programs designed to prevent breaches of foreign trade law. This also requires that such policies are actively implemented and adhered to in practice.

4. Increase in administrative fine frameworks

The reform also provides for significant increases in the levels of administrative fines, particularly for breaches of supervisory duties and corporate fines. The maximum corporate fine has been increased to up to EUR 40 million. The same applies to violations of supervisory obligations. These changes significantly increase the pressure on responsible executives and companies to enhance their compliance structures.

5. Abolition of the grace period and exception from criminal liability for humanitarian aid

In addition, the two-day grace period previously provided for in Art. 18 (11) AWG (old version) has been abolished. Companies must therefore more than ever monitor embargo-related developments on a daily basis to avoid potential penalties. At the same time, criminal liability for embargo violations remains excluded in certain cases involving humanitarian assistance, in order to protect legitimate humanitarian aid.

6. Introduction of comprehensive rules on trust management

Comprehensive rules have also been introduced for trust management, establishing a secure legal framework for these procedures. This applies in particular to European subsidiaries of Russian parent companies.

Conclusion

The recent legislative amendments in German foreign trade law place a clear focus on the expansion of criminal liability and stricter consequences for violations of export control regulations. Companies and responsible individuals are therefore well advised to comprehensively adapt their compliance and control mechanisms to the global challenges in the field of foreign trade, in order to minimize criminal risks.

We will be happy to support you in reviewing your existing processes and in the implementation of additional export control compliance measures.