By Daniel Kaiser Contributed by CMS Hasche Sigle From ILO

White Collar Crime Germany

In July 2016 the Federal Cabinet passed a bill to reform asset recovery in criminal law. The bill represents the biggest reform since the introduction of asset recovery in 1969. This update sets out the most important changes.

Content of reform

The reform will redesign major parts of criminal law asset recovery both substantively and procedurally. The core of the reform is the reorganisation of victim compensation. At present, the criminal authorities confiscate incriminated assets only temporarily in favour of the victims. The victims must then assert their claims in a complicated procedure after obtaining the corresponding civil instruments.

The priority principle – also known as the ‘first come, first served’ principle – applies in this procedure. In practice, the principle results in many victims being too late to assert their claims or deciding against it because of high costs. In future, compensation “organised by the criminal authorities” is planned. The criminal justice authorities will first confiscate the incriminated assets, and only after the criminal law judgment is legally binding will the assets be distributed to the victims.

The reform also includes multiple other substantial changes in the field of criminal asset recovery. For certain offences the reform will introduce a reversal of the burden of proof in favour of the criminal authorities, inspired by the non-conviction-based confiscation or forfeiture under US law. At present, incriminated assets must be returned to the perpetrator if the body of evidence is not fully clear. Under the reform, multiple legal concepts which have been developed by the jurisdiction will also be explicitly regulated in statute. This refers, for example, to the important questions in practice of:

the extent to which assets can be confiscated and recovered; and
how the criminal authorities should handle cases in which incriminated assets are transferred to third persons.
Practical consequences

Changes for companies often arise if they fall victim to criminal offences – for example:

investment fraud;
breach of trust; or
a transfer of company funds by employees.
Although a major goal of the reform is to simplify the asset recovery procedure for victims, whether this will succeed is questionable, especially for companies.

According to the reform, in future the criminal justice authorities will confiscate the incriminated assets and distribute them to the victims once the criminal law judgment is final. This may be a disadvantage for companies, because judgments in complicated white-collar criminal proceedings will often not be legally binding for many years. Therefore, as a consequence of the new regulations, companies may not be compensated until long after the pecuniary loss occurred. Although under existing law the pursuit of asset recovery interests is more complicated and more expensive, companies also have significantly more influence and leeway in order to assert their asset recovery claims.

In contrast to the cases in which a company is the victim of a criminal offence, employees also often commit criminal offences in favour of the company – for example, bribery, tax fraud or cutting costs by deferring environmental measures. In these cases the employees’ offences are attributed to the company and the illegally obtained assets will be confiscated and the company must defend against the asset recovery measures. In such cases, the changes to be introduced by the reform could affect companies disadvantageously since the asset recovery regulations will be extended and tightened.

For further information on this topic please contact Daniel Kaiser at CMS Hasche Sigle by telephone (+49 711 97 64 0) or email ([email protected]). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.

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