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The criminal enforcement environment in Germany remains robust. Criminal investigations into cum/ex trades are being pursued with high intensity. After the first criminal trial on cum/ex trades ended with convictions of the two defendants and a confiscation against a German bank in March 2020, new trials are currently being prepared or have already started. Besides this, the Wirecard scandal shocked Germany in June 2020 and resulted in criminal allegations and investigations. Furthermore, criminal investigations into the diesel emissions scandal are still affecting many car manufacturers and car components suppliers.

A revised draft bill of a German Corporate Sanctions Act is currently being negotiated in the German Federal Parliament (Bundestag). The Corporate Sanctions Act, expected to be passed by September 2021, will introduce a new system of sanctions for corporate crimes and will impact the conduct of internal investigations.

German authorities are also focusing on the prevention of money laundering and terrorist financing. In line with European legislation, this has led to stricter regulations under the German Money Laundering Act and a draft bill to significantly expand the scope of application of the money laundering offence in the German Criminal Code.


Investigations trends/developments

Enforcement actions by German criminal prosecution authorities relating to cum/ex trades, including potential dawn-raids, will continue in 2021. The Cologne Public Prosecutor’s Office is now conducting criminal investigation proceedings into cum/ex trades against more than 900 suspected individuals.

The German Federal Office of Administration (Bundesverwaltungsamt) has begun to more closely monitor compliance with reporting obligations to the transparency register under the German Money Laundering Act. The authority imposed several corporate administrative fines due to violations of these obligations and more are expected. The enforcement decisions taken by the German Federal Office of Administration have been made publicly available on the authority’s website.

Significant law reforms impacting corporate criminal liability

A new law on corporate criminal liability is expected to be passed soon. The German Federal Parliament (Bundestag) is discussing the latest draft bill of the German Corporate Sanctions Act. Some provisions have changed since the original draft bill was proposed by the German government in August 2019. For example, corporate fines against companies that cooperate with the authorities and conduct an internal investigation “shall” (instead of “can”) be reduced by up to 50%. The option to dissolve a company as a consequence of corporate crime has been removed. We expect the Corporate Sanctions Act to be passed before September 2021. Read more.

To combat money laundering and terrorist financing, an amended and considerably stricter Money Laundering Act came into force in 2020 in line with European legislation. The new law stipulates, inter alia, enhanced due diligence requirements in high‑risk cases and facilitates public access to the transparency register. The Federal Government prepared a draft bill to improve the criminal law framework for combating money laundering and to implement Directive (EU) 2018/1673 (6MLD). This draft law widens the scope of the money laundering offence in section 261 of the German Criminal Code by abandoning the list of predicate offences and instead taking an ‘all crimes’ approach. This means that any offence from which property has been obtained will suffice as a predicate offence.

On tax evasion, the parliamentary groups of the governing parties in the Bundestag agreed to extend the existing limitation period for serious tax evasion from 10 to 15 years. The Bundestag and the German Federal Council (Bundesrat) approved the relevant law before year-end. This is seen as a measure to prevent certain cum/ex trading related offences from becoming time-barred.

Internal investigations – key developments

The German Corporate Sanctions Act will introduce a set of rules for the conduct of internal investigations. A notable change since the original draft bill of August 2019 is that the amended draft bill prompts a court to reduce the statutory maximum fine if a company has conducted an internal investigation and cooperated fully with the authorities. The court must take into account the range of facts revealed by an internal investigation, their importance for the authorities’ investigation and the timing of disclosure. Another notable change is the removal of the option for a court to reduce a fine if a company discloses the results of the internal investigation after court proceedings have begun. This is designed to encourage early cooperation.

The provisions on employees’ rights during an internal investigation have not changed. Companies must still consider the General Data Protection Regulation when reviewing personal data during internal investigations. On a separate note, the German Corporate Sanctions Act will most likely not enhance the very limited protection of documents prepared in the context of an internal investigation from seizure by German criminal prosecution authorities.

Sectors targeted by law reforms or enforcement action

Due to the ongoing Wirecard scandal in Germany, an action plan, which had been developed by the Federal Ministry of Finance and the Federal Ministry of Justice and Consumer Protection, was presented to the Federal Cabinet in October 2020. The action plan aims at fighting accounting fraud and strengthening control over capital and financial markets. The Federal Financial Supervisory Authority’s (BaFin) powers are to be expanded. Among other things, BaFin will enjoy additional audit rights and rights to information in relation to capital market-oriented companies.

In connection with the Wirecard scandal, German prosecution authorities launched several criminal investigations and arrested the former Wirecard CEO as well as other Wirecard managers. Wirecard’s former COO is now a fugitive and his name is on Interpol’s most‑wanted list.

The investigations into the diesel emissions scandal are still impacting many car manufacturers and car components suppliers in Germany. A former Audi CEO became the first top executive to stand trial for his role in the diesel emissions scandal in September 2020. According to the criminal court’s provisional schedule, the trial is expected to continue until the end of the year 2022.

Most national and international banks are affected by cum/ex enforcement action. The Cologne public prosecutor’s office conducted a dawn raid in the context of cum/ex trades at the German Association of Banks (Bundesverband deutscher Banken e.V.). The Regional Court of Bonn was the first German court to decide that the participants in cum/ex trades may be held criminally liable – two former London bankers were found guilty of tax evasion in particularly severe cases. Due to the defendants’ cooperation with the prosecutors, their prison sentences were suspended. The next criminal trial at the Regional Court of Bonn, this time against a defendant with a more aggressive defence strategy, began in November 2020. The Regional Court of Wiesbaden has issued an arrest warrant for a well-known German lawyer residing in Switzerland who is alleged of having played a key role in setting up cum/ex schemes.

Cross-border coordinated enforcement activity

German authorities continue to reach out to foreign authorities in mutual legal assistance procedures in cross‑border matters. There are also indications that German criminal prosecution authorities share information and align enforcement activities with other European criminal prosecution authorities in relation to cum/ex trades which are said to have occurred in a number of jurisdictions.

Financial crime issue predictions for 2021

In‑house legal and investigations teams will need to familiarise themselves with the regulations set out in the draft Corporate Sanctions Act, as it is very likely that the draft bill will be enacted in 2021. In addition, we expect to see an increasing number of further investigations into allegations of money laundering and violations of the reporting obligations to the transparency register under the German Money Laundering Act.

This article is part of the Allen & Overy Cross-border White collar Crime and Investigations Review. Please visit the review homepage for our overviews and insights in other jurisdictions. 


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