In-house measures to prevent or detect crime have been standard practice for larger companies for years. Until now, companies themselves could not be prosecuted. However, high fines for violations by employees have long been possible. If accused companies, nevertheless, have certain criminal compliance measures in place, large fines can be avoided.
According to a draft law of the German Federal Ministry of Justice, a rigid corporate criminal law shall be introduced. Companies must therefore be prepared for much stricter prosecution and punishment of violations if employees have not behaved in accordance with the law. The scope of the planned law is broad and covers not only commercial enterprises but also nonprofit organizations in Germany.
This will give law enforcement agencies and courts more opportunities to punish corporate crime. It is particularly relevant that this obliges prosecuting authorities to impose penalties.
In the case of companies with an average annual turnover of more than one hundred million euros, monetary sanctions for infringements can amount to up to 10 percent of this.
The courts may suspend the imposition of a fine for a certain period of time (in effect a probationary period for companies) and issue directives and conditions to the company affected during this period. One of the directives provides for the appointment of an "expert body", i.e. an external compliance monitor (in effect, a probation officer for companies), with whom the company is obliged to cooperate and to report regularly.
As a last resort, the proposed legislation provides for the dissolution of the company. However, this may only be imposed in the event of particularly serious or repeated legal violations or if the company persistently refuses to cooperate with the competent body.
If the infringement results in a large number of injured parties, the court may make the conviction of the company public. This announcement is not intended to be a sanction but solely to enforce consumer interests. Thus far, it has been left to the individual company to determine how they can take action against such a serious infringement or remedy it through efforts to make amends.
Previously, the prosecution of business-related offences was left to the discretion of the competent authority. The authority was therefore given leave to decide whether or not to prosecute the corporate crime. According to lawmakers, this has led to insufficient punishment for corporate crime in Germany in the past. Only the cases that were rewarding or likely to garner ample media coverage have been pursued, if at all.
In future, the authorities will be obliged to investigate when they receive an initial suspicion of a crime committed by a company. As a rule, initial suspicion is already established by the individual offence of the employee, insofar as this is somehow associated with the company. If the authority finds that the company is responsible for the employee's violation, it must impose a sanction.
We therefore anticipate a considerable increase in the personnel resources of the public prosecutor's offices in the area of corporate criminal law. Thus, the risk that a corporate crime will be discovered in the future is amplified.
The penalty-reducing effect of compliance measures in the company will help prevent possible offences. Monetary sanctions will be lower if a company has tried to preventively hinder legal violations through compliance measures.
In view of the threat of sanctions, the establishment of an internal or external compliance management system is therefore strongly recommended. Up to now, only a few small to medium-sized companies even have a compliance officer, let alone a compliance department. Managing directors often justify this with the current costs involved. For smaller companies, however, only a few measures are usually sufficient to justify a reduction in the penalty.
In this respect, compliance is comparable to insurance: It appears to be a superfluous cost factor until the damage occurs. A compliance system is also indiscernible as long as it functions as intended, i.e. preventively hinders legal violations.
We would be pleased to support you in the development of a compliance system individually designed for the scope and risk of your company. A preventive compliance system can, for example, consist of the development of codes of conduct, i.e. the formulation of concrete behavioural guidelines for employees.
In addition, we offer checklists, trainings and other processes that minimize the risk of criminal violations. The involvement of a external compliance officer (similar to that of an external data protection officer) instead of an expensive in-house compliance department can save costs in this regard. We will gladly provide an appropriate representative for you. If a criminal offence has already occurred, we will take over the internal processing and advise you on how to limit the damage and minimize, or even prevent, a possible fine.
In the event of a denunciation, we can also take over the criminal defense of the companies affected and the accused company employees, wherein lies another advantage of hiring a law firm as an external compliance officer: We are part of the process from the beginning and do not need to acquaint ourselves.
Do you have questions about compliance in your company or do not know if you should take action yet? Our attorneys specializing in corporate criminal law are at your disposal. Your contact persons are attorney Bartosz Dzionsko and attorney Philipp Hornung. You can best reach us by e-mail (email@example.com) or by telephone (+49 69 76 75 77 80).