Criminal Compliance Measures 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 firms 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 in order to fulfil corporate criminal responsibility.

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 the damage by 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 firm 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 with the help of a corporate defense lawyer 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 of liability and 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.