According to the Federal Court of Justice's established case law, the penalty for tax evasion of more than €1 million should generally be imprisonment rather than a suspended sentence. However, the court recently ruled that these principles cannot apply to breach of trust allegations. The decision has significant implications for white collar crime and compliance.
A recent Federal Constitutional Court decision has clarified whether documents relating to internal investigations can be regarded as defence documents. Against the hope of companies and law firms, the court rejected the general prohibition on the seizure of such documents; however, it indicated that such a prohibition should always be determined on a case-by-case basis.
The federal government plans to create new corporate penalties and abandon the discretionary principle which has thus far applied in corporate prosecutions. Further, the upper limit of penalties will be significantly increased. At the same time, the government aims to establish legal requirements for internal investigations that provide an incentive for investigation support.
German businesses have steadily expanded their compliance structures and internal training programmes and have never been in a better position than they are now. However, declining support for compliance issues among management is giving compliance officers cause for concern, and recent compliance scandals appear to indicate that further work is necessary to make management fully acknowledge the significance of compliance matters.
The Federal Court of Justice recently decided for the first time that the establishment of a compliance management system designed to prevent breaches of the law can reduce fines in accordance with the Administrative Offences Act. The court pointed out that even the optimisation of a compliance management system following compliance breaches can lead to a reduction in fines and provided guidelines for the measures to be taken in such cases.
The new Act to Reform Criminal Law on Proceeds of Crime aims to simplify existing rules regarding the confiscation of assets resulting from criminal offences. The reform negates the principle that confiscation is prohibited if and to the extent that an injured person has a civil claim against the offender for damage compensation or other corresponding legal rights which legally enable the injured person to deprive the offender of any proceeds resulting from the criminal offence.
The Federal Cabinet recently adopted a draft law for the introduction of a so-called 'competition register'. The act will allow for the establishment of a Germany-wide register to record companies which have committed certain criminal and administrative offences. Its aim is to promote fair competition and replace the corruption registers introduced in many German states that deviate from each other with regard to essential issues.
The Federal Financial Supervisory Authority recently established a central contact point for whistleblowers to report misconduct in the financial sector and completed the set up by implementing an electronic whistleblowing system. The central whistleblower system will help to detect and fight breaches of law, legal regulations and general administrative acts. It is not meant to be used for consumer complaints, but to foster disclosures by persons with a special knowledge of a regulated entity's internal affairs.
The Federal Criminal Court recently set out the requirements for an abuse of trust pursuant to the Criminal Code by members of a management board of a stock corporation. The court clarified the relationship between a violation of duties of members of management boards pursuant to stock corporation law and the requirements for a criminal breach of trust.
As compliance breaches cannot be prevented, their disclosure through anonymous reports is important. There are different ways and means for a company to communicate with a potential whistleblowing employee, but the ombudsman model is frequently used in practice. The Bochum Regional Court recently decided that the confiscation provision in the Code of Criminal Procedure does not protect compliance ombudsmen with regard to obtaining information from anonymous whistleblowers.
Despite strict compliance regulations, it is customary to offer small gifts of friendship to business partners, especially at Christmas. Successful collaboration is based on trust. However, caution is required – non-compliance may have labour and criminal law consequences. Under criminal law, there are no objections to the common practice of offering small gifts on certain occasions. But to avoid the impression of bribery, employees should consult the company's compliance regulations.
Organised crime can be combatted effectively only if cross-border payments can be quickly identified. For this reason, the European Union first addressed the issue of combatting money laundering during the early 1990s and has since been vehement in pursuing this aim. Following a recent proposal for a directive published by the European Commission, Germany's money laundering law must once again be amended.
The Federal Cabinet has passed a bill to reform asset recovery in criminal law. The bill represents the biggest reform since the introduction of asset recovery in 1969. The reform will redesign major parts of criminal law asset recovery, both substantive and procedural. The core of the reform is the reorganisation of victim compensation.
The Act to Combat Corruption in the Healthcare Sector has entered into force after years of controversial debate. The act, which establishes the criminal offences of passive and active bribery, has intensified compliance risks for companies in the healthcare sector. In addition to criminal law provisions, possible labour law consequences in the event of violations should also be kept in mind.
Although the leniency applicant status of a company affords protection against cartel fines, it does not protect the company from necessary self-cleaning and potential personnel changes. Contracting authorities are well advised when investigating the facts of the misconduct to urge competitors to disclose the wrongdoing and measures taken as early as possible. A checklist with detailed requirements and comparative evaluation can help to guarantee equal treatment.
A frequent issue in internal investigations is whether the according documents are privileged from seizure by state authorities. The Braunschweig Regional Court recently decided that internal investigation documents are protected under certain circumstances. However, a considerable degree of legal uncertainty remains and companies must still be careful when setting up an internal investigation.
In the last 10 years most companies in Germany have implemented and enforced compliance programmes. Compliance officers, committees, helplines and hospitality guidelines have become standard tools to ensure that employees know what they are allowed to do. A recent study took a closer look at how larger companies tackle compliance and found that antitrust and anti-corruption issues remain high on the agenda.
After intensely controversial hearings and some late changes, Parliament has passed the new anti-corruption law. The new regulation aims to implement international standards in light of growing cross-border corruption. Together with the reform concerning the bribery of parliamentarians and new regulations on corruption in the healthcare sector, the government has implemented the biggest reform of anti-corruption law in the last 20 years.
The forthcoming Act to Combat Corruption in the Healthcare Sector will significantly expand the applicability of criminal law. If the new definitions of corruption offences are ultimately enacted, there will be an appreciable increase in the risk of criminal liability to members of the healthcare professions and life sciences industry. Companies are advised to ensure that they have robust internal compliance systems in place.
There are no specific regulations to be observed when drafting contracts appointing an ombudsman. As a rule, this is a classic legal services contract, so in principle the ombudsman has an obligation towards the undertaking to disclose the whistleblower's identity. However, an ombudsman is specifically deployed to ensure that the whistleblower remains anonymous.