Germany is a highly regulated market. This also applies to criminal law. The German Criminal Code lists only less than 300 offences. However, there is an immense number of criminal and administrative offences codified in other statutes and regulations. Many regulatory codes contain extensive lists of sanctioned behaviour. For this reason it can be difficult to determine if a certain action is still compliant with German Criminal Law. Businesses and individuals can be confronted with criminal investigations quite unexpectedly. On the other hand individuals involved in criminal proceedings have substantial rights, which will grant protection against arbitrary or unjust treatment by state authorities.
1. White-collar Crime
White-collar crime covers all kinds of business related offences. It includes among others corruption, embezzlement and fraud, but also corporate offences like violations of environmental, health, labour or foreign trade laws. In the past decade German authorities have made serious efforts to tackle on white collar crime. Especially corruption and violation of trust are taken as very severe offences and therefore investigations in that line can be long and often imply the use of strong measures like dawn raids and phone tapping.
2. Tax offences
The same applies to German criminal tax law. Tax fraud is a criminal offence that can be sanctioned with fines or even imprisonment. Negligent tax evasion can also be prosecuted. Criminal prosecution is often the result of a tax audit. If the tax inspector finds something that hints a tax fraud or bribery (e.g. very high commission payments to high risk countries), he is obliged to report this to the public prosecution. The defence against charges of tax fraud can be demanding as it requires sound knowledge of both criminal and tax law. The tax authorities are generally more focused on collecting taxes than on criminal prosecution, which can open the way to negotiations to settle the case.
Tip: A peculiarity in German criminal tax law is the voluntary disclosure of a tax fraud. If a tax fraud is completely reported to the fiscal authorities before it was discovered, the offence may not be sanctioned. However, there are further requirements. Among other things the disclosure must be complete and the evaded taxes have to be paid fully. In bigger cases a surcharge of up to 20 % of the evaded tax can be charged. The voluntary disclosure is a very useful tool, but it is complicated and every case must be thoroughly examined in order to safely avoid prosecution.
3. Procedural Matters
Investigation and prosecution in Germany is divided between several authorities. Most investigations are led by the police and the public prosecution. Tax offences are investigated by a special office within the tax authorities and the customs administration is in charge of offences concerning illegal employment and undeclared labour.
In all criminal proceedings a defence counsel generally has the right to access the complete file as soon as the investigation is made known to a defendant. For this reason it is highly recommended to contact a defence counsel in an early state of the investigation.
Criminal prosecution can end in three different ways:
- The prosecution can drop the charges if the suspicions are proven wrong or if not enough evidence is found.
- The criminal proceedings can also be ended without formal verdict after payment of a fine. This way is often possible in small to mid-size cases, but it is also used in prominent cases.
- The third and generally most difficult way is a verdict of a criminal court. Criminal court proceedings can go through several instances and may take years.
4. Dawn Raids
The execution of a search warrant, the so called dawn-raid, is very common and the requirements for such a warrant are low. A court order is generally required, but a simple suspicion based on minimal facts can be sufficient. In Germany there is no such thing as the fruit of the poisonous tree doctrine, meaning that search results can be legitimate proof even if the search itself was unlawful. Especially in business related investigations dawn raids have a wide effect and will often become public. A lot of major German companies have been searched in recent years accompanied by significant media attention.
Premises of third parties can also be searched if the authorities suspect to find evidence there. In tax investigations this will very often be the office of the tax advisor. Lawyers offices however may not be searched unless the lawyer is suspected to have taken part in criminal activities. The search of third parties is one of the reasons that businesses can come into contact with the criminal authorities without having done anything wrong. In very severe cases even phone lines can be tapped and mail can be secretly controlled.
On the whole criminal authorities have extensive powers when it comes to an investigation. On the other hand suspects and witnesses have strong rights which may not be infringed for any reason. Knowing these rights is essential when dealing with criminal investigations. Should you ever be so unfortunate as to be the addressor of a search warrant the following rules might be helpful:
1. Keep calm!
2. Do not answer questions. You may remain silent. A search is highly stressful and it is very difficult to act rationally in such conditions.
3. Do not try to hide anything. This might lead to an arrest.
4. Call a lawyer and seek immediate legal advice. You may not be denied this right.
5. Do not sign anything.
6. Demand a copy of the search warrant and the search protocol.
5. Criminal Records
Germany has a number of federal and state based registers which contain records of misconduct. All criminal court sentences are recorded in the Federal central register. Administrative offences or misdemeanours in the course of business are kept in the central business register if the fine excels ? 200. Germany has no federal register for corruption offences however these registers exist in several states. An entry in one of these registers can lead to exclusion from public contracts.
6. Company Fines
German criminal law is generally designed to sanction the behaviour of individuals. But if the individual is an employee of a legal entity and the sanctioned behaviour is business related, the entity can be fined up to ? 10 Million. In some cases this amount can even be excelled. For this reason companies subject to German law have a strong interest that employees understand and act according to their compliance obligations.
BRANDI's defense counsel team
BRANDI has a very experienced team specialized on white collar crime with a clear focus on tax law. Its members give advice on prevention as well as represent clients during dawn-raids or prosecutions/trials. Some of the members started their career on the other side - they worked as members of the tax authorities and conducted audits and searches themselves.