As of 1 July 2017 new rules under the Criminal Code (StGB) and Criminal Procedural Order (StPO) shall enter into force to regulate the recovery of criminal proceeds. The reform aims to effectively confiscate illegal proceeds from the offender or third beneficiaries as well as clarify terminology.
The new rules shall exclusively apply, also for old cases that have not been finalized in the first legal instance. This means that the principle of supremacy of the more favourable legal form, which normally prevails in cases of conflict, shall not apply.
Overview - Confiscation of criminal proceeds, previously forfeiture
The new law no longer distinguishes between confiscation and forfeiture; the latter terminology was replaced by the wording “confiscation of criminal proceeds”. The previously applicable principle of immediacy has been eliminated and the new terminology now also includes indirect benefits derived from criminal offences. It suffices to establish connections between the offence and the benefit based on the law of unjust enrichment.
A prerequisite for the confiscation of criminal proceeds pursuant to §§ 73ff. StGB is that an illegal but not necessarily a culpable offence must have led to a pecuniary benefit, either by obtaining the gain/loot or payment for the offence. Also legal surrogates of obtained or enjoyed benefits may be confiscated, however, it is permitted to estimate the amount of the obtained benefit.
Just like under the old law, the gross principle shall continue to apply whereby expenditures of the offender are in principle not deductable. Only if the benefit obtained through the offence is based on an effective legal transaction may the offender’s expenditures be deducted, i.e. deduction of provided consideration.
However, assets may not be confiscated if the claims of the injured individuals were thereby being thwarted. Such claims always take precedence over the recovery for the benefit of the state. If assets nevertheless have been confiscated, such confiscation shall not be effective against the injured individuals so that they continue to have access to the secured or confiscated assets.
As stipulated under § 73b StGB, the new rules facilitate taking action against third party beneficiaries thereby making transfers of assets to uninvolved parties pointless. This also applies in the case of inheritance. If the transfer in and of itself is already punishable under German law, such as the offence of money laundry, frustration of the enforcement etc., criminal proceedings will always be initiated.
If the originally obtained asset or benefit no longer exists, the provisions on extended compensation under § 73c StGB allow the state to access the remaining assets of the offender. This basically means that the state’s claim for payment may be asserted against the legal asset.
The provisions on extended confiscation pursuant to § 73a StGB are challenged if the pecuniary benefit is derived from another offence which is not part of the proceedings whereby the “other offence” no longer needs to be classified as catalogue offence, namely an initial suspicion that there are adequate factual indications that allow the conclusion that an offence has been committed.
The standard provisions regarding the confiscation of products of the offence and means with which the offence was committed remain unchanged. However, the new law clarifies that the confiscation of objects of the offence, known also as objects related to the offence, is only permissible subject to other special provisions, i.e. money related to money laundering. This is a permissive provision, its application has a punitive character and, thus, must be considered when assessing the penalty. Further, the confiscation is only permissible in the case of intentional offences and in principle presupposes the property of the person affected. In addition, it may only be asserted against third parties that are not involved in the offence, if they have acted in a malicious or reckless manner. A confiscation of the compensation against third parties is not considered.
Objective proceedings pursuant to § 76a StGB
The independent order of the confiscation in an objective proceeding aims to secure that benefits gained through the offence or means with which the offence was committed may also be confiscated if, for example, the proceedings were discontinued; the proceeding pursuant to §§ 153, 154 StPO was suspended, the defendant is considered not capable of being prosecuted, unfit to plead, his/her whereabouts are unknown or he/she has deceased.
The subsequent recovery of benefits derived from the offence or compensation is permissible and is in particular considered in cases where the offence of obtaining the asset (Erlangungstat) has lapsed or the confiscation decision was missed. However, a subsequent recovery is not permissible if the court has already issued an effective order against it.
What is new is that assets obtained from offences the origin of which is unclear may also be confiscated. This provision is similar to the US American non-conviction based confiscation.
- Securing an asset originating from an unlawful offence in a proceeding based on initial suspicion (terrorism, organized crime, money laundry, tax offences)
- Originating from acts such as money laundry
- Judicial authorisation of the origin of the offence, in particular in cases where there is a gross disproportion between the value of the asset and the legal proceeds
- The confiscation of an asset requires that the necessary discoveries are made regarding the motive of the offence, the corresponding investigation outcomes, the circumstances regarding the findings or the securing of assets as well as the personal and economic conditions
Procedural measures for securing assets
In order to secure a subsequent confiscation, incriminated assets pursuant to §§ 111b ff. StPO may be secured against the legal asset as a compensation by way of asset seizure pursuant to §§ 111b ff. StPO; this leads in particular to selling prohibitions and the invalidity of opposing injunctions.
In order to trace assets and execute a confiscation order or an asset seizure, it is permissible to carry out searches among the offender or third party.
Compensation of injured individuals
The biggest change introduced by the new law is to facilitate the compensation claims of the victims. The assistance in the recovery of criminal proceeds, which ensured the possibility of asserting claims for restitution, was replaced by the compensation model. Hitherto it was up to the injured individual to assert the claims. The new law now facilitates to confiscate the asset gained through the offence as well as the compensation of the victim by means of an order issued by the court. Contrary to the previous law which stipulated that the confiscation was not to take place if the claims of the injured individual were in danger of being thwarted, under the new law, the confiscation shall by default take place in the interest of the injured individual. Already in the investigative proceedings, the public prosecution office is obliged to effect an asset seizure if there are good reasons that justify a subsequent confiscation of the compensation.
The basis for the victim compensation is provided by § 75 StGB, according to which the ownership of a confiscated item or a right is transferred to the state unless the item can still be assigned to the previously entitled owner. The confiscation of illegal proceeds or compensation does not prevent a later transfer or distribution to the injured individual. However, the injured individual’s pacification is only possible after the court has issued a final and binding and enforceable confiscation order. The claims for compensation for damages must be asserted with the competent authorities, i.e. the public prosecution. These claims must be made credible or proven by means of a certificate within the meaning of § 794 ZPO, in case the court decision does not provide an estimate of the amount of the claims.
If the claims of the injured individual exceed the value of the secured assets, such claims enjoy the highest priority and equal treatment when it comes to the distribution of the secured assets. In order to achieve this goal, the prosecution is authorized to file for insolvency either as part of an enforcement proceeding or already at an earlier stage in order to manage the lack of principles under insolvency law.
Contrary to the old law, the access of injured individuals to temporarily secured items before the enforcement of the confiscation order is not possible. While it was irrelevant under § 111g StPO a. F. whether the proceedings were concluded or not, the aim of the new law is to make it difficult for injured persons to take their own actions by introducing an execution ban on arrested objects (§ 111h para. 2 Sentence 1 StPO) under civil law.