At the latest since the launch of the Russian war of aggression against Ukraine in February 2022, economic sanctions have been on everyone's lips. The concept is not new, however. Rather, it is a long-established instrument, also used by the EU, to impose sanctions against certain legal entities, natural persons, groups of persons or countries in order to enforce political interests and compliance with international law.
The sanctions imposed on Russia and Belarus include asset freezes on listed individuals, travel restrictions, restrictions on economic cooperation and access to financial markets, as well as import and export restrictions. These sanctions are directly applicable in the member states and therefore do not require national implementation. However, in the months since their entry into force in Germany (and in other member states), it has become apparent that effective operational enforcement has often failed due to unclear responsibilities of the authorities, a lack of cooperation, and obstacles in identifying assets. The legislature has therefore set itself the goal of enshrining in law measures necessary to effectively enforce the sanctions. With the German Sanctions Enforcement Act I, [Sanktionsdurchsetzungsgesetz 1] the first part of the previously planned two-part legislative package has now entered into force.
The Sanctions Enforcement Act I amends the Foreign Trade and Payments Act [Außenwirtschaftsgesetz, AWG], the Money Laundering Act [Geldwäschegesetz, GwG], the Banking Act [Kreditwesengesetz, KWG] and the Securities Trading Act [Wertpapierhandelsgesetz, WpHG]. In particular, it includes the following regulations:
- The competent authorities will be authorised to summon and question witnesses, secure evidence, search homes and business premises, inspect land registers and other public registers, as well as identify and query accounts in order to clarify ownership.
- Money and other economic resources can be secured until ownership has been clarified.
- Sanctioned persons are required to report their property to the German Bundesbank or the Federal Office of Economics and Export Control [Bundesamt für Wirtschaft und Ausfuhrkontrolle, BAFA] without undue delay. A violation of this provision is punishable by imprisonment for up to 1 year or a fine.
- The competent authorities are given further opportunities to exchange sanction-related information and retrieve data from the transparency register.
For companies, however, these regulations are unlikely to have any noticeable practical impact at present. Even before the Sanctions Enforcement Act came into force, economic operators were required to conduct regular screenings to verify whether business partners, employees or shareholders of the company were subject to sanctions. Although there has been no corresponding threat of criminal punishment under German law to date, most companies have provided information on frozen funds and other economic resources to the relevant German authorities in accordance with the cooperation obligations standardised in the EU sanctions. What is new insofar is the threat of criminal punishment for violations. It now remains to be seen how well the cooperation between the relevant authorities will be implemented, whether searches of business premises actually take place, and whether violations of the duty to report will actually be prosecuted and punished under criminal law.
A second Sanctions Enforcement Act is expected to be enacted in the coming months. It aims to establish a register for assets of unclear origin and for sanctioned assets, and to introduce an independent administrative procedure for clarifying assets of unclear origin. In addition, a special whistleblower office is going to be created. This whistleblower office would complement the existing EU whistleblower office for violations of sanctions.
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