Sanctions Screening in Germany: A New Era in Enforcement?

Background

Germany’s Foreign Trade and Payments Act underwent significant amendments on May 28, 2022, as part of the first Act on the More Effective Enforcement of Sanctions (Sanctions Enforcement Act I). This move aims to tackle the war in Ukraine and EU-imposed sanctions.

The New Regulations: Section 23a AWG

Section 23a of the Foreign Trade and Payments Act requires foreigners and nationals affected by sanction measures to report their economic resources and funds comprehensively to the Federal Office of Economics and Export Control and the Bundesbank. This applies to both natural persons and companies.

Reporting Obligation vs. Right to Refuse to Testify

However, critics argue that this reporting obligation conflicts with the right to refuse to testify, a fundamental principle in German and European law. The EU Commission’s legal service suggests that the connecting factor lies in the punishability of violating the reporting obligation, rather than the actual act of self-incrimination.

Implementation Issues

Despite the threat of penalties for non-compliance, no reports have been received. This raises questions about the effectiveness of the regulation and whether it will lead to successful sanctions enforcement.

Criticism and Comparison with Other Countries

Germany’s approach has been criticized for being half-hearted, with other countries like Italy successfully implementing economic sanctions. Some argue that Germany’s pronounced Russian business interests may contribute to a lack of enthusiasm in enforcing sanctions.

A Glimmer of Hope: The Creation of the Federal Financial Criminal Police Office

The creation of a new federal authority, the Federal Financial Criminal Police Office, aimed at fighting financial crime and enforcing sanctions, offers a glimmer of hope for more effective enforcement. Only time will tell if Germany will become a pioneer in the EU in this regard.

Conclusion

Germany’s approach to sanctions screening remains uncertain. While there are concerns about the effectiveness of the regulation and potential conflicts with fundamental rights, the creation of the Federal Financial Criminal Police Office offers a promising development. It remains to be seen whether Germany will successfully implement its new sanctions enforcement measures.