Germany: Five key things multinationals need to know about anti-bribery and anti-bribery law

In the following, we outline five key aspects of Germany’s Anti-Kickback and Anti-Corruption Law (ABAC Law) that multinationals may not be aware of, but should keep in mind when it comes to bribery and corruption related to a business client in Germany.

In the event of bribery and corruption incidents, not only does the notorious FCPA and the UK Bribery Act pose considerable legal risks, but Germany’s ABAC law also provides severe penalties that apply to any international business operating in Germany.

It is worth paying attention to the fact that the scope of the German ABAC law (part of the German penal code) might be wider than you think with regard to bribery payments also outside the Germany.

To be targeted by the German prosecution authorities, the active commission of offenses is not required. It may be enough that violations are tolerated within a company or that appropriate preventive measures are not taken by those responsible. So, in the case of bribes and corruption, looking away will not help.

In addition, if it is a bribe, related offenses under German criminal law must also be considered. In such cases, it may not (only) be corruption.

Due to the possible sanctions under the German ABAC law, any incident of bribery and corruption can cost the companies involved more than expected and should therefore be taken very seriously. However, it is important to proceed with caution: there are criminal tax traps for corporate executives, even if they were not in charge at the time of the actual corruption.

1. Germany’s ABAC law goes further than you think

The application beyond their own national borders of the US Foreign Corrupt Practices Act and the UK Bribery Act is well known. However, any international company operating in Germany is also affected by the German ABAC law. Like the US and UK laws, the scope of the German ABAC law is largely extraterritorial: an act of corruption committed outside Germany by a company operating in Germany can be blamed.

In principle, the application of the German ABAC law is linked to the commission of the offense in Germany. However, the law empowers German authorities to initiate criminal proceedings (for complicity) if corruption occurring anywhere in the world was facilitated from Germany.

Such facilitation must be understood very broadly; even any tolerance if necessary to commit the bribery or any (verbal) acceptance of the bribery abroad can be considered as a (psychological) facilitation of the bribery. For example, if those responsible for a parent company only discuss the giving of bribes by foreign subsidiaries and do not object to such payments, regulators might view this as helping and complicity in bribe payments.

German ABAC law may also apply if the offense is committed abroad by a German employee of the company and the bribery is punishable abroad.

Also, the German ABAC law still applies when the bribe involves a German public official or mandatary.

2. Looking Away Won’t Help

In the event of corruption, even those who, as responsible leaders, have done nothing to facilitate corrupt payments can find themselves facing possible criminal prosecution – precisely because they did nothing.

Under German law, the management of a company has a supervisory duty. When there are indications that a company is involved in paying bribes, if management does not intervene, the company may face sanctions, and members of management may also facing personal charges. The same applies if appropriate measures to prevent bribes, such as the establishment of a compliance management system, have not been taken.

Looking away is no excuse; Instead, if an incident of corruption is discovered, it is important for the company to closely examine the actions taken by management to ensure overall compliance.

3. It may not (only) be corruption

The risks in criminal law do not always reside solely in the bribery operation itself. In particular, under German criminal law, embezzlement and money laundering are generally closely linked to bribery offences, going beyond the initial transaction. For example, the management of “slush funds” (funds outside official company accounts) may be considered a criminal offense of embezzlement, even if no bribes are paid from these. coffers.

Corrupt payments themselves are criminalized, which means that any further handling of these funds carries the risk of prosecution for money laundering if the German criminal prosecution authorities assume a breach of due diligence in the management of these funds. . That’s to say, your business may be at risk even if you don’t give or accept bribes – if you have only handled another company’s illegal products without proper checks.

In addition, in the event of suspected money laundering, companies may be subject to extensive reporting obligations, the violation of which can be punished with considerable fines.

4. Corruption can be expensive

By international standards, the amount of fines imposed on companies under German law for bribery and corruption offenses may, at first glance, seem low: a maximum of 10 million euros.

It should be noted, however, that this limit of 10 million euros applies to each individual corrupt transaction. If a company is found to have engaged in numerous corrupt transactions, the fines can add up significantly.

These potential sanctions go even further. Even if the bribe only amounted to a few thousand euros, the total volume of business resulting from the payment of a bribe could be claimed by the authorities, limitless. The authorities can claim the volume of business and any other profit from the bribery operation, and they have up to 30 years after the actual bribery transaction took place to do so.

5. And there are tax pitfalls too, even for new leaders

We often observe that corruption is revealed after a change of direction. Seeking to clean house, the new management uncovers evidence of bribery and corruption and reports the incidents to the authorities.

Attention! This procedure may be laudable, but, for new executives, criminal law risks lurk. Often, bribe payments were claimed as business expenses and therefore reduced the corporate tax burden in Germany. If the new management becomes aware of it, it is required to rectify the corresponding tax declaration with the competent tax authorities, and this without delay.

Failing to correct these tax declarations can in itself be considered tax evasion, and the new leaders can be held guilty, even if they were not responsible at the time of the actual corruption. Sanctions not only against the company but also against the new management are possible, even if it is the new management that has actively investigated and reported the corruption to the authorities.

Previous Medical e-commerce software market expected to grow US$2.5 billion at a CAGR of 10.6% by 2032 -GE Healthcare, McKesson, Allscripts, Jointown, Sana, Oorjit, Medical Web Experts – Indian Defense News
Next UVA Finishes 11th in LEARFIELD Directors' Cup Final Rankings for Second Consecutive Year: Jerry Ratcliffe