Asset Recovery and Confiscation

Asset recovery and confiscation in Germany: the short answer

Asset recovery in German criminal law is governed by the confiscation rules in §§ 73 to 76b of the Criminal Code (Strafgesetzbuch, StGB) and the procedural rules in §§ 111b ff. and 459g ff. of the Code of Criminal Procedure (Strafprozessordnung, StPO), reformed in 2017. Whatever an offender or participant obtained through or for an unlawful act must be confiscated (§ 73 StGB). Confiscation can be ordered against third parties, including companies, if the offender acted for them or the proceeds were transferred to them (§ 73b StGB), and against the value of proceeds that no longer exist (§ 73c StGB). Victims are compensated mainly in the enforcement phase, when confiscated assets are returned or distributed to them (§§ 459h ff. StPO). Assets can be frozen at an early stage of an investigation.

For companies, asset recovery matters in two roles: as potential targets of confiscation where they benefited from offences committed by their managers, employees or business partners, and as victims seeking to recover losses from fraud, embezzlement or corruption. This article explains both perspectives.

How confiscation works

Confiscation is mandatory: if its requirements are met, the court must order it. The 2017 reform introduced the so-called gross principle in § 73d StGB: the value of what was obtained is confiscated, and expenses can only be deducted if they were not incurred for committing or preparing the offence. In corruption cases, for example, the entire contract price obtained through bribery may be the starting point, with deductions only for legitimate performance costs to the extent permitted.

Companies as targets of confiscation

Under § 73b StGB, confiscation can be ordered against a person who is not an offender or participant if the offender acted for that person and the person obtained something through the offence. This "representation case" is typical for companies: if a sales manager bribes a customer to win a contract, the company that receives the contract price may be subject to confiscation of the value obtained. Confiscation also applies where proceeds were transferred to the company without consideration or where the company knew or should have known of their criminal origin.

Confiscation is not a punishment and does not require fault of the company. It can therefore be ordered even if no corporate fine is imposed. However, if a corporate fine under § 30 of the Administrative Offences Act is imposed for the same offence, separate confiscation against the company is excluded, because the fine includes disgorgement (§ 30(5) OWiG). Prosecutors therefore choose between the two routes, and companies should consider which outcome is preferable when negotiating.

Freezing assets during the investigation

To secure later confiscation, prosecutors and courts can seize objects (§ 111b StPO) and order an attachment (Vermögensarrest) to secure confiscation of value (§ 111e StPO). These measures can be taken at an early stage, on the basis of a simple suspicion for seizure and grounds to assume that confiscation will be ordered for attachment. Bank accounts, receivables, real estate and shares can be frozen. For companies, an attachment can severely affect liquidity and business operations, and it can trigger contractual and financing consequences.

Companies affected by freezing orders can challenge them and apply for their lifting or reduction, for example by providing security. Proportionality is a key argument where the measure threatens the company's existence or affects assets that are clearly not related to the offence.

Victims: recovering losses through criminal proceedings

Companies that have been defrauded, for example through embezzlement by employees, investment fraud or business e-mail compromise, can benefit from the confiscation regime. Confiscated assets are used to compensate victims in the enforcement phase. Under § 459h StPO, a confiscated object is returned to the victim who has a claim for restitution, and where value has been confiscated, the proceeds are paid out to victims. If the secured assets are insufficient to satisfy all victims, the law provides for a distribution procedure that can lead to insolvency proceedings over the secured assets. Victims must register their claims, and they can also pursue civil claims in parallel.

The advantage of the criminal route is that prosecutors can freeze assets quickly and use investigative powers, including international mutual legal assistance, that private claimants lack. The disadvantages are limited control over timing and strategy and the need to coordinate civil and criminal proceedings.

Cooperating with prosecutors as a victim

Companies that are victims of economic crime often have better information than the authorities: internal records, forensic analyses and knowledge of the business. Providing this information in a structured way, with a clear description of the loss, the flow of funds and the persons involved, increases the chances that prosecutors will act quickly and freeze assets. At the same time, companies should consider confidentiality, data protection and the risk that information shared with prosecutors becomes accessible to the accused through file inspection.

Victims can join criminal proceedings as private accessory prosecutors (Nebenkläger) only for certain offences, but they can generally obtain file access through counsel where they have a legitimate interest. File access is valuable for civil claims and for identifying further assets and participants, including professional facilitators and recipients of funds.

Insurance

Many companies hold crime or fidelity insurance covering employee dishonesty and certain external fraud. Notification deadlines and cooperation obligations under these policies must be observed from the start, and insurers may take over recovery rights once they have paid. Coordinating criminal complaints, civil claims and insurance claims avoids conflicts and double recovery issues.

Civil-law tools for asset recovery

Victims can also use civil law. Claims in tort under § 823(2) BGB in conjunction with criminal provisions or under § 826 BGB for intentional damage contrary to public policy, and claims for unjust enrichment, can be secured by an attachment order (Arrest) under §§ 916 ff. of the Code of Civil Procedure, which can be obtained quickly and without prior hearing of the debtor in urgent cases. Cross-border assets within the EU can be frozen with a European Account Preservation Order. Disclosure claims, including access to criminal files through counsel, help to trace assets.

International asset recovery

Proceeds of economic crime are frequently moved abroad. Within the EU, Regulation (EU) 2018/1805 on the mutual recognition of freezing and confiscation orders allows German orders to be executed in other Member States. Outside the EU, mutual legal assistance treaties and conventions apply. Companies pursuing assets internationally need coordinated strategies across jurisdictions, combining criminal complaints, civil freezing orders and insolvency tools, and should act quickly before assets are dissipated.

Rights of third parties affected by confiscation

Companies affected by confiscation orders as third parties have their own procedural rights. They must be involved in the proceedings as confiscation participants (Einziehungsbeteiligte), can submit evidence, question witnesses and appeal against the confiscation order. Where proceeds were transferred to a company for full consideration and in good faith, confiscation against it is generally excluded. Documenting the commercial basis of transactions with business partners, including fair market value and due diligence performed, is therefore an important protective measure.

Limitation and timing

Confiscation is subject to its own limitation period, which in general follows the limitation of the offence but is extended for certain independent confiscation cases. In practice, prosecutors frequently pursue confiscation years after the events, especially in tax and corruption cases. Companies should therefore not assume that the passage of time ends their exposure. Equally, victims should register claims and initiate proceedings promptly, because the enforcement-phase compensation depends on the assets actually secured.

Tax and accounting consequences

Confiscation and attachments have tax and accounting consequences. Amounts confiscated from a company may affect its taxable income, and provisions may need to be formed for expected confiscation. The interaction between confiscation and tax assessments on the same proceeds can be complex, and coordination between criminal defence counsel and tax advisers avoids double burdens. Auditors will also want to understand the status of proceedings when assessing provisions and going-concern issues.

Prevention through compliance

Effective compliance reduces asset recovery risks on both sides. Strong payment controls, segregation of duties, verification of changes to bank details and monitoring of unusual transactions help prevent fraud against the company. Anti-corruption controls and third-party due diligence reduce the risk that the company obtains proceeds of offences committed on its behalf. Documented compliance measures also support arguments on deductions and on the company's good faith in confiscation proceedings.

Illustration: a hypothetical German medical technology company discovers that its finance manager diverted EUR 3 million to accounts abroad over several years. It files a criminal complaint, provides evidence to prosecutors and applies for freezing of the accounts identified. Prosecutors obtain an attachment and request freezing abroad under the EU Regulation. After conviction, the company receives the confiscated funds in the enforcement phase and pursues the remaining loss through civil claims and against the manager's personal assets.

For both targets and victims, early legal advice matters because asset recovery is a race against time. Assets can be moved within hours, and freezing measures are most effective before suspects are aware of the investigation. Companies should have a plan for who decides on criminal complaints, who contacts banks and how evidence is preserved.

How TRW & Co helps with asset recovery

We advise companies on asset recovery and confiscation in both roles. As defence counsel, we assess and challenge confiscation and freezing orders, negotiate with prosecutors on the relationship between confiscation and corporate fines and protect the company's liquidity. As counsel for victims, we file criminal complaints, apply for freezing measures, register claims in the enforcement phase and coordinate civil and cross-border recovery. Our work connects with our white-collar defence and commercial litigation practices. See also corporate fines under the OWiG and enforcing judgments in Germany. To discuss a case, contact us.