Defence in EU Sanctions Cases under Section 18 AWG

By Dr. Julius Hagen, Attorney at Law

Criminal liability under section 18 AWG

A breach of EU sanctions can be a criminal offence under section 18 AWG. The relevant EU regulation determines which transactions are prohibited, taking account of its annexes, sanctions lists and exceptions. A bank may block a payment while checking a suspicion; that does not yet establish a criminal offence.

We establish what you are alleged to have done and which prohibition applied at the time. A shipment, its financing and related services may each be subject to different restrictions. Any authorisation must cover the transaction that was actually carried out.

Dealings with listed persons

An allegation of making funds or resources available may concern the person intended to benefit from a payment or delivery, rather than just the immediate counterparty. Ownership records, contracts and payment documents can show whether a listed person was to gain access to the assets or receive an economic benefit covered by the prohibition.

The requirements depend on the particular prohibition. A ban on making funds available is governed by different rules from a sectoral transaction or services ban. A transaction involving Russia or another country subject to sanctions therefore needs to be assessed under the specific provision that applies. Assets already frozen are subject to additional restrictions on their use.

Allegations of sanctions circumvention

A change in payment route or the involvement of an intermediary in a third country may raise suspicion that the true recipient or destination was being concealed. Orders, shipping instructions and correspondence can establish why the route changed and what the parties knew about the goods' subsequent use.

Section 18(1), no. 3 AWG covers specified acts of concealment involving assets subject to freezing. Section 18(6a) AWG provides for particularly serious cases of certain goods-related offences, including deliberate false statements to public bodies or the use of controlled third-country companies to conceal a transaction. Investigators must establish those conditions; the presence of an intermediary alone is insufficient. Other circumvention allegations require examination of the applicable prohibition and criminal provision.

What the person accused knew

Intent must be established from the circumstances at the time of the alleged offence. Sanctions checks, warnings, queries and approvals may be important evidence. We examine what information the person actually had before making the decision. Later discoveries cannot simply be treated as knowledge they already possessed. German law also distinguishes between a mistake about the facts and a mistaken belief that a transaction was lawful.

Gross negligence can also be criminal. Section 18(8a) AWG limits this to specified sanctions-related goods and service offences involving listed dual-use items and the expressly identified cases in section 18(1) AWG. In addition to the listing, the prosecution must establish a particularly serious failure of care attributable to the individual. The provision does not apply generally to other negligent export-control errors.

The scope of an authorisation

An authorisation covers the transaction described in it for the stated period. Changes to the recipient, goods or end use require a fresh check of whether it still covers the transaction. In specified cases, an authorisation obtained through false or incomplete information can be treated in law as equivalent to acting without one.

Asset-reporting obligations

Section 18(5a) AWG criminalises certain breaches of asset-reporting obligations. The relevant EU measure determines whether you must report and what the report must contain. Section 18(13) AWG excludes criminal punishment for specified professionals bound by confidentiality. Information obtained professionally therefore needs to be assessed with that exception in mind.

Defending a sanctions allegation

RATH HAGEN represents companies and individuals in German sanctions proceedings. We review the investigation file and work with you to obtain the records of the transactions in question. For companies, we also assess the risk of a corporate fine or measures against company assets.

If the allegation rests on mistaken identity, documents distinguishing the counterparty from a listed person may be decisive. An allegation of indirect provision requires evidence about ownership and control. After reviewing the file, we discuss which arguments to put to the prosecutor, customs or the relevant specialist authority.