Asset Freezing and Confiscation

By Dr. Julius Hagen, Attorney at Law

Asset freezing during a criminal investigation

An asset freeze can restrict accounts and other assets before confiscation has been finally decided. The key issues are the connection to the alleged offence, valuation, ownership, liquidity and the procedural position of companies and third parties.

An asset-freezing order can affect a company before guilt or confiscation has been finally decided. Bank accounts, receivables, real estate, company interests and other assets may become economically restricted. Management then faces an immediate operational question alongside the criminal allegation: how to protect payroll, suppliers, taxes and the ability to keep the business running.

The measure secures a possible confiscation of an equivalent sum. The final asset decision remains for the later proceedings, but enforcement can already materially restrict the person’s ability to dispose of assets. The defence must therefore distinguish between the alleged benefit, the specific asset affected and the consequences for the company’s operations.

Asset freezing and confiscation are different decisions

An asset freeze is an interim protective measure. Under section 111e of the German Code of Criminal Procedure, it may be ordered where confiscation of an equivalent sum appears likely; where the grounds are compelling, the order is generally required. The measure can reach movable and immovable assets. The seizure of a specific object or instrument of crime follows a different protective logic; this page focuses on asset freezing to secure confiscation of an equivalent sum. Confiscation itself is normally ordered only later by a court.

The later confiscation analysis begins with what was obtained through or for the offence. Section 73 of the German Criminal Code concerns proceeds of crime. If the specific asset is no longer available or cannot be confiscated, section 73c permits confiscation of an equivalent monetary value. An allegation about a corporate benefit can therefore become an exposure affecting the company’s wider assets.

How authorities identify the alleged benefit

The investigation file may connect payments, invoices, contracts, account movements, internal approvals, delivery data or participant statements into an alleged benefit chain. In a corporate case, the issue is often whether the inflow came from a specific offence, whether the company itself obtained anything or whether the alleged benefit should instead be attributed to an employee or related person.

The legal assessment does not follow from the account balance alone. Section 73d addresses the value obtained and permits estimation in defined circumstances. Expenses are generally taken into account, while expenditure used for committing or preparing the offence is not automatically deductible. The payment flow, consideration, costs, period and connection to the alleged offence must therefore be reconstructed separately.

Accounts, receivables and business operations

Enforcement of the freeze can restrict bank balances and receivables in practice. Under section 111h, enforcement has the effect of a prohibition on disposal in relation to the affected asset, and certain forms of compulsory enforcement are excluded while the measure remains in force. A company may therefore lose operational room before the final confiscation issue has been decided.

The defence must show the economic effect concretely. This includes payment deadlines, payroll, social-security contributions, taxes, essential procurement and which accounts or receivables are actually covered. A viable continuation requires evidence of the funds needed and the effect of limiting enforcement or providing security.

Company assets and third-party rights

A criminal allegation against an individual does not create a blanket basis for accessing every asset economically connected with that person. If an account, vehicle, property or company interest belongs to a company or another person, the specific legal connection to the alleged offence must be established. Corporate proximity, family ties or shared use do not replace that attribution.

Companies and other rights holders may have their own procedural rights in confiscation proceedings. Under section 438, a person may participate as an accessory party where it appears credible that the person owns or is entitled to the asset, or holds another right whose extinction could be ordered if the asset were confiscated. The defence should therefore establish early whether the allegation concerns an individual and what procedural position the company itself has – for example as a party to confiscation proceedings, an accessory party or a legal person affected in regulatory-offence proceedings.

Legal remedies and procedural participation

An asset-freezing order must identify the claim to be secured and the amount. Review therefore begins with the alleged offence, the property said to have been obtained, the calculation and the selection of assets. Errors in attribution or excessive security may support an application to lift or limit the freeze. Enforcement is a separate issue: the affected party may ask the court to review individual enforcement measures, and security may bring enforcement to an end under section 111g.

The procedural rights of the affected individual or company must also be protected. These include access to the relevant documents, an opportunity to respond and, depending on the procedural position, participation in the confiscation proceedings. Participation under sections 424 et seq. and accessory-party status under section 438 are substantive safeguards because they determine how the affected party can influence the asset decision.

Equivalent-value confiscation, estimation and victims’ claims

If the actual proceeds are no longer available, the court may order confiscation of their value. For a company, the key issues are whether the alleged benefit remained with it, which expenses should be taken into account and whether the same amount is being attributed to several people or entities. Simply adding all turnover or incoming payments does not establish the confiscation value on its own.

Victims’ claims can affect confiscation under section 73e where a claim for return or compensation arising from the offence has been extinguished. Confiscation, civil claims and insolvency consequences therefore need to be assessed together.

Insolvency and parallel proceedings

An asset freeze can increase insolvency pressure for a company because secured assets are not freely available for other enforcement. Insolvency and confiscation law therefore need to be considered together.

A criminal investigation against management, proceedings against the company, an internal investigation, tax measures and civil claims may run in parallel. Statements, payment data and asset schedules must not be transferred between proceedings without control. The company-search situation belongs on the dedicated situation page. The general asset-recovery framework and confiscation under section 20 AWG address the neighbouring issues.