Germany is now moving at full speed – Germany’s reform of criminal enforcement for EU economic sanctions & embargoes is accelerating rapidly

• The German Bundestag (lower house of the parliament) conducted the first reading of the Act Amending Criminal Offences and Sanctions for Violations of EU Restrictive Measures (Gesetz zur Anpassung von Straftatbeständen und Sanktionen bei Verstößen gegen restriktive Maßnahmen der Europäischen Union) on 6 November 2025 (Drs. 21/2508).
• The draft implements Directive (EU) 2024/1226 on criminal offences and penalties for violations of Union restrictive measures and introduces substantial amendments to the Foreign Trade and Payments Act (Außenwirtschaftsgesetz – AWG) and the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung – AWV).
• The German Bundesrat (upper house of the parliament) committees issued their coordinated recommendations on 7 November (563-1-25), followed by plenary discussion in the Bundesrat on 21 November. 

Why this reform matters – and how it reshapes corporate risk

The reform substantially expands criminal liability, strengthens reporting obligations, and raises the compliance expectations placed on companies. 

Key Changes Proposed in the Draft Legislation

The five key changes proposed in the draft legislation – all of which are very likely to be adopted in the final law – are as follows:

1. Several administrative offences become criminal offences

The draft elevates violations of sectoral transaction bans to criminal offences under § 18(1) AWG. This implements Art. 3(1)(d) of Directive (EU) 2024/1226, which requires Member States to criminalise breaches of sectoral transaction prohibitions. 

Examples include 

• the cooperation and transaction ban in Art. 5aa of Regulation (EU) No 833/2014 (which prohibits entering into, continuing, performing or facilitating any transaction or business relationship with certain Russian state-owned or state-controlled entities, their 50%+ subsidiaries, or entities acting on their behalf) and
• the leasing and rental ban in Art. 20(1) of Regulation (EU) 2017/1509 (which prohibits leasing or renting vessels, aircraft, or other specified equipment to North Korean entities or for use in North Korea).

Until now, breaches of these provisions were administrative offences under § 82 AWV. With the gap closed, any prohibited transaction becomes a criminal offence. 

2. New aggravated cases of sanctions circumvention are introduced

Two new “particularly serious cases” are added to § 18 AWG:

• Providing false, incomplete or misleading information to authorities in connection with goods movements or sanctions-relevant transactions.
• Using a controlled third-country entity to conceal the true nature of a prohibited transaction.

These cases are intended to address circumvention patterns observed in enforcement practice. Where triggered, they permit higher penalties and signal stricter prosecutorial attention.

3. The standard of fault for dual-use related breaches is lowered to recklessness 

The draft introduces criminal liability for violations involving dual-use items where the breach is committed with recklessness (Leichtfertigkeit). This aligns German law with the Directive’s requirement to penalise serious negligent conduct involving sensitive goods and significantly raises compliance expectations for technical and commercial due diligence, classification accuracy and screening processes.

4. New mandatory reporting offences are added

Violations of the general reporting obligation in Art. 6b of Regulation (EU) No 833/2014 become criminal offences. This includes failures to report information about frozen assets or other sanctions-relevant findings. 

A personal exclusion ground protects lawyers, tax advisers, auditors and similar professions that are subject to statutory confidentiality obligations, replacing the previous rule in § 18(13) AWG.

5. Corporate fines are quadrupled

The upper limit for corporate fines increases from EUR 10 million to EUR 40 million in accordance with the Directive’s minimum standards. 

Importantly, this applies not only where a criminal predicate offence exists but also where the underlying conduct reflects a supervisory failure under § 130 of the German Administrative Offences Act (OWiG – Gesetz über Ordnungswidrigkeiten).

Changes to the draft likely to be expected following Bundesrat feedback

The Bundesrat has signalled the following areas where changes to the draft are likely:

1. Reinstatement of the 48-hour implementation period

The draft proposes deleting the long-standing 48-hour implementation buffer in § 18(11) AWG that shields violations committed within two days of a new EU restrictive measure entering into force. The Economic Affairs Committee warned that eliminating this rule creates operational risks, particularly in automated high-volume payment environments. The Bundesrat endorsed this view on 21 November 2025, making it likely that the 48-hour buffer will be reinstated or revised in the legislative process.

2. Wider personal exclusion ground or self-disclosure option

The draft’s personal exclusion ground applies only to certain regulated professions. The Bundesrat committees and the Bundesrat itself consider this insufficient and recommend examining a broader self-disclosure mechanism to provide certainty for compliance staff, especially in financial institutions working under time pressure.

3. Limiting telecommunications surveillance

The Legal Affairs Committee recommends excluding § 18(5a) and (5b) AWG from the scope of telecommunications surveillance under § 100a StPO, as these provisions cover Ukraine-related sanctions offences with a maximum penalty of one year – for example acts that undermine Ukraine’s territorial integrity (§ 18(5a) AWG) or supporting/facilitating such acts (§ 18(5b) AWG). Because these offences are not classified as “serious crimes”, the Bundesrat supported the proposal and this change is likely to be adopted.

What Companies Should Do Now

Even before adoption, the direction of the reform is clear – companies should now begin to:

• Map exposure to sectoral bans (especially Art. 5aa) across contracts, services, payments, procurement, joint ventures, and group entities.
• Strengthen internal escalation and reporting processes, including whistleblowing channels, sanctions red flags, and documentation of decision-making.
• Review dual-use classifications and overlaps with sanctions controls, ensuring that “recklessness” is avoided through robust technical and commercial due diligence.
• Re-evaluate payment flows and automated system triggers, particularly in high-volume or time-critical environments (e.g., treasury, payments, clearing).
• Enhance documentation and audit trails, ensuring they meet a standard consistent with the new penalty framework and expected supervisory scrutiny.
• Train relevant teams on the broadened criminalisation and upcoming reporting duties.

Outlook

The legislative process is on a fast track procedure under Art. 76(2) GG. Once the Bundestag completes the second and third readings, the law can be promulgated and enter into force without delay – potentially before year-end. Germany will then align fully with Directive (EU) 2024/1226, shifting to a far more robust criminal enforcement framework for EU sanctions & embargoes. For companies, this means heightened scrutiny. Preparing early will be essential to navigate the sharper enforcement landscape expected in 2026.