GERMANY Law and Practice Contributed by: Bettina Mertgen, Felix Siebler, Michael Herold and Sebastian Faust, GvW Graf von Westphalen
4.3 Screening and Due Diligence Requirements
4.6 Sanctions Compliance Programmes An effective sanctions compliance programme should be risk-based and tailored to the company’s business activities, products and geographic footprint. Core elements typically include: • management commitment and governance; • risk analysis, customer and third-party due dili - gence; • sanctions screening procedures; • organisational structures; • process organisation including escalation and approval processes; • employee selection and training; • record-keeping and storage; • periodic audits and compliance reviews; Although German authorities do not prescribe a single compliance model, the Federal Office for Economic Affairs and Export Control has published guidance promoting Internal Compliance Programmes and robust export control compliance structures. 4.7 Enforcement, Penalties and Voluntary Disclosure Breaches of sanctions regulations may result in admin - istrative fines or criminal penalties under the Foreign Trade and Payments Act. The severity of enforcement action depends on factors such as intent, the nature of the violation, the compliance measures in place and the degree of co-operation with authorities. • whistle-blowing system; and • physical and technical security. Investigations are typically conducted by customs authorities and public prosecutors, often in co-ordi - nation with the Federal Office for Economic Affairs and Export Control. Voluntary disclosures are not governed by a dedicated sanctions disclosure regime. Whether a self-reporting and co-operation with authorities may be considered helpful has to be assessed on a case- by-case basis. 4.8 Recent Enforcement Actions and Developments The most significant developments in recent years continue to relate to the extensive EU sanctions
There is no official single statutory screening meth - odology, but best practice (not only in the defence sector) is to screen customers, suppliers, intermediar - ies and other business partners including employees every 24 hours against all applicable sanctions lists. Regulators expect companies to assess both direct counterparties and ownership and control structures to avoid the provision of benefits to sanctioned par - ties indirectly. In practice, ongoing screening and peri - odic re-screening form part of standard compliance expectations, particularly in higher-risk jurisdictions and sectors. 4.4 Licences, Derogations and Exceptions Many EU sanctions regulations contain licensing grounds, derogations and exceptions that allow spe - cific activities which would otherwise be prohibited. Where available, applications are generally submitted to the Federal Office for Economic Affairs and Export Control or another designated competent authority identified in the relevant sanctions regulation. Appli - cants must demonstrate that the conditions for the relevant derogation are met and provide supporting information regarding the transaction, counterparties and intended purpose. With respect to payments, the Federal Bank of Ger - many is the competent authority. 4.5 Extraterritorial Sanctions and Secondary Sanctions Risk Germany does not generally accept the direct applica - tion of foreign sanctions laws, including US second - ary sanctions. Within the EU, the Blocking Regulation seeks to counter the extraterritorial application of cer - tain US sanctions measures. Nevertheless, US sanctions can have significant prac - tical consequences for defence sector participants through financial, contractual and supply chain rela - tionships. Companies with US business exposure and nexus should therefore assess secondary sanctions risks as part of broader compliance and risk manage - ment processes.
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