Term and Definition of Embezzlement from Custody
Die Embezzlement from Custody constitutes a special form of embezzlement whose main legal basis under German criminal law is Section 246 of the German Criminal Code (StGB). The offense describes the unlawful appropriation of a movable object belonging to another, which is in the context of a so-called deposit is in the custody of the perpetrator. The focus is thus on the violation of the relationship of possession and trust between the depositor and the custodian (depository).
In a broader sense, embezzlement from custody refers to any unauthorized use, appropriation, or removal of items that were entrusted for a specific purpose—often for safekeeping, security, or as part of a storage agreement. Typical examples are found with bank deposits, warehouses, forwarding agents, and fiduciary custodianships.
Legal Basis of Embezzlement from Custody
Criminal Law Classification
Embezzlement from custody is a qualified form of embezzlement under German law. General embezzlement is defined by Section 246 StGB. Embezzlement from custody occurs in particular when the perpetrator unlawfully assimilates to his own assets or otherwise misuses an object entrusted as part of a custodial relationship, contrary to the interests of the owner.
Section 246 StGB – Embezzlement
Section 246 StGB is divided into two paragraphs, which are structured as follows:
- Embezzlement (Section 246 (1) StGB): Anyone who unlawfully appropriates a movable object belonging to another, either for themselves or for a third party, shall be punished pursuant to paragraph 1 with imprisonment for up to three years or with a fine.
- Embezzlement by Breach of Trust (Section 246 (2) StGB): This applies to cases where the item has been entrusted to the perpetrator, as is the case with a deposit. The law provides for an increased penalty here and underscores the particular need to protect the trustor.
Distinction from Simple Embezzlement (Section 246 (2) StGB)
Embezzlement from custody regularly fulfills the elements of embezzlement by breach of trust under Section 246 (2) StGB, as it requires that the entrusted object was given to the perpetrator in the context of a custodial or similar fiduciary relationship. It is crucial that the custodian (depository) acts according to the instructions of the depositor (owner) and has no right of disposal over the item.
Elements of Embezzlement from Custody
Entrusted Object
Embezzlement from custody only exists if the item was actually entrusted. This means there must be a custody agreement, a security relationship, or a fiduciary arrangement between the depositor and depository. Custody is typically assigned by temporary transfer, with an obligation to return the item or use it for a specific purpose later.
Appropriation
The central criminal act in embezzlement from custody is appropriation. This occurs when the depository either uses, sells, consumes, or otherwise permanently excludes the owner from control of the item, without authorization. The key factor is treating the item as one’s own.
Unlawfulness and Intent
The perpetrator must act intentionally and unlawfully. Appropriation is only a criminal offense if it is committed against the will of the owner and without a justifying reason. Negligent conduct is not sufficient.
Special Cases and Distinctions in the Context of Embezzlement from Custody
Difference from Theft
Embezzlement from custody differs from theft in that theft involves breaking custody against the will of the owner. In the case of a deposit, the item is initially entrusted voluntarily to the perpetrator.
Distinction from Breach of Trust (Section 266 StGB)
Although there may be overlaps with breach of trust (Section 266 StGB), the focus in embezzlement from custody is on appropriation and the breaking of the custody relationship, while breach of trust concerns the breach of a duty to manage assets.
Relevance in Banking and Securities Deposits
A particularly frequent area of application for embezzlement from custody is banking. Here, securities, shares, or other assets are held by a bank as custodian. Unauthorized sale, use, or encumbrance of such deposits by an employee or third party regularly fulfills the offense of embezzlement from custody.
Threat of Punishment and Sanctions
The threat of punishment for embezzlement from custody is determined by Section 246 (2) StGB. Depending on the severity of the case and the value of the embezzled items, either a fine or a prison sentence may be imposed.
- Simple embezzlement: Imprisonment for up to three years or a fine
- Embezzlement by breach of trust (deposit): The penalty may be increased, especially if a particular relationship of trust was abused.
In addition, civil claims for damages, surrender, or restitution may arise.
Civil Law Aspects of Embezzlement from Custody
Claim for Surrender (Section 985 BGB)
The owner of an embezzled item may demand its return from the depository in accordance with Section 985 BGB.
Damages (Sections 280 ff. BGB)
Embezzlement from custody may give rise to claims for damages if the depositor suffers a financial loss.
Prevention and Practical Significance
Prevention of embezzlement from custody is achieved through strict contractual provisions, ongoing monitoring of custodial locations, supervision of authorizations, and regular audits. In the financial services sector in particular, stringent regulatory standards apply to prevent such embezzlement.
Conclusion
Embezzlement from custody is a significant criminal offense with high practical relevance, especially in custodial, fiduciary, and depository relationships. The central object of protection is the trust associated with handing over property to a third party. In addition to criminal penalties, embezzlement from custody has significant civil law consequences. Preventive and investigative procedures play a key role for custodians and their clients to minimize liability and loss risks.
Frequently Asked Questions
What are the legal consequences of embezzlement from custody?
Embezzlement from custody constitutes a criminal offense in Germany under Section 246 StGB (embezzlement) and is punishable by imprisonment for up to three years or a fine. The offense requires that the perpetrator appropriates an object belonging to another and entrusted to him—particularly securities, shares, or other deposit assets in the case of embezzlement from custody—against or without the will of the rightful owner for himself or a third party. In a professional context, such as banks or asset managers, embezzlement from custody may also fulfill the requirements of Section 266 StGB (breach of trust) and, if applicable, Section 263 StGB (fraud), especially if there is a specific breach of duty to the detriment of the depositor. In addition, there may be civil claims for damages, as the depositor is entitled to claim full compensation for financial losses. Professional consequences may also arise (such as loss of banking license under Section 35 KWG or regulatory action by BaFin).
How is the prosecution of embezzlement from custody conducted?
The prosecution of embezzlement from custody generally requires a criminal complaint from the injured party or the authorities becoming aware of the matter. When a complaint is received, the public prosecutor’s office initiates an investigation in which witnesses are questioned, documents examined, and the affected accounts and deposit transactions analyzed. As this is an ‘official offense,’ the prosecutor is required to take up investigations as soon as there are sufficient indications of a crime. In the case of banks and financial service providers, the Federal Financial Supervisory Authority (BaFin) is often involved, conducting parallel regulatory investigations. If there is sufficient suspicion, the perpetrator must be brought before a court at the end of the investigation.
What claims does a victim of embezzlement from custody have?
The victim primarily has civil claims for damages against the perpetrator. These are aimed at natural restitution, i.e., restoring the state as it existed before the offense in accordance with Section 249 BGB. If that is not possible, monetary compensation for the economic loss incurred may be claimed. In the case of banks and institutional custodians, special contractual and regulatory safeguarding mechanisms usually apply, such as through compensation arrangements like the Entschädigungseinrichtung deutscher Banken GmbH (EdB) or voluntary deposit protection funds. Furthermore, the victim can also assert his claims in criminal proceedings through so-called adhesion proceedings, so that a decision on civil claims can already be made as part of the criminal process.
Are there special limitation periods for embezzlement from custody?
The criminal prosecution of embezzlement from custody ordinarily becomes time-barred after five years from the date of the offense, pursuant to Section 78 (3) No. 4 StGB. For civil claims for damages, the standard statutory limitation period of three years applies according to Section 195 BGB, beginning at the end of the year in which the victim first becomes aware of the offense and the person of the perpetrator, or ought to have known but for gross negligence. In special cases, especially where an unlawful act or serious intentional breach of duty is involved, the limitation period may be up to ten years (Section 199 (3a) BGB).
Who is liable in cases of embezzlement from custody when several persons have access to the deposit?
Where several persons are authorized to access the deposit (for example, in the context of a joint deposit account or by authorized representatives), it must be examined in each case who acted independently or jointly. In principle, the person who actually committed the embezzlement is liable. If several persons collaborated as part of a joint criminal plan, joint and several liability under Section 830 BGB may apply. In banks and financial service providers, it depends on whether the deposit-managing institution committed the offense itself or facilitated it by failing in its supervisory duties; in such cases, (joint) liability may also apply.
What role do regulatory requirements and reporting obligations play in embezzlement from custody?
Depository institutions are subject to the supervision of BaFin as well as the provisions of the German Banking Act (KWG) and the Securities Trading Act (WpHG). In case of suspected embezzlement from custody, there are extensive reporting obligations, particularly under the Money Laundering Act (GwG) and the regulatory requirements of BaFin. Institutions are required to report suspected cases immediately and to initiate internal monitoring measures. Failure to comply with these reporting obligations can itself constitute an administrative offense or even a criminal offense and regularly results in additional regulatory sanctions, such as fines or—in extreme cases—revocation of the license under Section 35 KWG.
