Ruling [DEU] ¦ BGH Rewrites the Playbook: Partly Dirty Money Is Enough to Lose the Whole Asset

BGH Broadens Scope for Asset Seizure: Mixed-Funding Real Estate Can Be Confiscated

Germany’s Federal Court of Justice (Bundesgerichtshof, BGH) has sharpened one of the key tools in the fight against organized crime and money laundering: the confiscation of assets even where they are only partly financed with illicit funds. In a high‑profile case linked to a Berlin-based clan, the court clarified that a legal–illegal “mixed financing” of real estate is sufficient to justify asset seizure. For financial crime practitioners, this decision is a major marker for how vigorously German authorities can now strip criminal networks of their wealth.

A Clan, Six Properties, and 1.9 Million Euro

The case centers on six properties in Berlin, worth roughly 1.9 million euro, purchased between 2012 and 2018 in the name of an 18‑year‑old member of the clan family. According to the prosecution, he acted as a frontman for his father, who wanted to avoid appearing as owner in order not to endanger social benefits.

The purchases allegedly involved funds from real estate activities in Lebanon and relied heavily on cash, checks, and the involvement of a real estate broker who handled cross‑border flows. Adding to the picture, a brother of the young purchaser had taken part in a spectacular burglary of a Sparkasse branch in 2014, stealing over 10 million euro. The whereabouts of most of that money remain unexplained.

A money laundering investigation against the young man was opened in 2018 but discontinued in 2020 for lack of proof of a specific predicate offense. Instead, the prosecutor’s office launched a stand‑alone confiscation procedure under the reformed German confiscation regime.

The Trial Court’s Narrow View: Only Fully Illicit Assets Seizable

The Berlin Regional Court (Landgericht Berlin) rejected the seizure of the six properties in late 2023. It argued that it was not sufficiently convinced that the funds used for the purchases originated from criminal activity. On the contrary, according to the court, lawful proceeds from real estate dealings in Lebanon, such as rental income and sales, were plausible and could have funded the acquisitions.

Crucially, the court interpreted the statutory requirement that assets must “originate from” (“herrühren aus”) an unlawful act in a very restrictive way. In its view, confiscation required that each property was fully financed by criminal proceeds. Once the court assumed that legal funds alone would have been enough to cover the purchases, it saw no basis for seizure.

The court did apply the post‑2017 confiscation rules, but it denied that the “origin” threshold was met and did not engage seriously with the possibility of mixed financing, where purchases are funded in part from legal income and in part from criminal money.

Bastian Schwind-Wagner _Follow

"The BGH’s decision in this real estate case significantly strengthens Germany’s asset recovery toolkit against organized crime. By confirming that a legal–illegal mix of funds is sufficient for confiscation, the court rejects the idea that only fully crime-financed assets are vulnerable.

For financial crime practitioners, this means economic reality and overall patterns matter more than formal ownership or partial lawful funding. Properties, related security interests, bank balances, and even rental income can be seized if a non-trivial portion of the value can be linked to criminal activity."

BGH Intervention: Mixed Financing Is Enough

The Berlin prosecutor appealed – successfully. In July 2025, the BGH’s 5th Criminal Panel (5 StR 465/24) overturned the lower court’s decision. The core message is blunt and highly relevant for financial crime enforcement: the statutory requirement that an asset “originates from” unlawful acts does not mean it must be 100% financed by criminal funds. A legal–illegal mixture is sufficient, as long as the criminal share is not negligible.

Under § 76a(4) of the German Criminal Code (StGB), the notion of “origin” is to be interpreted economically. The court stressed that it covers entire chains of transactions, including conversions, reinvestments, and surrogates. If illicit funds are used in a way that feeds into the acquisition or creation of an asset, and this is economically relevant, the link is established.

The BGH explicitly criticized the Berlin court for setting “overly demanding” standards for its conviction regarding the source of the funds. By assuming that confiscation only comes into play where a property is fully paid with criminal funds, the court had blinded itself to the relevance of individual partial payments, intermingled funds, and mixed financing structures.

For financial crime professionals, this means that asset tracing and confiscation can now focus on material contamination: once a non‑trivial portion of an asset is funded by criminal proceeds, the door to full confiscation is open.

Economic Perspective: Credit Financing Does Not Break the Chain

Another important aspect of the BGH’s ruling is its treatment of financing via bank loans. The Berlin court had noted that certain purchases were financed through bank loans and treated this as a factor against a criminal origin.

The BGH rejected such formalism. Even where a property is nominally financed with a bank loan, the requirement that the asset “originates from” unlawful acts can still be met. This is particularly true if the loan structure was intentionally used to inject illicit funds into the legal financial system, for instance by using criminal proceeds to service the loan or provide collateral.

The court faulted the Berlin judges for failing to apply a holistic economic analysis: they had fragmented the case into individual transactions instead of taking a comprehensive view of the patterns and context.

Indicia Ignored: Straw Men, Cash, and Timing

The BGH also criticized the trial court’s handling of circumstantial evidence. According to the higher court, the Berlin judges failed to properly evaluate a range of red flags that, taken together, strongly suggested criminal financing:

• systematic use of straw men (front persons) in ownership structures;
• false statements in notarial deeds;
• an unusually extensive and risky role of the real estate broker in cross‑border payments;
• heavy use of cash and untraceable checks in real estate transactions in Lebanon;
• the close temporal connection between the multimillion‑euro Sparkasse burglary at the end of 2014 and the property purchases starting in 2015.

From a financial crime perspective, the BGH is effectively instructing lower courts to conduct a genuine “intelligence‑style” assessment of the overall picture instead of treating each element in isolation. Patterns of behavior, transaction structures, and timing must be weighed together to infer whether an asset plausibly stems from criminal activity.

Confiscation Beyond the Properties: Mortgages, Balances, and Rents

The BGH’s legal guidance goes beyond the six pieces of real estate. It clarifies that other financial claims and rights tied to the properties may also be subject to confiscation when they embody the same economic value.

The court points out that:

• A bearer land charge (Inhabergrundschuld) can “embody” the essential value of a property. If the property was partly financed with illicit funds, the land charge can “originate from” unlawful acts in an economic sense and be confiscated.
• Claims to bank account balances can be seized if the balances stem from possibly tainted assets.
• Already under the 2017 version of § 76a(4) StGB, “uses” (“Nutzungen”) in the civil law sense – such as rental income – could be confiscated where the “taint” of the property carries through to its yields and the claims can be secured. The fact that a 2021 reform later mentioned “uses” explicitly does not represent a change in law but confirms the earlier understanding.

This is crucial for depriving organized crime of ongoing income streams. Confiscating only the underlying property while letting the rents continue to flow to the same network would undermine the purpose of the law.

Legal Background: The 2017 Confiscation Reform and Retroactivity

The case also sits within the framework of the 2017 overhaul of German confiscation law. The reform replaced the older concept of “forfeiture” with an extended confiscation regime in §§ 73a ff. StGB and introduced stand‑alone confiscation proceedings under § 76a StGB.

The key idea: authorities can confiscate assets that obviously stem from criminal activity even if they cannot prove a specific predicate offense. § 76a StGB states that confiscation “should” be ordered where an object originates from an unlawful act, as long as the person concerned was operating at least within a certain catalog of offenses – designed mainly with organized crime in mind.

One of the most controversial aspects was retroactive application. Confiscation can also target assets from crimes committed before 1 July 2017. To survive the constitutional prohibition on retroactive punishment, the lawmakers argued that confiscation is not a penalty in the strict sense but a restoration of a lawful state. In 2021, the Federal Constitutional Court largely endorsed this approach in a case involving tax offenses.

This case confirms that the courts are willing to use this tool robustly – and to interpret its core concepts, such as “origin”, broadly.

February 2025: A Forewarning from the BGH

The July 2025 decision did not come out of nowhere. In February 2025, the BGH’s 2nd Criminal Panel had already pointed in the same direction (2 StR 419/23). In that decision, the court held that partial financing by bank loan does not generally block confiscation. The wide concept of “origin” also covers situations of mixing and partial contamination of legal and illegal funds, as long as a non‑trivial part is of criminal origin.

The court also addressed constitutional concerns. Where the mixing of lawful and unlawful funds stems from unclarified crimes linked to organized crime, the risk of overly harsh confiscation orders can be managed through the “should” structure of § 76a StGB: in exceptional cases, courts can refrain from confiscation to avoid disproportionality.

This decision explicitly relies on this earlier ruling. Together, they cement a doctrinal line: mixing does not cleanse, and partial contamination can be enough to justify full confiscation, subject to proportionality.

Operational Impact: Berlin’s Asset Seizure Offensive

Since 2017, the Berlin prosecutor’s office has ordered the seizure of around 100 properties. In spring 2025, the Berlin Regional Court I ordered the confiscation of 58 properties attributed to the clan. The new BGH judgment will likely strengthen prosecutors’ hands in ongoing and future proceedings, both in Berlin and nationwide.

For investigators and asset recovery specialists, the message is that carefully documented patterns of transaction behavior, use of straw men, cross‑border cash dynamics, and timing around major crimes can cumulatively justify the inference that assets “originate from” criminal activity, even without a fully mapped money trail.

EU Pressure and the Next Step: Central Confiscation Offices

The decision also lands at a moment when Germany is further restructuring its asset recovery architecture under EU pressure. The Federal Ministry of Justice (BMJV) has just presented a new draft law to implement EU rules on asset tracing, freezing, and confiscation.

Substantive criminal law needs little adjustment; the ministry itself notes that German law already offers a broad range of confiscation tools that largely match the directive’s standards. The major novelty is institutional: the EU directive requires member states to set up central asset recovery and asset management offices.

According to the draft, in Germany:

• state prosecutors’ offices in the federal states will act as asset recovery offices for the judiciary;
• the states will be allowed to centralize these functions in one or a few designated prosecutor’s offices;
• asset management functions will also be centralized at state level, assigned to a public prosecutor’s office or a general prosecutor’s office;
• the Federal Criminal Police Office (Bundeskriminalamt, BKA) will remain the central police authority for asset recovery tasks.

For cross‑border financial crime and money laundering cases, these central offices should streamline cooperation with other EU jurisdictions, both on tracing assets and on managing and liquidating them.

Takeaways for Financial Crime and Compliance Professionals

From a financial crime perspective, this case delivers several key messages:

• Mixed funding is enough: Real estate and other assets can be confiscated even if only partially funded with illicit money, as long as that portion is not insignificant.
• Economic analysis over formal structures: Courts and authorities must look at the economic reality of transactions, including loans and surrogates, not just their formal legal structure.
• Patterns and context matter: Repeated use of frontmen, false declarations, cash‑heavy cross‑border flows, and timing around major crimes are critical indicia.
• Wider asset universe: Not only properties, but also mortgages, account balances, and rental income tied to tainted assets are within reach of confiscation.
• Institutional strengthening: The establishment of new EU-driven central offices is set to make asset recovery in Germany more coordinated, particularly in international cases.

For investigators, prosecutors, and compliance teams, the BGH’s clarification significantly widens the runway for targeting assets in complex money laundering structures. Legal–illegal mixing, once a favored technique to obscure criminal proceeds, now clearly increases the risk that the entire asset will be lost.

Dive deeper

• BGH ¦ Az. 5 StR 465/24 Einziehungsverfahren ¦ Link