Charge of Breach of Trust, § 266 German Criminal Code

What does an accusation of breach of trust mean for those affected?

Breach of trust under § 266 German Criminal Code is one of the most complex and practically relevant white-collar crimes. It regularly affects individuals professionally or organizationally entrusted with asset management — from managing directors to accountants, from landlords to association board members.

Many accused immediately ask themselves:

“What is the penalty for breach of trust?”,

“What exactly does the accusation of embezzlement mean?”

“Do I need a lawyer immediately?”

If you have received a police summons for breach of trust or if the company initiates an internal investigation, you should make no statements and immediately seek legal assistance. 

When is breach of trust punishable?

§ 266 German Criminal Code distinguishes between two equivalent types of offenses:

1. 1. Abuse Offense: the perpetrator consciously exceeds their legal authority
   2. Breach of Duty Offense: the perpetrator violates their duty to safeguard third-party financial interests

A prerequisite for both variants is a duty to manage assets. Colloquially, one often speaks of “embezzlement of funds”, even if legally the term “breach of trust” is decisive.

The duty must be substantial; mere auxiliary services (e.g., cashiers without independent power of disposal) are not sufficient.

Abuse Offense

In the case of an abuse offense, the perpetrator must have legally effective authority to dispose of third-party assets. They use this authority formally correctly, but against the economic interest of the authorized person.

Typical examples:

• • Authorized signatory concludes contracts in their own interest
  • Bank employee transfers funds to their own account
  • Trustee uses trust funds for personal expenses

Breach of Duty Offense (§ 266 Alt. 2 German Criminal Code)

Here, the focus is not on legal power, but on the duty to protect third-party financial interests. A breach of duty is sufficient – even without formal authorization.

Examples:

• • Managing director of a GmbH enters into high-risk transactions contrary to instructions
  • Landlord uses the rental deposit for private purposes
  • Investment advisor mediates products despite clearly high loss potential

Violation of the Duty to Manage Assets

Breach of trust is only punishable if the perpetrator holds elevated responsibility for third-party assets. The law requires a “primary” or “essential” duty of care.

Typical professional groups with a duty to manage assets:

• • Managing Director / Executive Board
  • Accountant, Controller, Cashier
  • Lawyers, Tax Advisors, Trustees
  • Landlords (deposit management)
  • Insolvency Administrator, Guardian, Estate Administrator

The violation of a duty to manage assets can arise not only through active conduct but also through omission.

This means:

Even inaction can constitute breach of trust if the perpetrator was actually obliged to act to protect the client’s assets.

Example:

The perpetrator should have seized a concrete opportunity for profit because it would have brought the client a high probability of financial advantage.

If they omit this action, although it was objectively required, this can already constitute a breach of duty causing damage or endangering assets.

Result of the Offense: Financial Disadvantage

Financial damage exists if:

• • the total assets after the action are lower than before, or
  • a concrete risk to assets occurs (e.g., withdrawal of trust funds).

For criminal liability, the serious risk that damage will occur is already sufficient.

Subjective Elements – Intent

Subjectively, the offense of breach of trust requires that the perpetrator acted intentionally.

If intent is absent, negligent breach of duty may be considered, but this is not punishable.

If, however, the asset owner’s consent exists, criminal liability for breach of trust is excluded.

Particularly Serious Case of Breach of Trust (§ 266 para. 2 German Criminal Code)

According to § 266 para. 2 German Criminal Code , a breach of trust can be classified as a particularly serious case. The norm refers to the standard examples of § 263 para. 3 German Criminal Code , which also apply analogously to breach of trust. If one of these standard examples is present, a particularly serious case is typically assumed, which entails an increased penalty of six months to ten years imprisonment.

1. Large-Scale Financial Loss (§ 263 para. 3 no. 2 var. 1 German Criminal Code)

Of particular importance is the standard example of “large-scale financial loss”.

Such a loss exists when the amount of damage is exceptionally high. The decisive factor here is an objective assessment of the economic impact.

According to established case law, a large-scale financial loss is regularly assumed from approximately €50,000.

The damage must have actually occurred; mere endangerment is not sufficient here. It is therefore crucial that the victim’s assets have already been concretely and significantly impaired.

2. Breach of Trust in Office (§§ 266 para. 2, 263 para. 3 no. 4 German Criminal Code)

Another practically relevant standard example is breach of trust in office.

It occurs when an official abuses their official powers, thereby causing financial damage. Officials within the meaning of §§ 11 para. 1 no. 2, 263 para. 3 no. 4 German Criminal Code include, for example, civil servants, judges, or persons performing public duties.

Examples:

• • A treasurer or clerk improperly uses public funds entrusted to them.
  • A managing director of a GmbH or executive board member of an AG abuses their powers in the context of public-law duties in the collection, administration, or use of taxes, fees, or other public revenues.
  • Administrative acts are deliberately used in breach of duty to withdraw or incorrectly allocate assets.

The special trust placed in officials, as well as the protectability of public assets, is the reason why the legislator classifies this constellation as particularly serious.

3. Further Standard Examples

Further standard examples, also relevant in individual cases, include:

• • Commercial breach of trust, i.e., repeated acts for continuous income generation (§ 263 para. 3 no. 1 German Criminal Code).
  • Breach of trust committed by a gang (§ 263 para. 3 no. 1 alt. 2 German Criminal Code).
  • Breach of trust by exploiting the defenselessness of a person (§ 263 para. 3 no. 3 German Criminal Code).

Classic Categories of Breach of Trust (§ 266 German Criminal Code)

Practice shows that certain constellations particularly frequently lead to investigations for breach of trust. The following case groups have emerged as typical manifestations and often serve courts as guidance when examining a breach of duty or financial damage.

1. Slush Funds

Slush funds are among the classic cases of breach of trust and are regularly prosecuted.

Typical process:

• • Employees or executives of a legal entity withdraw funds from proper accounting,
  • transfer them to hidden accounts, or
  • use them outside of financial accounting for their own or “company-related” purposes.

The mere establishment of such a fund fulfills the requirements of a breach of duty in asset management, as the asset owner can no longer access the funds.

The risk of financial damage arises immediately.

Typical constellations:

• • Payments from suppliers are not recorded
  • Funds are used for hidden commissions or bribe payments
  • Building informal reserves “for all eventualities”

Case law regularly considers slush funds to be an obvious exceeding of the duty to manage assets, as they prevent full control by the asset owner and eliminate the transparency of payment transactions.

2. Kickback Payments (Bribes and Rebates)

Kickback transactions are among the most frequent triggers for investigations in the field of white-collar crime. They occur when a decision-maker receives economic advantages to conclude a specific transaction in favor of a contracting party.

Typical examples:

• • Suppliers pay hidden commissions for an order to be placed
  • A managing director receives “rebates” for later service adjustments
  • Service providers grant personal benefits (money, travel, in-kind benefits)

The unlawfulness lies in the fact that the decision-maker acts not in the interest of the asset owner, but for their own benefit. Case law regularly considers such payments to be a breach of duty influencing asset decisions.

3. Risky Transactions

Risky transactions become criminally relevant if the person with the duty to manage assets violates internal guidelines, contractual limits, or the discernible will of the client.

Not every loss-making transaction is punishable – the decisive factors are:

• • Did the decision-maker have authority to take this risk?
  • Were instructions, investment guidelines, or approval reservations disregarded?
  • Was the prognostic uncertainty so high that an honest asset manager would not have undertaken the transaction?

Typical Case Categories

• • Speculative transactions with stocks, derivatives, or foreign currencies
  • Unsecured loan disbursements contrary to clear guidelines
  • Risky investments without the required consent of the asset owner

Criminal liability arises if the action is objectively in breach of duty and the risk is unreasonably high, such that the asset owner should have been protected from a significant loss.

4. Breach of Trust by a Landlord (Use of Rental Deposit)

Landlords can also be liable for breach of trust if they do not keep the rental deposit separate from their own assets (§ 551 German Civil Code requires an insolvency-proof account).

Relevant constellations:

• • The deposit is held in the landlord’s private account
  • The deposit is used for the landlord’s own purposes
  • The deposit is speculatively invested or not kept available

Since the deposit is held only in trust, any use for private or business purposes constitutes a clear breach of duty. Investigations often begin when the tenant moves out and the deposit cannot be repaid.

 What penalty can I expect for breach of trust?

• • § 266 para. 1 German Criminal Code: Fine up to 5 years imprisonment
  • particularly serious case: 6 months to 10 years
  • no fine in particularly serious cases

The specific penalty depends, among other things, on:

• • Amount of financial damage
  • Position of the accused
  • Duration and intensity of the breach of duty
  • Previous convictions, confession, cooperation

Do I need legal advice?

Yes – absolutely.

Breach of trust proceedings are among the most complex white-collar crime constellations. Ill-considered statements often lead to incriminating admissions that are difficult to correct later.

Important:

Make no statements to the police.

A lawyer will request access to files, develop a defense strategy, and examine whether a dismissal of the proceedings is possible.

Our firm has been defending clients in sometimes highly complex breach of trust cases for many years – discreetly, strategically, and assertively.