Tickets are checked once in a while by BVG personell (they are disguised however)
Tickets get checked periodically by BVG personnell on the train. You may or may not recognize them (they may disguise as regular passengers).
The fine is normally 40 €. You don’t have to pay it immediately. You have to give them your identity card. They will note down name and address and then you will be fined 40 €. (If you get caught repeatedly, you might even get sued at some point, but normally that’s only the case if you’re a regular offender.) If you can’t prove your identity, they will take you to the next police station so that they will identify you.
The small machines put a time stamp (and perhaps code of the station where you stamped it) onto the ticket. When you buy a ticket, it’s normally not valid yet, since it doesn’t have a date on it. You might buy it on one day and use it on another. After you put it into the machine, it has a time stamp on it and is valid for whatever period that ticket’s supposed to be valid for.
Note that regular tickets are not valid for round trips. You can use them up to two hours after validating them, and you can stop for a coffee break en route, but you cannot travel back towards the starting point.
Tickets get checked once in a while, usually by people with nondescript clothes waiting for passengers exiting the platforms or getting into the carriage and revealing themselves as ticket inspectors once the doors close and the train is on the move. Happened to me once or twice when working in Berlin and commuting by public transport for 6+ months a few years ago so I can vouch that it does happen but it does not seem that common either.
It’s true that it’s a strategy (random check and deterrence) closer to what you typically find in middle-sized towns with only a bus network than to what you see in large cities like London or Paris. But then again, Berlin is no London.
Also, all students in Berlin get a “Semesterticket” allowing unlimited travel on the Berlin transit network. It’s not free but included in their registration fee, which is a rather heavy-handed but very effective approach: A major group of potential fare evaders simply have no choice but to pay for a rail card, whether they want it or not, thus obviating the need to spend resources on enforcement, at least for that demographic.
The machines you described are date/time validators for “open” tickets. You ‘punch’ or ‘validate’ the ticket (it’s called entwerten in German) when you first use it and it remains valid for two hours/one day/a few days after the date/time printed by the machine. Using this mechanism, you can therefore purchase several day tickets at once, and use them one-by-one whenever you want.
If you look at a validated ticket, you will also notice the name of the station, which is especially useful for Kurzstrecken-tickets, which are valid for up to three stations on the U-Bahn or S-Bahn or to verify you haven’t done a round-trip (which is not allowed on a single-trip ticket).
Do beware, day tickets need to be validated. Since you don’t have to use them on the day you bought them, they aren’t valid if you don’t ‘punch’ them with the machine when you do want to use them. If you are tourist and buy them from a counter, maybe the clerk would warn you about it but IIRC ticket machines always give you an “open” day ticket (except the machines placed in trams).
The penalty if you are found without a valid ticket is a €60 fine.
To my experience, tickets get checked by people dressed as passengers, so you cannot notice them when entering the metro and change your path. When the doors close, they rapidly ask everyone to show their tickets.
I was checked twice on the same day during my 3-day visit in Berlin, which was quite a shock to me. There are no barriers to enter the metro where I live, and I get checked once a month on average.
Edit: Gayot Fow adds that the people checking tickets show their IDs while doing so after the doors are closed.
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