Dembele made the switch to Camp Nou in August for an initial €105 million, with add-ons potentially taking the deal up to €147m.
His move came after the 20-year-old went on strike in a bid to force Dortmund's hand, with Dembele refusing to train with Peter Bosz's side.
Dembele – who is currently sidelined with a hamstring injury – has no regrets about the action he took, but Riedle says the forward should have been punished for his actions.
"[He made a] massive impact, we knew it was difficult to keep him, [but] he wanted to play for Barcelona," Riedle – who scored twice when Dortmund won the Champions League final in 1997 – told Goal's sister site Omnisport .
"I didn't like how it went, how he pressured [Dortmund], it's a joke.
"You should be banned for doing things like this."
While Dembele left, Pierre-Emerick Aubameyang remained at Signal Iduna Park despite speculation linking him with AC Milan and the Chinese Super League.
And Riedle thinks the Gabon international could continue to shun advances from elsewhere and remain in the Bundesliga.
He added: "You never know with Aubameyang, maybe he'll stay at Dortmund forever."