Flavio Romerio and Roman Richers discuss bribery and corruption in Switzerland. As well as international judicial assistance and regulation of the financial industry. They also examine the revised law against bribery in the private sector and discontinuation of proceedings
1. What trends, in terms of activity or focus, have you seen in the prosecution of business crimes in your jurisdiction in the last 12 months?
The last 12 months have been a busy time for the Swiss enforcement authorities. The scandal around FIFA not only made headlines all over the world, but also led to a multitude of legal proceedings, ranging from extradition proceedings, judicial assistance proceedings to several Swiss criminal investigations against FIFA's former management. Other international investigations continued to leave their mark in Switzerland as well. The corruption investigations surrounding Petrobras led to more than 300 banking relations being notified to the Swiss Money Laundering Reporting Office, and the Office of the Attorney General (OAG) requested documents concerning more than 800 accounts from more than 40 banks. Around USD 800 million in suspicious assets were frozen, and a multitude of Swiss criminal proceedings and judicial assistance proceedings are pending.
Further cases concerned the increasing efforts to fight international terrorism in Switzerland as well, and the OAG has obtained its first convictions in such proceedings. The OAG is further continuing its efforts to reduce its backlog of older cases, and has focused various investigations on the main accused while discontinuing the case against other involved persons. The courts will have to decide whether this approach is lawful.
Other important cases concerned a major bank data theft, where the OAG obtained a conviction for economic espionage and a sentence of five years of imprisonment, as well as, rather unusual for Switzerland, several bribery investigations against federal employees, in particular in connection with IT procurement frauds at the Federal Tax Administration and the State Secretariat for Economy.
2. Are enforcement agencies particularly focused on any specific industries or crimes?
A clear focus of the Swiss law enforcement agencies for many years now has been the finance industry and crimes associated with the finance sector, hardly surprising given the dominant role of this industry for the Swiss economy. Switzerland is the world’s largest wealth management centre for private clients, managing about a third of the world's assets. In this context, the exposure to corruption and money laundering, concerning assets from clients from emerging countries in particular, demands the continued attention of the law enforcement authorities and rigorous supervision by the Swiss Financial Market Supervisory Authority (FINMA). The two most prominent examples of the last year are the mentioned Petrobras cases as well as the Malaysian sovereign fund 1MDB case.
In recent years, the OAG has also repeatedly stated that one of its prosecution focuses is combating bribery and corruption, and it seems that there has indeed been an increase in the number of investigated cases.
3. Are enforcement agencies more or less focused on pursuing cases against corporations or individuals?
Traditionally, Swiss criminal law establishes individual liability, and the prosecution of business crimes such as fraud, mismanagement, forgery of documents or money laundering, to name a few, is focused on individuals.
Corporate criminal liability on the other hand has two prongs. First, an enterprise may be prosecuted if a crime is committed in the exercise of commercial activities, but it is not possible to attribute this act to any specific individual due to an inadequate organisation of the company. Second, an enterprise may become criminally liable regardless of the liability of any individual if certain crimes exhaustively listed in statutory law are committed and if the enterprise failed to take all appropriate compliance measures to prevent the crime from occurring. The respective list of crimes comprises in particular organised crime, terrorism financing and bribery and corruption. Despite these provisions having been in force for more than a dozen years, criminal proceedings against enterprises are still the exception, and most prosecutors focus on individual liability.
In contrast, in the financial market sector, FINMA traditionally pursues cases at the corporate level, conducting investigations against the supervised financial institutions. However, recently, FINMA has increased its efforts also to target individuals and imposing industry bans against employees and top managers engaged in misconduct at supervised institutions.
4. Does the legal framework concerning the prosecution of business crimes allow for extraterritorial enforcement? Are such matters being pursued?
In principle, the Swiss authorities have jurisdiction over crimes committed in Switzerland, i.e. where the perpetrator acted in Switzerland or the crime had its effects in Switzerland. Regarding certain crimes against the state, the Swiss authorities also expressly have extraterritorial jurisdiction. Swiss criminal law applies in particular regardless of the nationality or resident status of the perpetrator if a business crime is committed in Switzerland.
However, Swiss jurisdiction also exists under certain circumstances for crimes committed abroad if the perpetrator is found in Switzerland. This is in particular the case where Switzerland undertook to pursue the crime in question in an international treaty, to the extent that the crime is also punishable at the place of commission. Alternatively – and more relevant in practice – Swiss jurisdiction also exists over any act punishable both at the place of commission and in Switzerland, if the offence in question is an extraditable offence and the perpetrator is located in Switzerland, but not extradited.
However, if the crime was committed outside of Switzerland, prosecutors are in practice often highly selective when it comes to prosecuting, even if in theory they could do so, mainly due to the practical difficulties of collecting evidence that is largely located abroad. Instead, the Swiss authorities often attempt to prosecute foreign offences indirectly by targeting the perpetrators for related acts committed in Switzerland, including in particular money laundering. In addition, forfeiture proceedings regarding tainted assets are possible in Switzerland even where the underlying crime occurred abroad.
5. What judicial or legislative developments have impacted the prosecution of business crimes in your jurisdiction in the last 12 months? Are there any significant proposals for reform of the legal framework that governs business crimes in your jurisdiction?
Switzerland has recently amended its laws concerning bribery in the private sector by introducing the new articles 322octies and 322novies of the Swiss Penal Code (SPC). With these new provisions, Switzerland is further tightening the prohibition of corrupt business practices. While the revision was not directly linked to the recent scandals affecting international sports organisations, such as FIFA, it certainly gained traction in the wake of these events. As a consequence of the revision, bribery in the private sector is now a crime under the SPC, and not just the Unfair Competition Act as had previously been the case, and it will be prosecuted by the authorities on their own motion. Prior to the revision, an injured party needed to request prosecution, which rarely happened in practice. Under the revised law, this request will only be needed in ‘minor cases’, and while it is not yet entirely clear how this will be defined, presumably only small incidents will fall under this exception. As soon as the bribery in question exceeds a few thousand francs, or the health and safety of third-parties is at risk, or where repeated infringements occur, no ‘minor case’ would exist anymore. The revision therefore has the potential to impact the way bribery in the private sector is effectively prosecuted.
Another development concerns the introduction of aggravated tax misdemeanour as a predicate offence to money laundering, introduced in January 2016. Aggravated tax misdemeanour now constitutes a predicate offence, and is defined as tax fraud relating to direct taxes (income tax, profit tax, etc.) provided the evaded tax in any tax period exceeds 300,000 Swiss francs. Further, the anti-money laundering framework is also continuously improved, with parliament amending the Anti-Money Laundering Act and FINMA updating its Anti-Money Laundering Ordinance.
The Swiss legislator is also currently overhauling the legal framework applicable to the financial market, covering the four pillars of supervision, financial market infrastructure, financial institutions and financial services. On January 1, 2016, the Financial Market Infrastructure Act entered into force, establishing a regulatory framework for financial market infrastructure in conformity with international requirements. Further, the Swiss government has presented a draft for a new Financial Services Act that would provide Switzerland with, among others, a comprehensive primary market regulation, implement a documentation concept modelled after the European Prospectus Directive and introduce a registration requirement for foreign financial services providers. The Swiss government further presented a draft for a new Financial Institutions Act that will subject asset managers to licensing requirements and prudential supervision for the first time in Switzerland. Both drafts are rather controversial.
6. How common is it for enforcement agencies in your jurisdiction to exchange information and cooperate internationally with other agencies? What are the consequences of cross-border cooperation on prosecutions of entities and individuals in your jurisdiction?
Switzerland is traditionally very supportive of legal assistance requests and dealt with over 36,000 legal assistance proceedings in criminal matters in 2015. Switzerland is a Member State of the European Convention on Mutual Assistance in Criminal Matters, the European Extradition Treaty and many other multilateral and bilateral treaties on legal assistance in criminal matters. Further, the International Legal Assistance in Criminal Matters Act governs the legal assistance where no international treaty applies, usually subject to reciprocity and a requirement of double criminality, which is, however, interpreted generously by the Swiss courts. Under certain conditions, the Swiss authorities may also transmit information to foreign authorities outside a formal legal assistance proceeding.
Further, administrative assistance in tax matters is also available under international treaties and federal law. There is a large number of cases and international cooperation is very common, recently especially in connection with the Swiss banks and the U.S. tax dispute. These cases are handled by the Swiss Federal Tax Administration. Furthermore, administrative assistance is also granted by FINMA to foreign financial regulators, subject to the official and professional secrecy and assurances that the information is only used for regulatory purposes.
As a consequence of a legal assistance request, the Swiss enforcement agencies commonly also initiate their own local criminal and forfeiture proceedings.
7. What unique challenges do entities or individuals face when enforcement agencies in your jurisdiction initiate an investigation?
Individuals and enterprises involved in a business crime investigation face various challenges.
One recurring difficulty lies in the fact that the authorities are frequently suffering from a heavy workload and limited capacity. By law they are in principle under an obligation to investigate any wrongdoing that comes to their attention, but in practice they lack the resources to do so, forcing them to be selective in which cases to investigate with priority. As a consequence, the parties to a proceeding often observe that the investigation advances only slowly and in waves. In addition, the level of experience with large-scale white collar crimes varies considerably. While certain regulatory authorities and prosecutor's offices have substantial experience in complex economic matters (in particular in the major financial centres), this is not the case with others, leading to delays and more complex proceedings. Further delays can also be caused due to the rights of the parties to appeal many investigatory measures ordered by the prosecutor, in particular compulsory measures.
Other complications can result from procedural peculiarities such as the rather restrictive file access rights. In Swiss criminal investigations, prosecutors frequently grant full access to the file only at a late stage of the investigation, making it more difficult for the accused to defend themselves and for any injured parties to support the investigation. This is particularly challenging as the Swiss enforcement authorities have considerable powers, and the Swiss courts apply only a lenient standard when it comes to reviewing the prosecutors' investigatory activities.
8. Do enforcement agencies in your jurisdiction provide incentives for individuals or entities to self-report a business crime or otherwise provide assistance to the government? If so, what factors should individuals or entities consider when assessing whether to self-report a business crime or cooperate with a government investigation?
Neither individuals nor enterprises have an obligation to self-report a business crime or to cooperate in a criminal investigation. In principle, self-reporting a crime and fully cooperating in the investigation constitutes a mitigating factor at the sentencing stage. In practice, however, the impact is often difficult to measure, and this advantage of a cooperation may be outweighed by the fact that self-reporting triggers the certain prosecution of the crime. Any decision to self-report should therefore be taken only after a careful assessment of the potential benefits and disadvantages. Nonetheless, an enterprise should take the necessary steps to internally investigate suspected wrongdoing with a view to taking the appropriate internal measures to ensure its compliance and deciding on whether or not to self-report.
In regulatory investigations, the situation can be very different, however, in particular where a regulated business has a legal obligation to self-report under the applicable regulatory framework. Any regulated business is well advised to fully cooperate with the authorities and to conduct its own internal investigation of the issues at hand, in order to be able to act on an informed basis and to ensure future compliance.
One important practical aspect are the leniency rules that apply under cartel law. Under these rules, a company that joined a cartel and that assists in the discovery and elimination of the competition restraint can benefit from a substantial mitigation or even an exclusion from punishment.
9. Do enforcement agencies in your jurisdiction use non-prosecution agreements ("NPA") or deferred prosecution agreements ("DPA")? If so, how do such agreements work in practice and what can entities or individuals do to reach an NPA or a DPA with enforcement agencies? If not, do you believe it is likely that such agreements will become part of the legal framework in the next five years.
Non-prosecution agreements or deferred prosecution agreements do not exist in Swiss criminal law. Their introduction was recently debated when the Federal Code of Criminal Procedure was introduced in 2011, but there was largely agreement that these instruments would be alien to the Swiss legal tradition.
In practice there are, however, certain institutes that achieve similar effects.
Under article 53 SPC, the criminal authorities can, in certain cases, terminate a criminal proceeding if any damage caused has been repaired to the extent possible and if the public interest in a prosecution is small. This provision has been used in the past in particular to terminate proceedings for corporate criminal liability.
Further, under criminal procedural law, the accused may at any time prior to the case proceeding to trial request that the public prosecutor conduct an abbreviated proceeding, subject to the accused admitting the wrongdoing and, if only in principle, any civil claims. Accelerated proceedings are possible where the prosecutor requests a custodial sentence of up to five years. The public prosecutor decides on the request in a final and binding decision that cannot be appealed. If the public prosecutor allows the accelerated proceeding, the prosecutor submits the indictment to the parties and, if the parties accept it, to the court for approval. The court decides on the charges in an abbreviated proceeding. If the court accepts it, the indictment becomes an enforceable judgment; otherwise, an ordinary trial takes place.
Finally, the prosecutors also have the power not to initiate an investigation, or to terminate an ongoing investigation, if they come to the conclusion that no crime was committed or that a conviction is unlikely to be achieved. In practice, a settlement between the parties may in some instances lead to the prosecutor making use of this power to discontinue criminal proceedings.