Owing to Switzerland's political structure as a confederation of – in many respects – sovereign states (cantons), the competence to investigate and prosecute criminal conduct in general, including unlawful corporate conduct, may lie with cantonal or with federal authorities, depending on the specific circumstances of the case.
The Criminal Procedure Code (CPC)2 stipulates that the cantonal criminal justice authorities shall prosecute and judge offences under federal law, unless a statutory exception applies.3 The exceptions to this rule, however, are many. The federal authorities typically have jurisdiction in matters concerning the interests of the confederation, such as:
- offences committed against persons protected by international law;
- offences committed against federal magistrates;4
- acts infringing Switzerland's sovereignty, neutrality or economic interests;
- offences that pose a severe threat to the public;5 or
- offences that threaten the proper functioning of the federal political system.6
Of greater practical significance, however, is reserving jurisdiction to the federal authorities in economic crime matters when a substantial part of the unlawful conduct has occurred abroad or in two or several cantons with no clear local focus of the criminal activity. Such matters may include the forming of a criminal organisation, money laundering, terrorist financing and corruption, and general offences against property interests.7 The federal judiciary is also competent to investigate and prosecute insider trading and manipulation of the market price of securities admitted to trading in Switzerland.8
The authority generally competent at the federal level to investigate and prosecute criminal conduct is the Office of the Attorney General (OAG). Matters in the field of economic crime are being handled by a dedicated division. Likewise, cantons with major financial centres, such as Basle, Ticino, Geneva and Zurich, have special units in charge of investigating and prosecuting economic crime.
The powers of investigation by prosecutors at both federal and cantonal levels are defined by federal law, namely the CPC. They comprise the range of compulsory measures typically available to public prosecutors to secure evidence, ensure that persons attend the proceedings and guarantee execution of the final judgment,9 in particular summons, tracing of persons and property, remand and preventive detention, searches of records, persons and premises (including dawn raids), seizure and confiscation, DNA analysis and covert surveillance (including surveillance of post and telecommunications, monitoring bank transactions and undercover investigations).
Offences in the financial sector may also trigger regulatory action by the Financial Market Supervisory Authority (FINMA)10 for contravention of financial markets laws, such as the Anti-Money Laundering Act (AMLA),11 the Financial Market Infrastructure Act and the Banking Act.12
Investigations of suspected violations of regulatory laws are often assigned to independent examiners (typically a law firm or an audit firm with expertise in the field at issue); however, these examiners act under the auspices of FINMA. While neither the examiners nor FINMA agents have the power to carry out dawn raids or to search the premises of a financial institution, the law directs the parties subject to an investigation to fully cooperate with FINMA, to allow examiners access to premises and to provide them with all the information and documents that they may require to fulfil their tasks.13 Thus, in practice, examiners and investigating agents of FINMA have extensive investigative powers.
At the initial stage of regulatory intervention, it is not uncommon that FINMA will order an institution to conduct an internal investigation (mostly assisted by external legal and forensic experts) and to furnish a written report on the findings so as to enable FINMA to make an early assessment of the matter prior to assigning its own resources to the case.
FINMA and the competent federal or cantonal prosecution authorities may exchange information, and they are directed by the law to coordinate their investigations.14 Moreover, if FINMA obtains knowledge of felonies and misdemeanours pursuant to the Criminal Code (CC)15 or of offences against penal provisions of financial market acts, it is under a duty to report to the competent prosecution authorities.16
FINMA has no powers to impose penal sanctions such as fines. However, it may respond to contraventions of regulatory rules with severe administrative measures.17
Suspected unlawful restraints of competition pursuant to the Cartel Act (CartA)18 are investigated by the secretariat of the Competition Commission (COMCO). The secretariat has far-reaching investigative powers. It may, without prior court approval, order production of documents and information, carry out witness hearings, interview managers and staff of enterprises believed to be involved in a cartel or other restraints of competition, conduct dawn raids, demand expert reports and seize evidence.19
In line with international law protecting civil rights,20 Swiss law recognises that no one must be held to incriminate himself or herself (nemo tenetur se ipsum accusare). The CPC expressly confirms this principle, specifying that the accused party is entitled to refuse to make a statement or cooperate in criminal proceedings.21 However, this principle does not apply in administrative investigations, such as those conducted by FINMA or COMCO.22
What is more, in the context of criminal investigations in a corporate context, the nemo tenetur principle is subject to important limitations.
Swiss criminal law is characterised by the premise that an enterprise, subject to certain exceptions, cannot be held criminally liable.23 The investigation and prosecution of unlawful conduct is thus often directed against employees only, so that the enterprise, not being in a position to make use of the defence rights of an accused party, cannot refuse to cooperate with the prosecuting authorities. Where undertakings are subject themselves to criminal liability,24 they enjoy the same procedural guarantees as Swiss law would grant to any individual. Since the procedural rules make a distinction between the accused enterprise and those directors, officers and employees who can be called upon by the prosecuting authorities as information persons or witnesses, the options for enterprises to prevent disclosure of internal matters is nevertheless limited. Also, cooperation may be condoned by mitigating sanctions or by not sanctioning the undertaking at all.25 Last but not least, refusing to cooperate is rarely beneficial: a protracted investigation persistently absorbs management capacity, often disrupts business relationships, erodes reputation and creates legal and financial uncertainties.
As mentioned in Section I, Swiss law recognises the nemo tenetur principle. This rule also applies to legal entities.26
For undertakings active in the field of financial intermediation27 and legal entities that trade in goods commercially and accept cash in so doing, Swiss anti-money laundering legislation provides for an important exception: they must report suspected money laundering, or connections to terrorist financing or criminal organisations to the Money Laundering Reporting Office of Switzerland.28 This reporting duty also exists in cases where the undertaking itself is involved in the money laundering transaction. Non-compliance may entail a fine and, more importantly, regulatory sanctions.
Within the ambit of administrative (regulatory) law, the Financial Market Supervision Act (FINMASA) requires supervised persons and entities and their auditors to immediately report to FINMA any incident that is of substantial importance to the supervision.29 The incidents referred to by the FINMASA comprise significant cases of unlawful conduct, including criminal acts such as the embezzlement of clients' assets, disloyalty, criminal mismanagement, money laundering or large-scale tax offences.
Although Swiss cartel law does not stipulate a self-reporting duty, it strongly encourages undertakings to report unlawful restraints by providing for leniency, which ranges from a mere reduction to a full waiver of (administrative) sanction payments.30 Against the background that sanction payments under the CartA may amount to 10 per cent of the turnover achieved in Switzerland in the preceding three financial years, the incentive for undertakings to report is a strong one. Indeed, leniency applications (which necessarily require admission of own wrongdoing) are a common phenomenon in cartel law investigations. The criteria for assessing sanctions, and likewise the conditions and procedures for obtaining partial or complete immunity from sanctions, are set out in detail in an ordinance of the Swiss government, so that applicants may determine with a reasonable degree of certainty if and to what extent they may profit from self-reporting and cooperation.31
ii Internal investigations
The need to tackle suspected or actual irregularities by way of an internal investigation typically originates from diligence duties imposed by civil and administrative (regulatory) law.
As already noted, undertakings subject to supervision by FINMA are obliged to report incidents that are material from a regulatory perspective. If a matter that comes to the attention of a supervised undertaking potentially meets that criterion, the undertaking will have to clarify the pertinent facts and assess them in respect of the need to take action, including, besides reporting to FINMA, possible measures to restore compliance.
At the civil law level, an internal investigation may become imperative for board members and senior managers of an undertaking in order to fulfil their duty to ascertain compliance with applicable governance standards. The Swiss Code of Obligations32 provides that members of the board and others engaged in managing an entity's business must perform their duties with all due diligence and safeguard the interests of the undertaking in good faith.33 Hence, indications of material misconduct must lead them to initiate an internal investigation.
An aspect to be given due consideration in the context of internal investigations is the protection of employees' rights. Though it is widely recognised in Swiss doctrine and practice that communications of employees that relate to the performance of their work may be searched without their knowledge or specific consent if the prevailing interests of the employer so require, the principle of proportionality and the privacy rights of the employees must be respected.34 Hence, any analysis of the contents of correspondence should be preceded by a process that permits the separation of potentially relevant communications from those that are unlikely to require review. Searching communications is also relevant under data protection law.35 In particular, the analysis of data for communication patterns and the disclosure of personal data to third parties may be unlawful unless justified by an overriding interest of the employer.36
As a result of their general obligation of loyalty to their employers,37 employees must cooperate in an internal investigation, inter alia, by undergoing interrogation, unless they would thus incriminate or expose themselves to civil (or criminal) liability. To enable employees to adequately exercise their rights and – not least – to create an atmosphere of mutual confidence promoting their willingness to cooperate, undertakings should, and in practice regularly do, encourage employees to retain independent counsel. Related costs are typically covered by the employer.
Confidentiality is a key requirement in not prematurely narrowing down the number of options for an adequate response to the findings that may result from an internal investigation. This applies even in cases where the undertaking may ultimately have to share its findings with the (regulatory) authorities or proceed to voluntary self-reporting. To ensure confidentiality, undertakings regularly retain law firms to lead internal investigations.38 Provided that the investigation is a task embedded in the law firm's advisory or legal representation mandate, attorney–client privilege protects communications between the law firm and the undertaking, and between the law firm and its agents (namely accounting and forensic firms instructed by the law firm to perform certain tasks under its auspices), and documents such as minutes of interviews conducted by the law firm, meeting notes and reports.
Recent Swiss case law underlines the importance of placing an internal investigation into the wider context of specific attorney work if confidentiality is of concern.39 Business undertakings cannot simply 'outsource' investigations and the keeping of records of an investigation's results to law firms in order to preserve privilege. Attorney–client privilege applies comprehensively only when the collation of facts, their interpretation and legal analysis are inseparable elements of one and the same comprehensive (advisory or defence) mandate.
A new attempt to introduce to existing laws specific provisions on whistle-blowing in the private sector was launched by the Federal Council in 2018, some years after a first bill failed in parliament in 2015. The draft bill, in essence, prescribes a three-step process comprising mandatory internal reporting and the involvement of public authorities, which a whistle-blower must observe before reporting to the public. The process was criticised as being overly strict and offering insufficient protection by organisations such as Transparency International.40 Considering the overwhelmingly negative result of the vote in the National Council, it seems likely that this second attempt will not be successful either.41 Pending the ongoing legislative process, whistle-blowing in the private sector is still governed by the general rules and principles of employment law, company law, criminal law and data protection law.
An employee must raise suspected or known irregularities with his or her employer according to applicable internal rules (if any) prior to releasing any information to external entities; otherwise the employee may be in breach of contractual loyalty and confidentiality obligations towards the employer. If the disclosure is made intentionally, criminal liability may ensue in addition to the liability for breach of contract.
In effect, Swiss law does not require undertakings to set up a specific internal whistle-blowing unit to which employees may report confidentially, although, in line with international guidelines and best practices, many corporations have introduced a mechanism or designated an independent body to which suspected misconduct can be reported. Studies show that 11 per cent of all companies in Switzerland have introduced a reporting point.42 Considerable differences exist between large international corporations where the majority of the designated internal or external reporting points are to be found (70 per cent) and smaller to medium-sized enterprises where such reporting points are still rare (less than 10 per cent).
The case law of the Federal Supreme Court provides additional guidance, in particular with respect to the requirements that employees must meet before reporting to the public.43 First, employees are bound not to disclose to the public any information concerning their employer and its business that is not in the public domain. Generally, employees must remain silent even about offences committed within the employer's domain unless there is a public interest in the disclosure that overrides the employer's interest in keeping unlawful conduct confidential. The proportionality test requires that an employee informs the employer before notifying the authorities and, further, that employees may report to the public only if the notified authorities fail to take action.
The public sector is ahead of the private sector regarding protection of whistle-blowers. Since 2011, employees of the federal government must report criminal conduct to the penal authorities44 and may inform the Swiss Federal Audit Office about suspected irregularities.45 In 2017, the federal government introduced an official and secured digital platform where public employees or private persons may report suspected misconduct anonymously.46 Since the introduction of the platform, the number of reports has increased significantly.47
The Swiss Federal Police (Fedpol) is operating a web-based platform for reporting suspected corruption.48 The platform safeguards the anonymity of the person reporting and neither stores the IP addresses, time or metadata that may allow identification of the person or of the computer used to make the report. Fedpol reviews each report for criminal relevance before forwarding it to the competent internal office, external agency (e.g., cantonal police) or, in the case of irregularities within the federal administrative units, to the Federal Audit Office for follow-up action.49
Non-government organisations, such as Transparency International, promote the importance of whistle-blowing in the fight against commercial crime and corruption, and advocate ensuring that whistle-blowers are afforded proper protection and disclosure opportunities under the law.50
With the enactment of whistle-blower legislation in Switzerland remaining blocked, Swiss companies are advised to take guidance in generally accepted practices when shaping their own whistle-blowing policies. To encourage internal reporting, companies should, in particular: designate an independent whistle-blowing unit; specify rules of procedure to follow up on reported irregularities; prohibit dismissal or disadvantages because of reports; and allow for anonymous reports.
i Corporate liability
Criminal law provides for a general ancillary liability of an undertaking for felonies or misdemeanours committed in its business domain if it is not possible to attribute the wrongful act to any specific individual perpetrator because of inadequate organisation by the undertaking.51 Moreover, an undertaking may be subject to criminal liability, irrespective of the liability of any individual perpetrator, for participation in a criminal organisation (Article 260 ter CC), the financing of terrorism (Article 260 quinquies CC), money laundering (Article 305 bis CC) or bribery (Article 322 ter, 322 quinquies, 322 septies, Paragraph 1 or 322 octies CC) if it is found to have failed to take all reasonable organisational measures required to prevent such an offence.52
The law on corporate criminal liability thus sanctions organisational deficiencies rather than the criminal conduct (for which the individual perpetrator remains responsible), thereby creating a strong incentive for undertakings to establish sound compliance and government standards.
Swiss law is rooted in the principle that all acts – including unlawful conduct – of board members or senior managers committed in their official capacity are deemed to be acts of the undertaking itself and may therefore expose the undertaking to civil liability.53 Likewise, an undertaking is subject to civil liability for any loss resulting from acts of employees unless it proves that it has taken all precautionary measures required in the circumstances to prevent the respective loss.54 Non-compliance with statutory duties by members of the board or senior managers (including the duty to ascertain adequate organisation of the undertaking and effective overall supervision regarding compliance with the law, the articles of association, operational regulations and directives) may also trigger the personal civil liability of board members.55
Undertakings may be fined up to 5 million Swiss francs for criminal conduct that occurs in their domain.56 Moreover, assets that have been acquired through, or that are intended to be used in, the commission of a criminal offence (e.g., bribes) are subject to disgorgement.57
Contraventions of regulatory rules in the financial sector are primarily sanctioned by measures aiming to restore compliance with the law to protect either the public or the good functioning of financial markets. The array of instruments available to FINMA comprises corrective measures such as cease and desist orders, declaratory rulings, disqualification of the individuals responsible from acting in a management capacity at any undertaking subject to FINMA's supervision for up to five years, publication of supervisory rulings, confiscation of profit made through a serious violation of supervisory provisions, revocation of licence, withdrawal of recognition or cancellation of registration and compulsory dissolution.58 In addition, anyone who wilfully disregards licensing, recognition or registration requirements as set forth in financial markets legislation, wilfully provides wrong information to FINMA, auditors or self-regulating organisations, or wilfully avoids mandatory audits of financial statements by refusing to fully cooperate with auditors or FINMA's agents, as the case may be, is liable to a custodial sentence of up to three years or a monetary penalty. Negligent conduct may be fined up to 250,000 Swiss francs. Non-compliance with FINMA rulings is subject to a fine of up to 100,000 Swiss francs.59
COMCO may sanction undertakings that have participated in a cartel or unlawful vertical restraints, or that have abused their dominant position in the market, by charging up to 10 per cent of the turnover achieved in Switzerland in the preceding three financial years. The same sanction may be imposed by COMCO on undertakings that breach an amicable settlement made with, or a final and non-appealable ruling issued by, COMCO or an appellate body.60 In the event of a breach in the context of merger control matters, COMCO may charge up to 1 million Swiss francs, or, in the case of repeated non-compliance, up to 10 per cent of the combined turnover which the undertakings concerned have achieved in Switzerland.61 Undertakings that fail to fulfil their obligation to provide information or produce documents to COMCO are subject to a charge of up to 100,000 Swiss francs.62 In addition, COMCO may fine individuals up to 100,000 Swiss francs.63
iii Compliance programmes
The existence of an adequate compliance programme is a key defence to corporate criminal liability. As noted above, Swiss law does not hold undertakings criminally liable for offences committed by individuals within their domain, but for their failure to take all organisational measures required to prevent such offences. Among the measures required, compliance programmes have a pivotal role.64
From a regulatory perspective, compliance policies are an indispensable element of the mandatory internal control system of undertakings supervised by FINMA. Failure to establish a compliance programme constitutes a breach of the regulatory duty to ensure adequate organisation and may thus entail regulatory sanctions.65
In the area of competition law, the existence of compliance programmes to prevent contraventions of the CartA may provide a decisive argument to shield members of the governing bodies of an undertaking involved in unlawful conduct from personal criminal liability under Articles 54 and 55 CartA.
Valuable guidance for establishing a compliance programme in accordance with standards accepted as adequate by Swiss authorities may be found in ISO 19600 on compliance management systems, ISO 31000 on risk management and ISO 37001 on anti-bribery systems.66
iv Prosecution of individuals
As noted above, criminal law primarily addresses the conduct of individual perpetrators. Liability of undertakings is basically of an accessory nature only. Accordingly, criminal prosecution inevitably means prosecution of individuals, also in a corporate crime context.
To enhance the preventive effect of enforcement in the financial sector, FINMA has stepped up its action against individuals for suspected serious breaches of supervisory law since 2014.67 Consequently, action against individuals is an increasingly common feature of regulatory proceedings.68
Coordination of defence strategies and arguments between the undertaking and a targeted employee is often delicate as it may be perceived as collusion. In penal matters, supporting the defence of a suspected person by sharing information relating to the investigation, non-disclosure of relevant evidence, incomplete or misleading fact statements or the like may amount to unlawful assistance to evade prosecution.69 Furthermore, prosecuting authorities may, and often do, impose a duty of confidentiality on witnesses.70
Ideally, the undertaking therefore limits interaction with the targeted employee to obtaining information from him or her (or the employee's counsel), whereas it cannot keep the employee apprised of its own strategies, actions and communications with the authorities.
During an investigation, an employee's contract should not be terminated. For as long as the employment relationship continues, the undertaking has a handle on the employee to assert compliance with directives and instructions and loyal safeguarding of the undertaking's interests,71 which may include cooperation in fact finding and reporting on developments of concern to the employer.
While the undertaking may consider releasing the employee from his or her work pending the investigation (garden leave) for reputational reasons, or to avoid undue interference, it should not take disciplinary measures prior to completion of the investigation. Also, when considering any disciplinary measures, the undertaking must apply principles of fair process; the safeguarding of an employee's personal rights (including the right to be heard) is mandatory.72 Regularly, undertakings concerned about criminal or administrative proceedings arrange for independent legal counsel to support the employee under investigation and sustain the resulting cost. As a rule, legal fees are paid by the employee only if he or she acted manifestly against internal regulations, instructions or statutory law.
i Extraterritorial jurisdiction
There are several areas in which Switzerland imposes its laws and jurisdiction on undertakings (foreign or domestic) for conduct that took place outside Switzerland. This extraterritorial reach is often in line with obligations in international treaties and bodies of which Switzerland is a part, such as the United Nations, the European Convention on Human Rights and the Organisation for Economic Co-operation and Development (OECD), and aims to safeguard against the infringement of human rights by corporations.73
In the public law domain, it is the Act against Unfair Competition,74 the CartA, the Data Protection Act and the Public Procurement Act75 that have extraterritorial reach. The competition law, for example, applies in all matters that have an unfair impact on the Swiss market irrespective of whether the infringing conduct took place within or outside Switzerland (effects doctrine).76 Similarly, competition law offences that have an effect in Switzerland can be investigated and sanctioned by COMCO even if they took place abroad.
Criminal law follows the principle of territoriality, but extends its reach with respect to certain offences. In combating corruption in the private sector, Parliament recently introduced Articles 322 octies and 322 novies CC, which declare it punishable for anyone to offer or request undue advantages in exchange for carrying out or omitting an act in connection with the function in a company or organisation in the private sector, be it in contravention of duties or in the exercise of discretion. Active bribery in the private sector does not only expose the individuals committing the act to prosecution, but by virtue of Article 102, Paragraph 2 CC may also trigger the liability of the undertaking. This provision can lead to extraterritorial jurisdiction over non-domestic branch offices of Swiss undertakings.
Parliament is debating a controversial initiative seeking to extend liability of Swiss undertakings to the conduct of entities abroad that are controlled by them, and to introduce mandatory governance standards based on the United Nations Guiding Principles on Business and Human Rights.77 Should the proposed regulation become law, governance breaches by Swiss undertakings abroad would generally come within the reach of Swiss courts.
ii International cooperation
Switzerland cooperates with other countries' government agencies, judiciary or prosecution authorities by way of administrative assistance or judicial assistance.78 The distinction of these two routes of cooperation is important. In a recent judgment, the Federal Supreme Court underlined that administrative assistance is limited to cooperation between administrative bodies and for administrative purposes (for example, the enforcement of tax laws) only, whereas information required for the purposes of criminal prosecution must be sought by way of judicial assistance in criminal matters.79 There is no bypassing of the rules – and specific procedural guarantees – of judicial assistance by the route of administrative assistance.
Switzerland provides assistance in criminal matters that is not treaty-based under the International Mutual Legal Assistance Act (IMAC).80 There is no extradition of Swiss nationals against their will, but foreigners can be extradited under respective international treaties or the IMAC.81
FINMA cooperates with foreign supervisory authorities in specific supervisory or enforcement proceedings. The latest statistics (published in 2017)82 show a steady number of requests for international cooperation (436 in 2016, 457 in 2017) pertaining mostly to offences of insider trading, market manipulation and breach of reporting duties.
COMCO participates in a number of competition authority networks, such as the Competition Committee of the OECD and the International Competition Network. Bilateral and multilateral cooperation agreements exist between Switzerland and the European Union and other countries. The degree of integration allows for an efficient prosecution of anti-competitive cross-border activities.83
iii Local law considerations
There are certain criminal provisions that need to be considered in an investigation abroad having a nexus to Switzerland.
The first is the prohibition to carry out activities on behalf of a foreign state on Swiss territory without official approval, where the activities are the responsibility of a public authority or an official pursuant to Article 271 CC. This provision is intended to prevent the exercise of foreign official power on Swiss territory and thus protect state sovereignty. An act attributable to an authority or official is any act that characterises itself as such by its nature and purpose, regardless of whether it was carried out by a person formally holding an official position. The decisive factor is, therefore, not the individual, but the official character of the conduct. The Federal Supreme Court recently held that the disclosure of client information to US authorities by a Swiss-based asset management company with a view to facilitating the conclusion of a non-prosecution agreement violated Article 271 CC, despite the responsible manager of the company claiming he had not and could not have been aware that he was committing an unlawful act at the time of the relevant conduct.84 The criminal sanction may also apply to foreign attorneys travelling to Switzerland for the purpose of an investigation85 and may even cover the remote accessing of information via a Swiss-based server.
The second is the ban on divulging Swiss business secrets to foreign entities and states pursuant to Article 273 CC. A 'Swiss business secret' is any information of commercial value that is not in the public domain outside Switzerland and that typically relates to a business domiciled in Switzerland.86 It applies also to the intra-group and cross-border disclosure of business secrets from a subsidiary to the parent company. Even the inadvertent cross-border disclosure of facts may constitute a violation of Swiss business secrecy. Further, Article 47 of the Banking Act sanctions the duty on banks to keep private information about their clients confidential (often referred to as bank secrecy). The purpose of the provision is to safeguard the privacy of the client; it is not a confidentiality privilege of the bank.
Article 162 CC makes it an offence to reveal a business secret that has to be guarded pursuant to a statutory or contractual obligation.
In Swiss law, attorney–client privilege is expressly guaranteed by the Attorneys Act87 and any breach is sanctioned by criminal law.88 However, the concept of legal privilege is fairly narrow and does not (yet) encompass legal advice from in-house counsel or external legal experts who are not members of the Swiss Bar.89 A recent proposal for amendments to the Swiss Code on Civil Procedure contains a new Article 160a, which – if enacted – extends legal privilege to in-house counsel and their team for 'attorney-specific' work performed under the auspices of a person who attained a domestic bar registration or equivalent permit for attorney work.90
V YEAR IN REVIEW
There are several noteworthy amendments to existing laws under way. On 1 June 2018, the Federal Council initiated the consultation on proposed amendments to the AMLA. The amendments aim to implement the most important recommendations of the Financial Action Task Force's (FATF) Mutual Evaluation Report on Switzerland of December 2016. The key amendments are:
- The scope of application of the AMLA is extended to include providers of services (e.g., advisers, consultants, attorneys) relating to the establishment, management or administration of companies and trusts. These service providers must comply with due diligence duties similar to those applying to financial intermediaries.
- Financial intermediaries will no longer be entitled to simply rely on self-declarations of contracting parties as to beneficial ownership, but have to verify such declarations in the light of any other information they have about the relationship (e.g., customer profile, transaction lists). Financial intermediaries will also be obliged to regularly check that client data is up to date.
- The threshold for cash payments in precious metals and gem trading will be reduced. Currently, traders must obey specific duties of care when receiving a cash payment of 100,000 Swiss francs. This threshold will newly be set at 15,000 Swiss francs. The consultation draft also deals with the risk of associations being misused for the financing of terrorism or money laundering.91
Last September, the government published a draft bill on whistle-blowing in the private sector; however, as noted above, this bill is unlikely to pass parliamentary debate in its current form (if at all). Further, parliamentary work to amend the codes on civil and criminal procedure is under way. Topics discussed in that context include the introduction of agreements on the deferred indictment of undertakings and the extension of legal privilege to in-house counsel.
The OAG's Annual Report for 2018 has not yet been published at the time of writing. Press releases show that the OAG was occupied with the Petrobras investigation and able to restitute 365 million Swiss francs to Brazil. The investigation of the 1MDB case remains ongoing and the OAG paid working visits to its counterparts in Malaysia. In the area of cyber crime, charges have been brought for the first time in a 'voice phishing' case following close cooperation between Switzerland and the Netherlands: the criminal proceedings were directed against an individual accused of making telephone calls to deceive persons into disclosing e-banking access data. The data obtained was then used to make unlawful money transfers to the detriment of around 50 victims in Switzerland.
A highly publicised matter in 2018 was that concerning money laundering and terrorist financing risks associated with cryptocurrency assets and crowdfunding. The Interdepartmental Coordination Group on the Combating of Money Laundering and Terrorist Financing issued a comprehensive report on the topic in October 2018. While the report considers the legislative framework to identify and minimise money-laundering risks associated with transactions using blockchain technology as reasonably robust, it concludes that crowdfunding platforms, since typically not encompassed in the current legislation on know-your-client procedures and due diligence in the financial sector, are seriously exposed to the risk of being abused for unlawful operations, including terrorist financing. The Group suggests that the government, in coordination with the FATF, takes measures to extend the scope of application of anti-money laundering and terrorist-financing rules on these platforms.92
VI CONCLUSIONS AND OUTLOOK
Navigating an undertaking through criminal or administrative investigations remains a challenge, although case law has in recent years significantly sharpened the contours of best practice. A number of important issues are still pending clarification:
- Attorney–client privilege in connection with internal investigations: case law remains in flux as regards the prerequisites for, and scope of, protection of attorney work products in internal investigations. The proposed extension of legal privilege to in-house lawyers may bring clarification.
- Protection of whistle-blowers: the legislative process to clarify the mutual rights, obligations and duties of individuals on the one hand and undertakings on the other is blocked. With the contours of the future legal framework remaining blurred, companies should take guidance in best practices that have evolved during the past years.
- Multi-jurisdictional investigations: the legal corset of domestic and international laws on administrative and judicial cooperation is often perceived by investigating authorities and – in some instances also by undertakings and individuals investigated – as not flexible enough to sensibly respond to the challenges of multi-jurisdictional investigations; cooperation is thus often informal. Also, there continues to be a high degree of uncertainty as regards protection of basic civil rights in matters that are being investigated in parallel in various jurisdictions, such as nemo tenetur and ne bis in idem.
- Protection of supervisory privilege: Swiss courts, including the Federal Supreme Court, have in the past repeatedly confirmed the prosecutors' authority to compel undertakings and individuals in criminal investigations to disclose documents (including internal investigation reports) that had been prepared for regulatory purposes even where the competent regulatory agency expressly declined to share such documents with the prosecuting authorities.
What remains clear, however, is the need for constant review and improvement of compliance structures to keep pace with national and international developments. Adequate organisation and, no less importantly, a culture promoting compliance, are the most efficient ways to minimise exposure to criminal or regulatory scrutiny in general and the uncertainties outlined in this chapter in particular.
1 Bernhard Lötscher is a partner at CMS von Erlach Poncet Ltd and and Aline Wey Speirs is a partner at Altenburger Ltd legal + tax.
2 Swiss Criminal Procedure Code (CPC, SR 312.1).
3 See: Article 22 CPC. The provision roots in Article 123, Paragraph 2 of the Swiss Constitution, which directs that the cantons are responsible for the organisation of the courts, the administration of justice in criminal cases as well as for the execution of penalties and measures, unless the law provides otherwise.
4 e.g., members of the federal government, the federal parliament or the Federal Supreme Court.
5 e.g., offences involving the use of explosives, toxic gas or radioactive substances.
6 Article 23 CPC.
7 Article 24 CPC.
8 Articles 154 to 156 of the Financial Market Infrastructure Act (SR 958.1).
9 Article 196 CPC.
10 The scope of regulatory jurisdiction and the powers of FINMA are specified in the Financial Market Supervision Act (FINMASA, SR 956.1).
11 Federal Act on Combating Money Laundering and Terrorist Financing (SR 955.0).
12 Federal Act on Banks and Saving Banks (SR 952.0).
13 Articles 29 and 36 FINMASA.
14 Article 38, Paragraphs 1 and 2 FINMASA.
15 Swiss Criminal Code (CC, SR 311.0).
16 Article 38, Paragraph 3 FINMASA. Violations of the criminal provisions of the financial market acts are generally prosecuted by the Federal Department of Finance or, in cases where a matter may be subject to a custodial sentence, by federal or cantonal prosecutors; cf. Article 50 FINMASA.
17 See: Articles 31 et seq. FINMASA.
18 Federal Act on Cartels and Other Restraints of Competition (SR 251).
19 See, in particular, Articles 40 and 42 of the Cartel Act (CartA).
20 See Article 14, Paragraph 3(g) of the International Covenant on Civil and Political Rights and Article 6 of the European Convention of Human Rights.
21 Article 113, Paragraph 1 CPC.
22 In conjunction with FINMA and Competition Commission (COMCO) investigations, the targeted party is subject to a comprehensive duty to cooperate (Articles 29 and 36 FINMASA and Article 40 CartA).
23 The principle known as societas non delinquere potest was abolished in Swiss criminal law only on 1 October 2003, when Article 102 CC on corporate criminal liability entered into force.
24 Pursuant to Article 102, Paragraph 2 CC, undertakings may be held criminally liable for participation in a criminal organisation (Article 260 ter CC), financing of terrorism (Article 260 quinquies CC), money laundering (Article 305 bis CC) and bribery (Articles 322 ter, 322 quinquies, 322 septies, Paragraph 1 or 322 octies CC).
25 Articles 47 et seq. CC.
26 In spring 2018, the OAG proposed supplementing the CPC with provisions that would allow for a deferred indictment of undertakings based on deferred prosecution agreements. The prerequisites for an agreement on a deferred indictment, according to the concept, would be self-reporting or a rapid response to a criminal investigation and full cooperation with the law enforcement agencies. The undertaking would also have to recognise the facts and circumstances relevant to the criminal assessment of the conduct and any civil claims, but it would not be required to make a formal admission of guilt. The proposal is not part of the current legislative process to update the CPC, and if and when it will become law is thus entirely undecided. Once introduced, the option to obtain a deferred indictment would, however, significantly impair the practical significance of the nemo tenetur principle.
27 Financial intermediaries include banks, investment companies, insurance companies, securities traders, central counterparties and securities depositories, providers of payment services, casinos and asset managers.
28 Article 9 of the Anti-Money Laundering Act. The Money Laundering Reporting Office of Switzerland is a member of the Egmont Group, which is an international association of financial intelligence units, whose objective is to foster a secure, prompt and legally admissible exchange of information to combat money laundering and terrorist financing.
29 Article 29, Paragraph 2 FINMASA.
30 Article 49a, Paragraph 2 CartA.
31 See: Ordinance on Sanctions Imposed for Unlawful Restraints of Competition (Cartel Act Sanctions Ordinance, SR 251.5).
32 Federal Act on the Amendment of the Swiss Civil Code, Part Five: Code of Obligations (CO, SR 220).
33 See: Article 717 CO.
34 Articles 328 and 328b CO.
35 Federal Act on Data Protection (FADP, SR 235.1).
36 Articles 12 et seq. FADP.
37 Article 321a, Paragraph 1 CO.
38 Swiss law does not recognise a legal privilege of in-house counsels and legal advisers who are not members of the Bar Association, even if the work they perform may qualify as legal advice.
39 Federal Supreme Court, judgment of 20 September 2016, 1B_85/2016; Federal Criminal Court, judgment of 4 September 2017, BE.2017.2.
40 See: https://transparency.ch/vernehmlassung/whistleblower-schutz-parlamentsberatungen-zur-revision-des-obligationenrechts/.
41 The National Council (chamber of the federal parliament) rejected the bill on 3 June 2019 with opposing votes exceeding approving votes by the factor of five.
42 See: HTW Chur, 'Whistleblowing Report 2018', https://whistleblowingreport.ch.
43 See: DFT 127 III 310, 30 March 2011, consid. 5.
44 Article 22a Federal Act on Personnel (BPG, SR 172.220.1).
45 See: www.efk.admin.ch/de/whistleblowing-d.html.
46 See: www.whistleblowing.admin.ch.
47 From around 70 reports in previous years to 122 reports in 2017 (numbers for 2018 are not yet published).
48 See: https://fedpol.integrityplatform.org.
49 See: https://www.fedpol.admin.ch/fedpol/en/home/kriminalitaet/korruption.html.
50 See: International Principles for Whistle-blower Legislation published by Transparency International in 2013; https://transparency.ch/wp-content/uploads/2017/08/2013_WhistleblowerPrinciples_EN.pdf.
51 Article 102, Paragraph 1 CC.
52 Article 102, Paragraph 2 CC.
53 Article 55, Paragraph 2 Civil Code.
54 Article 55, Paragraph 1 CO.
55 Article 754 CO.
56 Article 102 CC.
57 Articles 70 et seq. CC.
58 Articles 31 et seq. FINMASA.
59 Articles 44 et seq. FINMASA.
60 Articles 49 and 50 CartA.
61 Article 51 CartA.
62 Article 52 CartA.
63 Articles 54 et seq. CartA.
64 Article 102, Paragraph 2 CC.
65 See: FINMA Circular 2017/1 'Corporate governance – banks', note 6.
66 See also: OECD (2014), Risk Management and Corporate Governance, Corporate Governance, OECD Publishing, http://dx.doi.org/10.1787/9789264208636-en.
67 FINMA guidelines on enforcement policy of 25 September 2014.
68 See: 'FINMA enforcement report 2018' of 4 April 2019.
69 Article 305 CC.
70 Article 165 CPC.
71 Articles 321a and 321d CO.
72 See: Article 328, Paragraph 1 CO.
73 See: Report of the Swiss Centre of Expertise in Human Rights, 'Extraterritorialität im Bereich Wirtschaft und Menschenrechte', 15 August 2016, www.skmr.ch/cms/upload/pdf/160815_SKMR_Studie_Extraterritorialitaet.pdf.
74 Federal Act Against Unfair Competition (UCA, SR 241).
75 Federal Act on Public Procurement (SR 172.056.1).
76 Articles 3 and 7 UCA.
77 The initiative is known as 'Konzernverantwortungsinitiative'; see: http://konzern-initiative.ch.
78 The Swiss government maintains a comprehensive database on the sources of law and forms relevant in international legal assistance, https://www.rhf.admin.ch/rhf/de/home/rechtshilfefuehrer/laenderindex.html.
79 Federal Supreme Court judgment dated 28 December 2017, 2C_640/2016.
80 Federal Act on International Mutual Assistance in Criminal Matters (SR 351.1).
81 Article 32 of the International Mutual Legal Assistance Act.
82 See: https://www.finma.ch/de/durchsetzung/amtshilfe/internationale-amtshilfe/.
83 See: https://www.weko.admin.ch/weko/en/home/comco/international-cooperation.html.
84 Federal Supreme Court Decision 6B_804/2018 of 4 December 2018.
85 Spehl/Gruetzner (eds.), Corporate Internal Investigations, CH Beck oHG, Munich 2013, Germany, p. 360
86 ibid., p. 361 n 29.
87 Article 13 Federal Act on Free Movement of Attorneys (BGFA, SR 935.61).
88 Article 321 CC: the person violating the professional secret may, upon complaint, be liable to a custodial sentence of up to three years or to a monetary penalty.
89 Whether and to what extent foreign lawyers can invoke legal advice or representation privilege widely depends on the rules applying in their own jurisdiction. Switzerland tends to recognise the core elements of foreign privilege rules.
90 See: https://www.bj.admin.ch/bj/de/home/staat/gesetzgebung/aenderung-zpo.html.
91 See FATF's Mutual Evaluation Report on Switzerland, at 192 and 256.
92 See: https://www.admin.ch/gov/de/start/dokumentation/medienmitteilungen/rss-feeds/nach-themen/medienmitteilungen-und-reden.msg-id-73398.html.