Lexology GTDT Market Intelligence provides a unique perspective on evolving legal and regulatory landscapes. This interview is taken from the Anti-Corruption volume featuring discussion and analysis of legal developments, compliance risk and the role of enforcement authorities within key jurisdictions worldwide.

1 What are the key developments related to anti-corruption regulation and investigations in the past year in your jurisdiction, and what lessons can compliance professionals learn from them?

In 2019, Switzerland ranked fourth out of 180 countries examined by Transparency International’s Corruption Perception Index, with a score of 85 out of 100.

Despite its high ranking, Switzerland is not exempt from corrupt behaviour. Indeed, in 2019, Swiss courts dealt with 48 cases involving a sum of at least 50,000 Swiss francs and a total prejudice of 363 million francs. In comparison with the previous year, the amount of offences increased by 119 per cent to 166 million francs in 2018. Experience has shown that a large proportion of offences are not reported, so that a much higher proportion of cases are likely to go unreported.

The Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery regularly assesses states party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions on the basis of their implementation of the convention. Switzerland was last reviewed (Country Assessment Phase 4) in the OECD report of 27 March 2018. The follow-up report of this phase is expected to be carried out in the course of 2020.

On 15 July 2019, the Swiss Federal Department of Finance, through the Interdepartmental Coordination Group on Combating Money Laundering and Terrorist Financing, published its report on corruption as a predicate offence to money laundering. The report concludes that there is a high risk of money laundering from foreign corruption in Switzerland.

However, we can commend Switzerland’s legislative efforts for having adopted the necessary legislative and administrative measures to deal with the money laundering from foreign corruption – and having already undertaken to improve these measures.

Among the measures contributing to reducing the risk of money laundering derived from foreign corruption, several have already been put forward by the authorities and are, or will soon be, subject to parliamentary discussion. These include the following.

  • The abolition of privileged tax status, as established by the Federal Law on Tax Reform and the Financing of the AHV of 28 September 2018, which came into force on 1 January 2020. This measure makes the establishment of domiciliary companies less attractive, so that the risk related to the use of Swiss domiciliary companies to launder funds derived from foreign corruption should decrease.
  • The draft amendment to the Code of Obligations currently under discussion in Parliament (FF 2017 625). According to this project, companies active in the field of raw materials production will be required to publish the sums they pay to foreign states under the operating contracts they have won. This will certainly improve the transparency of the financial flows related to such activities and thus reduce the risk of corruption they represent.
  • The submission to the Anti-Money Laundering Act (AMLA) of consulting activities related to the creation, management and administration of companies and legal arrangements, proposed in particular by lawyers, notaries and fiduciaries, will help to reduce the risk associated with the involvement of consulting and financial management companies in money laundering derived from corruption. These legislative improvements are provided for in the draft amendment to the Federal Law on Combating Money Laundering, prepared by the Federal Department of Finance, which was adopted by the Federal Council on 26 June 2019.
  • The new version of the Money Laundering Ordinance of the Swiss Financial Market Supervisory Authority (FINMA), which entered into force on 1 January 2020, now explicitly provides that financial intermediaries must know the reasons why a domiciliary company is being used. Financial intermediaries who manage business relationships in which domiciliary companies are involved must therefore clarify, by means of risk-based measures, the reasons why a domiciliary company is being used. This measure reduces the risks associated with the use of domiciliary companies for bribery purposes.

On 1 March 2020, we can also welcome the entry into force of the Federal Department of Defence, Civil Protection and Sport Guidelines on the organisation of the prevention of bribery and the behavioural obligations of employees.

However, Switzerland still has serious shortcomings in the areas of transparency in political financing, protection of whistle-blowers, combating money laundering and corruption in the private sector and sport.

2 What are the key areas of anti-corruption compliance risk on which companies operating in your jurisdiction should focus?

In our contribution to Private Equity 2019, we indicated that, in order to comply with anti-corruption and anti-money laundering regulations, organisations must focus on implementing and maintaining effective risk and compliance management systems.

We reiterate our statement, especially that in the event of corruption committed within the company, the company itself is criminally liable if it is accused of not having taken all reasonable and necessary organisational measures to prevent such an offence (article 102, paragraph 2 of the Criminal Code).

Of course, the extent of the preventive measures will depend on their specifications – their size, the nature of their business activity developed, the risks associated with the type of products or services sold, the markets targeted and other things.

International and national standards particularly advise companies to implement a code of conduct and an anti-corruption programme to prevent and detect bribery. This code would specify, for example, that a company’s employees are prohibited from accepting undue advantages and must inform their superior of any gifts they receive, that the company provides a disciplinary procedure to address violations of the code and that it trains employees, among other things.

We also recommend a protection mechanism for whistle-blowers within the company, in the absence of sufficient protection in Swiss legislation (for more on this, see question 3).

It goes without saying that it is not enough to adopt appropriate and effective organisational measures. They must also be implemented.

3 Do you expect the enforcement policies or priorities of anti-corruption authorities in your jurisdiction to change in the near future? If so, how do you think that might affect compliance efforts by companies or impact their business?

In answer to question 1, we referred to legislative work currently underway in the context of the fight against corruption. There is no doubt that the Swiss legislative system still has serious shortcomings in the prevention of bribery.

In Private Equity 2019, we talked about the fact that a legislative revision was currently underway to establish legal protection for whistle-blowers. Unfortunately, Parliament definitively dropped the bill, which was considered too complex, on 5 March 2020.

However, in cases of suspected corruption, there are state entities that can receive suspicious reports: in particular the Compliance Office of the Federal Department of Foreign Affairs, the whistle-blower platform of the Swiss Federal Audit Office and the Money Laundering Reporting Office (MROS) – it being specified that a quarter of the predicate offences to money laundering are corruption offences.

Another gap lies in the fight against money laundering, as well as against bribery in the private sector and sport.

Finally, it is worth mentioning the opacity in the financing of political parties, which can lead to the payment of bribes. This failure should be the subject of a parliamentary review in the coming months.

There remains pressure from the OECD and Transparency International to improve the fight against corruption in Switzerland. We are quite enthusiastic that Switzerland is improving because our country attaches great importance to preventing bribery and to Switzerland’s good reputation around the world.

It goes without saying that with legislative changes along the lines explained above, companies will spontaneously have to put in place adequate structures to avoid any risk of corruption.

4 Have you seen evidence of continuing or increasing cooperation by the enforcement authorities in your jurisdiction with authorities in other countries? If so, how has that affected the implementation or outcomes of their investigations?

In Switzerland, there are already legal bases for the taking of repressive measures in the event of human rights violations or criminal acts of international corruption: the Embargo Act, the Property Control Act, the Federal Act on War Material, the Act on International Mutual Assistance in Criminal Matters, the Act on Assets of Illegal Origin and the Criminal Code.

However, the offence of transnational corruption inherently involves several states, so international collaboration is an indispensable tool in the detection and prosecution of corruption offences.

Moreover, the fight against the laundering of money from foreign corruption in Switzerland depends, to a large extent, on the cooperation of foreign authorities, especially judicial authorities, with their Swiss counterparts. Therefore, it is at the international level that the main efforts must be made to mitigate this risk.

At the international level, there are several international instruments allowing for mutual assistance between state parties (in particular article 60 of the UN Convention Against Corruption).

In addition, we can mention the draft Federal Decree approving and implementing the Council of Europe Convention on the Prevention of Terrorism and its Additional Protocol and concerning the strengthening of penal standards against terrorism and organised crime (FF 2018 6557), which is currently being debated by Parliament. This project should also make the fight against money laundering, and thus against the laundering of money derived from corruption abroad, more effective. It gives MROS the power to issue requests for information to Swiss financial intermediaries on the basis of information received from foreign authorities. This measure will, therefore, strengthen MROS’s role in international cooperation to combat the laundering of corrupt money.

5 Have you seen any recent changes in how the enforcement authorities handle the potential culpability of individuals versus the treatment of corporate entities? How has this affected your advice to compliance professionals managing corruption risks?

The criminal liability of the company (article 102 of the Swiss Criminal Code) is to be presented more deeply at this stage.

To summarise this provision, when a misdemeanour or a crime is committed within the company in the exercise of business activities in accordance with its goals, the offence is imputed to the company if it cannot be attributed to any specific natural person due to the lack of organisation of the company.

In the case of a bribery offence, the company shall be punished irrespective of the punishability of natural persons if it is to be blamed for failing to take all reasonable and necessary organisational measures to prevent such an offence.

If the company is convicted in the sense of article 102 of the Criminal Code, it risks a fine of up to 5 million francs. If an individual is convicted of bribery, they risk a custodial sentence of between three and five years at most (article 322 of the Criminal Code).

Thus, the treatment of an individual versus a corporate entity can sometimes be very unequal.

In various criminal proceedings for corporate criminal liability (notably the Alstom and Siemens corruption cases), the authorities have made use of article 53 of the Criminal Code.

This provision allows the criminal prosecution authority to drop proceedings, in particular if the accused has repaired the damage or made all efforts to compensate for the harm he or she has caused (for example, if the company pays a substantial amount to the state and the plaintiff) and if he or she is liable to a custodial sentence of up to one year, a pecuniary penalty or a fine.

The application of this provision gives great advantages to the defendant who benefits from it: among these being the absence of publicity of the proceedings and the reputational risk of a conviction.

Thus, there is a great inequality of treatment between companies, which are liable to a fine in accordance with article 102 of the Criminal Code, and individuals, who are subject to the penalty for bribery, and therefore cannot benefit from this legal provision.

6 Has there been any new guidance from enforcement authorities in your jurisdiction regarding how they assess the effectiveness of corporate anti-corruption compliance programmes?

The bribery of foreign public officials is a major money laundering threat to the Swiss financial centre.

When it comes to laundering money derived from corruption, the Swiss financial centre is mainly used by suspected criminals to bring into Switzerland funds whose laundering process has already begun abroad.

Banks are therefore particularly vulnerable to this money laundering threat. Asset managers, trustees, lawyers, notaries and securities dealers are also exposed.

Swiss law does not have a preventive anti-corruption arsenal. However, preventive anti-money laundering measures also serve the fight against corruption, since a quarter of the reports of suspected money laundering to MROS in 2019 had corruption as a predicate offence to money laundering.

In this respect, Swiss law requires financial intermediaries to proceed to the ‘know your customer’ procedure (articles 3 to 5 AMLA).

The increase in the number of reports of suspicions of money laundering linked to corruption received by MROS reflects the growing awareness of financial intermediaries of this threat. In total, the sum of assets reported to MROS amounted to 12.9 billion Swiss francs by the end of November 2019. As in previous years, these sums are primarily the result of swindles or alleged acts of corruption.

The criminal proceedings initiated by the Office of the Attorney General of Switzerland and the monitoring and enforcement measures undertaken by FINMA are further evidence of the significant efforts made in Switzerland to combat the laundering of money derived from corruption.

7 How have developments in laws governing data privacy in your jurisdiction affected companies’ abilities to investigate and deter potential corrupt activities or cooperate with government inquiries?

Companies located in Switzerland must comply with the Swiss Data Protection Act, the Swiss Labour Law and, de facto, the General Data Protection Regulation of the European Union, which came into force on 25 May 2018.

The Swiss Data Protection Act has been revised to comply with the EU General Data Protection Regulation and will come into force soon. Of course, the Swiss Data Protection Act does not facilitate the authorities in the fight against corruption. However, the Swiss legal system is based on the fundamental principles of weighing interests and proportionality.

In our case, the individual’s interest in not having their data extracted by the authorities must be weighed against the authorities’ interest in fighting corruption and not hindering the functioning of the rule of law.

The Inside Track

What are the critical abilities or experience for an adviser in the anti-corruption area in your jurisdiction?

Solid legal knowledge about criminal law, corporate criminal law and the interactions between criminal and administrative procedures.

What issues in your jurisdiction make advising on anti-corruption compliance challenging or unique?

Switzerland has a federal structure. As the case may be, either the federal or the state authorities may have jurisdiction to investigate and prosecute bribery and corruption offences.

In addition to this, Switzerland is a signatory to three international anti-­corruption conventions:

  • the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions;
  • the Criminal Law Convention on Corruption; and
  • the UN Convention against Corruption.

Finally, Switzerland has an export-oriented economy and is also one of the most important international financial centres (40 per cent of all offshore wealth is managed by Swiss banks). This increases the exposure of companies and managers to corruption and money laundering risks.

What have been the most interesting or challenging anti-corruption matters you have handled recently?

We have recently been contacted by a multinational company based in Geneva that suspected some bribery and assets diversion from one of its managers.

We held an urgent internal investigation to identify the authors of the supposed facts, prepared legal advice for the board of directors and filed a criminal complaint on behalf of the company.