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?
Swiss authorities benefit from a very high level of trust from citizens, which results from a well-functioning government and administrative management. This strong trust could be severely undermined by acts of corruption, not to mention the blow to Switzerland’s international reputation. Fortunately, Switzerland gained a place and ranked third out of 180 countries in Transparency International’s Corruption Perception Index, with a score of 85 out of 100, in 2020.
Even though Switzerland seems to be a good student according to this index every year, serious deficiencies still exist, especially in areas that are not represented in the index. For example, Switzerland has serious shortcomings in the fields of political financing transparency, protection of whistleblowers, combating money laundering, as well as corruption in the private sector and in sports.
The country should actually raise awareness of the issues and ensure that proven cases are better sanctioned.
Moreover, practices that carry a significant risk of corruption are very common. A good example is the ‘links of interest system’, which allows members of the Swiss Parliament to hold various paid mandates outside their political activities. This is a particularity of Swiss politics: nearly 200 elected members of parliament – almost 80 per cent – have at least one paid extra-parliamentary function. Since December 2019, they have been obliged to announce for which mandates they receive money or other benefits.
However, there is still a strong resistance to transparency, which shows us that the changes made the past years do not go far enough. Indeed, a clear majority of the National Council decided not to follow up on the parliamentary initiative called ‘Links of interest of parliamentarians. For a transparent declaration’, which was rejected on 13 February 2020.
In this regard, Switzerland has been repeatedly singled out by the Group of States against Corruption (GRECO), which has identified considerable shortcomings in our country. It is time to take this problem seriously, as a step to start resolving the deficiencies existing in the Swiss system. The population demands integrity from its political representatives and the best way to demonstrate this exemplarity is to offer guarantees by putting measures in place.
Among all of this, the covid-19 pandemic made the fight against corruption globally even more challenging last year. Indeed, it goes without saying that corruption intensifies the effects of a crisis. Corruption has globally diverted funds from much-needed investments in healthcare, leaving people without doctors, equipment, medicines and, even sometimes, without clinics and hospitals. Moreover, the lack of transparency of public spending intensified the risk of corruption and affected the ability to manage the global pandemic.
More generally, corruption has had a negative impact on the implementation of a solution to the health crisis, on a worldwide scale. Indeed, in this field, more than any other public spending, transparency is key.
Anyhow, as stated above, Switzerland performed well on Transparency International’s Corruption Perception index. This means that the country is more able to provide universal health coverage and is less likely to violate democratic norms and institutions. Switzerland is in fact not remaining passive.
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 Federal Act on International Mutual Assistance in Criminal Matters has been modified in order to implement the Council of Europe’s Convention on the Prevention of Terrorism and its Additional Protocol concerning the strengthening of penal standards against terrorism and organised crime. This point will be discussed further in question 4.
- The Federal Act on Combating Money Laundering and Terrorist Financing (the Anti-Money Laundering Act) has also been modified. The law revision covers situations where the financial intermediary must clarify the economic background and the purpose of the transaction or business relationship, for example in the case of indications that assets are the proceeds of a felony or an aggravated tax misdemeanour.
2 What are the key areas of anti-corruption compliance risk on which companies operating in your jurisdiction should focus?
In the Switzerland chapter for the 2019 and 2020 editions of this publication, 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 maintain our statement.
As a matter of fact, although Switzerland introduced corporate criminal liability on 1 October 2003, the responsibility of a company is still subsidiary to the responsibility of the individual, when the offence can be attributed to a specific person. Indeed, even if article 102 paragraph 2 of the Swiss Criminal Code provides that in the case of a bribery offence, the company shall be punished independently of the punishability of natural persons, this provision is far too limited as it does not apply to other economic offences such as money laundering. As a result, Swiss corporate criminal law is deficient, article 102 paragraph 2 of the Swiss Criminal Code being far too limited.
In 2020, the Federal Council adopted an anti-corruption strategy covering the 2021–2024 period.
Various tasks of the Confederation are delegated to companies and institutions of the Confederation. The Confederation – as a company owner – has to set an example in the area of responsible corporate governance, including prevention of corruption.
In June 2019, the Federal Council decided to strengthen the obligation of companies to be accountable to the Confederation in the area of compliance.
On an international level, the Organisation for Economic Co-operation and Development (OECD) recommended to its members – including Switzerland – to clarify expectations towards state-owned enterprises in the area of anti-corruption and integrity.
It appears from the above that change is afoot in Swiss corporate criminal law. However, our criminal authorities have to continue to exploit legal possibilities that could be implemented to reduce compliance risks, not only for public but also for private companies. The extent of the preventive measures will of course depend on their specifications, their size, the nature of their business activity, the risks associated to the type of products or services sold, the markets targeted, and so on.
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 the context of the current reform of the Swiss Criminal Procedure Code, the Office of the Swiss Federal Attorney General suggested the adoption of a new instrument: the deferred indictment for companies.
Briefly, the deferred indictment is an out-of-court agreement by which the prosecution delays the indictment for a defined period of time. If the company honours its commitments to the public prosecutor, the case will definitively be closed. If the company violates the agreement and does not remedy the situation within said period of time, the public prosecutor will submit an indictment to the judge.
In the agreement, the company must admit the facts leading to its accusation and agree to the fine and the seizure and forfeiture of assets with the public prosecutor. It also governs the steps that the company must take to remedy the lack of organisation and to prevent further violations.
This instrument would safeguard the interests of companies, as it would avoid a conviction that would be highly prejudicial in terms of reputation. We can also assume that companies would be less fearful of retaliation because the consequences are less drastic and private corporations would be more open to cooperation.
However, in its message concerning the revision of the Swiss Criminal Procedure Code, the Federal Council preferred not to include the deferred indictment, because this instrument would give excessive control to the public prosecutor and would suffer from a lack of control mechanisms.
The project is currently being examined by the Swiss Parliament.
Reforms along the same lines are also being pursued at an international level. The introduction of instruments for non-trial agreements is currently being discussed by the OECD in the context of the ongoing revision of their recommendations. The OECD reaffirmed the essential importance of these anti-corruption mechanisms.
Furthermore, in Switzerland, the phenomenon of transnational corruption materialises in two main aspects.
First, there is the risk of companies – often multinationals – based in Switzerland corrupting foreign public officials. This risk is heightened by the fact that these companies are active in sectors that are particularly exposed to corruption such as the raw materials sector. Secondly, the threat comes from the use of the Swiss financial industry in order to pay, receive or carry out the transit of bribes, in particular in the laundering process.
The OECD Anti-Bribery Convention has a mechanism for monitoring its implementation through the Working Group, which is composed of representatives of the states parties to the Convention (article 12 of the Convention).
The process takes place in phases, which are reported on and then followed up two or three years later by a report. The Working Group was in Phase 4 in 2020, which focused on the enforcement and detection of foreign bribery, corporate accountability and international cooperation. The Phase 4 report on Switzerland was delivered in March 2018. The follow-up report was published on 16 October 2020.
Several of the recommendations, respectively criticisms, given by the OECD in its report on Switzerland are related to newly adopted or ongoing legislative revisions.
First, the application of article 53 of the Swiss Criminal Code in cases of foreign bribery has been criticised by the OECD, because this provision allows authorities to refrain from prosecuting offences, which cannot be considered as insignificant.
This article, entitled ‘Reparation’, requires the competent authority to refrain from prosecuting the offender, bringing them to court or punishing them under four cumulative conditions: (1) the offender has made reparation for the loss, damage or injury or made every reasonable effort to right the wrong that they have caused; (2) a suspended custodial sentence not exceeding one year, a suspended monetary penalty or a fine are suitable as a penalty; (3) the interests in prosecution of the general public and of the persons harmed are negligible; and (4) the offender has admitted the offence.
In practice, article 53 of the Swiss Criminal Code is applied after an agreement has been reached between the accused, the public prosecutor’s office and, if there is one, the injured party, in particular regarding the amount of compensation.
In its report, the OECD offers an alternative to article 53 of the Swiss Criminal Code which consists of introducing into the Swiss legal system ‘an alternative procedure to prosecution that is strictly regulated, that allows for effective, proportionate and dissuasive sentences while respecting the rules of predictability and transparency that are necessary and essential in this type of procedure’. According to the Working Group, such a procedure could be applied to economic crime, including transnational corruption.
This suggestion reflects the proposal made by the Office of the Attorney General, which we mentioned above (ie, the deferred indictment for companies).
4 Have you seen evidence of 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?
Transnational corruption usually involves several states and different actors (agents, intermediaries, etc) whose main objective is to cover the tracks of their actions. For this reason, cooperation among states is essential.
On 25 September 2020, a Federal Decree of the Swiss Parliament approving and implementing the Council of Europe Convention on the Prevention of Terrorism and its Additional Protocol concerning the strengthening of penal standards against terrorism and organised crime has been issued (RO 2021 360).
The implementation of this Convention has led to the modification of several laws such as the Federal Act on International Mutual Assistance in Criminal Matters (IMAC), which entered into force on 1 July 2021. For example, before issuing a ruling giving reasons on whether mutual assistance is granted and to what extent (conclusion of the mutual assistance proceedings), the competent – federal or cantonal – authority may exceptionally (in order to avert a serious and immediate danger, for example) decide to early disclose information or evidence to foreign authorities.
Another consequence of the approval of the Europe Convention is the introduction of the Joint Investigation Team in the Federal Act on International Mutual Assistance in Criminal Matters.
In Switzerland, this instrument is already used by the Office of the Swiss Federal Attorney General. The joint investigation team is defined as an instrument of international cooperation. Its purpose is to facilitate interstate collaboration when criminal proceedings are initiated in one or more states.
The establishment of a joint investigation team is a ‘dynamic’ mutual legal assistance measure, increasingly used in the fight against organised crime with international ramifications.
For example, a joint investigation team has been set up with the Portuguese authorities in the context of the criminal proceedings opened in connection with the Espirito Santo group, as well as with the Brazilian authorities in connection with the Petrobras case.
The introduction of the Joint Investigation Team in the Federal Act on International Mutual Assistance in Criminal Matters allows federal and cantonal assistance authorities to create a joint investigation team after consultation with their foreign counterparts for the purpose of conducting or supporting a criminal investigation for which such a measure has been decided in a state participating in the team. The criminal procedure does not need to be formally initiated in Switzerland. Swiss authorities could participate in a joint investigation team for the sole purpose of carrying out investigative acts on its territory on behalf of the team created by a foreign state.
In summary, cooperation between Swiss authorities and authorities of other countries is increasing in order to identify and punish the commission of white-collar crimes.
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?
Since the criminal liability of the company has been adopted (article 102 of the Swiss Criminal Code), the treatment of an individual and a corporate entity can sometimes be very unequal.
Indeed, 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 (article 102 paragraph 1 of the Swiss Criminal Code).
In the case of a bribery offence, the company shall be punished independently 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 (article 102 paragraph 2 of the Swiss Criminal Code).
If the company is convicted in the sense of article 102, it risks a fine of 5 million Swiss francs. However, if an individual is convicted of bribery, he or she risks a custodial sentence of between three or five years at most (article 322ter to 322novies of the Swiss Criminal Code).
Furthermore, even if article 102 of the Swiss Criminal Code was introduced on 1 October 2003, this article is rarely applied. Indeed, since 2003, only four companies have been convicted under article 102 paragraph 1 of the Swiss Criminal Code and only eight under article 102 paragraph 2. The actual crime rate should be much higher because Swiss companies are often involved in serious corruption and money laundering scandals.
Individuals are more often convicted of corruption than companies. Corporations are rarely convicted because it is difficult for public prosecutors to gather evidence; they often rely heavily on the cooperation of the companies to establish guilt.
Thus, there are no recent changes in how the enforcement authorities handle the potential guilt of individuals versus the treatment of corporate entities, but something has to change because actually, the culpability of corporate entities under Swiss law is unsatisfactory in terms of preventing and fighting corruption.
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 Federal Council wants to continue to develop Switzerland’s anti-corruption measures in a timely manner and maintain oversight of the situation.
Therefore, as mentioned above, in 2020, the Federal Council adopted an anti-corruption strategy covering the 2021–2024 period.
This strategy has been developed by the Interdepartmental Working Group for the Fight against Corruption (GTID), a planning entity of the federal administration.
It is essentially limited to the Federal Council’s area of responsibility and is primarily addressed to the federal administration.
The strategy defines objectives and measures to prevent corruption.
For example, the GTID has to create guidelines to identify functions that are particularly exposed to the risks of corruption within the federal administration and the Federal Council will examine whether existing provisions should be adapted to ensure that these functions are controlled at irregular intervals.
The strategy also details measures for prosecution of corruption and international cooperation. For instance, the GTID is examining how to encourage natural and legal persons to self-report acts of corruption. In terms of international cooperation, there are measures to increase the participation of Swiss authorities in the exchange of information on international corruption cases, such as the regular participation in activities of the International Anti-Corruption Coordination Centre.
Even if the measures are aimed directly at the federal administration, the Federal Council hopes it will have an indirect impact on other fields.
As corruption often stems from the combination of public and private interests, the state cannot prevent or eradicate it alone. Therefore, the Federal Council expects the private sector and the collectivity to see the fight against corruption as a challenge to be taken up together.
In summary, the Federal Council defines the criteria that must be respected by the federal administration. At the end of 2024, the Federal Council will take stock of this strategy and decide whether it should be expanded.
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 Regulations of the European Union, which came into force on 25 May 2018.
Parliament split up the revision of the Swiss Data Protection Act.
The first part was the drafting of the Schengen Data Protection Act, which entered into force on 1 March 2019 in order to comply with EU Directive 2016/680 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties.
The second part is the draft of the total revision of the Swiss Data Protection Act, which is currently being examined by Parliament. This revision aims to adapt data protection to the digital era and to strengthen citizens’ rights. Furthermore, the purpose of this law revision is also to ensure that data transmission between Switzerland and the EU member states can take place without additional obstacles. This revision will help Switzerland fight against international crime, in particular white-collar crimes.
Thus, we can expect some changes to the laws governing data privacy, which will facilitate determination of potential corrupt activities.
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.