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White Collar Crime
Proposed implementation of FATF and Global Forum transparency recommendations meets stiff oppositionSwitzerland | June 11 2018
In one comprehensive bill, the Federal Council addressed the concerns of the Financial Action Task Force and the Global Forum on Transparency and Exchange of Information for Tax Purposes with regard to the transparency of legal entities. The proposed measures would not only replace a system that was introduced merely three years ago and has proven to be effective, but would also entail severe consequences for approximately 60,000 companies in Switzerland.
Distinction between administrative assistance in tax matters and legal assistance in criminal mattersSwitzerland | February 26 2018
The Federal Supreme Court recently rendered a landmark decision preventing the Swiss Federal Tax Administration from transmitting un-redacted bank files to the US Internal Revenue Service (IRS) which contained information on third parties which had allegedly helped a US taxpayer to defraud the IRS. What is of particular interest to white collar crime practitioners is the emphasis put on the distinction between administrative assistance in tax matters versus legal assistance in criminal matters.
In the aftermath of the fourth mutual evaluation of Switzerland's dispositive to combat money laundering and terrorist financing by the Financial Action Task Force, the Swiss Financial Markets Supervisory Authority recently published a draft amendment to its Anti-money Laundering Ordinance. The amendment will result in a significant increase of compliance work for all financial intermediaries.
The Federal Criminal Court recently took the opportunity to examine methods whereby rules of Swiss domestic law in penal matters are bypassed by looking at the example of the disclosure of certain bank records to the Brazilian authorities as exhibits to a Swiss request for international judicial assistance, the procurement and transmission of which had been applied for by the Brazilian authorities in a previous request for judicial assistance.
The Federal Tribunal recently held that professional privilege did not prevent prosecutors from accessing information collected by attorneys retained by a Swiss bank to carry out an investigation of suspected contraventions of regulatory and penal laws by the bank's employees. This decision should be seen in context with another decision in which the tribunal clarified the scope of protection provided by the nemo tenetur privilege in penal investigations against corporate entities.
The Federal Tribunal recently made some significant clarifications regarding the scope of protection provided by the nemo tenetur privilege in penal investigations against corporate entities. The tribunal confirmed that, although legal entities can rely on the privilege, it should be applied restrictively concerning information which the legal entity is obliged to obtain, keep and record, as the purpose of these obligations is typically to ensure access to information.
Parliament recently adopted amendments to the Penal Code introducing new provisions on corruption in the private sector. Corporate undertakings should accordingly scrutinise internal regulations and directives and internal control procedures should be reviewed to strengthen the overall resistance against corruption. Undertakings should also consider establishing an internal reporting mechanism for suspected wrongdoing.
The Federal Supreme Court recently rendered its first decision on the extradition of one of the FIFA officials that were spectacularly arrested in Zurich. The case concerned the extradition of Julio Rocha, former president of the Nicaraguan Football League. Rocha consented to be extradited to Nicaragua, but opposed extradition to the United States and appealed to the Federal Supreme Court.
A recent decision of the Federal Criminal Court has demonstrated an exception to the rule that Switzerland does not assist foreign investigations of fiscal offences. If a party domiciled in the European Union seeks to avoid tax by artificially shifting turnover to Switzerland, mutual legal assistance to prosecute fiscal offences may be granted on the basis of the Schengen rules on combating fiscal offences in the field of indirect taxation.
The Federal Tribunal has provided guidelines to resolve the controversial question of whether the sale of Swiss bank customer information to foreign tax authorities is punishable under Swiss law, even if the perpetrator acts abroad. The tribunal held that the conduct at issue qualified as economic espionage and was an offence against the state's interests. As such, it was subject to Swiss jurisdiction, regardless of where the offence was committed.
From January 1 2016 servicing tax fraudsters may expose financial intermediaries in Switzerland to prosecution for money laundering. Given that final tax declarations for 2016 will not, as a rule, be filed before the end of 2016, the general consensus is that the new anti-money laundering reporting obligations will have no practical bearing before the end of 2016.
The Council of States recently approved a draft bill on the amendment of anti-corruption laws. The draft bill introduces changes that are widely perceived as overdue, in view of a series of scandals relating to the practices of international sports organisations headquartered in Switzerland – including the ongoing FIFA affair. In light of these scandals, there is little doubt that the National Council will endorse the Council of State's resolutions.
Switzerland is revising the regulatory framework governing its financial infrastructure, Swiss and foreign financial service providers and the distribution of financial products in Switzerland. Many of the criminal provisions contained in the proposed legislation are already in place. However, the scope of application of the proposed acts is wider than in existing legislation.
Proposed legislation on whistleblowing employees in the private sector focuses on reporting irregularities to employers, the competent authorities and the public. The suggested reporting mechanism aims to establish a process which requires that an employee always inform his or her employer before notifying the authorities, and always bring a matter to the attention of the authorities before reporting to the public.
Corporate policies and procedures on combating corruption seek to define thresholds for gifts and hospitality. It is recommended that benefits of whatever kind or value in the public sector may be granted only subject to approval of senior management or a special compliance unit. Moreover, the policies of key clients in the public sector should be checked regularly for changes in order to ensure that approval is given on a case-by-case basis.
The Federal Tribunal recently held that an agreement between the offender and the victim on the settlement of financial loss incurred as a result of a criminal act would not withstand the confiscation and forfeiture of the proceeds of such an act by the penal authorities. Pursuant to civil law principles, it is impossible to acquire valid title to an asset without a valid cause.
In 2013 the government passed two draft bills proposing new legislation to combat money laundering and prevent tax evasion. One set of the proposed rules – a key element of Switzerland's white money strategy – introduced new diligence duties for banks and other providers of financial services to the Anti-money Laundering Act in order to keep untaxed money away from the Swiss financial sector.
The Ordinance against Excessive Compensation recently entered into force. It aims to limit executive remuneration by improving corporate governance and giving shareholders increased influence over executive compensation. The new ordinance is particularly striking as it includes penal provisions and provides for the criminal liability of executives who grant or accept certain kinds of excessive compensation.
A recent decision illustrates the extent to which Swiss criminal prosecution authorities may informally exchange secret information with foreign peers. The court interpreted the term 'secret information' broadly. Bank account statements, for example, are secret evidence and must not be transmitted to foreign authorities, while internal case summaries are secret information and can thus be forwarded to foreign authorities.
The government recently opened public consultations for a proposal on a comprehensive overhaul of the Swiss tax crime regime. The new proposal takes a significant step towards implementation of the 'White Money' strategy adopted by the government. It recommends that the cantonal tax authorities be granted extensive powers to investigate suspected tax offences, even in non-serious cases.
In response to a Group of States Against Corruption report the government published a draft bill on the amendment of Swiss anti-corruption laws. The government proposes to supplement the Penal Code with two new provisions concerning bribery in the private sector. The same penalties for punishable conduct will apply and the requirement of a criminal complaint as a prerequisite to prosecution will be abolished.
In response to the political events in North Africa, commonly known as the 'Arab Spring', the Swiss government has proposed new legislation which is intended to create a legal basis for the freezing of assets presumed to have been obtained illegally by foreign political leaders and the restitution of such assets to the countries of origin, outside the framework of international mutual legal assistance proceedings.
New amendments to the Stock Exchange and Securities Trading Act redefine the offences of insider trading and market manipulation, and introduce a new administrative enforcement regime to combat such conduct more effectively. This marks a significant change to Swiss financial markets law and increases the exposure of financial services providers to regulatory and criminal liability risks.
The government recently passed two draft bills proposing new legislation to combat money laundering and prevent tax evasion. The proposed legislation contains certain groundbreaking novelties, including making tax fraud (in its aggravated form) a predicate offence to money laundering. However, it remains to be seen which proposals will be contained in the definitive bills submitted to Parliament for approval.