Confiscation of Commingled Funds: the Sedimentation Method

The Swiss Criminal Code provides that the court shall order the confiscation of assets that were acquired through the commission of an offence or that were intended to be used to induce or reward the commission of an offence, unless they are to be restored to the injured party in order to re-establish that party’s lawful rights (art. 70 of the Swiss Criminal Code, hereinafter the “SCC“).

Where the assets subject to confiscation are no longer available — because they have been consumed, concealed, or otherwise rendered inaccessible — the court may order a compensatory claim against the offender or a third party in an amount corresponding to the value of the assets that would otherwise have been confiscated (art. 71 SCC).

In a landmark decision dated 5 December 2025 (ATF 7B_65/2023), the Swiss Supreme Court addressed how to determine the scope of confiscation (art. 70 SCC) and compensatory claims (art. 71 SCC) when lawful and unlawful funds are commingled in a single bank account.

The Swiss Prosecutor had previously applied the “proportional commingling” method, under which criminal proceeds taint all account assets proportionally, meaning that every transaction from the account is treated as partly illicit. The Swiss Supreme Court rejected this approach as contrary to the law, holding that it risks contaminating the lawful economy and violating property rights under art. 26 of the Federal Constitution.

Instead, the Swiss Supreme Court applied the “sedimentation” method. Under this approach, unlawful assets are treated as a distinct layer at the bottom of the account. The account holder may freely transact so long as those transactions draw only on lawful or undetermined funds. The illicit “sediment” remains subject to confiscation, and money laundering only arises when that base layer is drawn upon.

The Swiss Supreme Court added one important corrective: where an account holder deliberately preserves the illicit amount in the account — effectively waiting out the limitation period while spending only the lawful balance — the lawful funds themselves become tainted, and their transfer may constitute money laundering.

This decision should prompt all financial and legal practitioners to bear in mind the following considerations:

First, when advising clients or analysing commingled accounts, practitioners should treat illicit funds as a separate, settled layer rather than assuming proportional contamination of all account assets. This distinction is critical for accurately assessing confiscation exposure.

Second, if an account holder’s transaction pattern suggests that they are deliberately leaving the illicit amount untouched while spending lawful funds — particularly with a view to the expiry of the limitation period — the protective logic of sedimentation no longer applies. In such cases, even transfers of ostensibly lawful funds may be characterised as money laundering.

Third, for both prosecution and defence, the sedimentation method places a premium on tracing the chronological flow of funds in and out of an account. A detailed transaction-level analysis — identifying which deposits are lawful, unlawful, or undetermined — is essential to the correct application of this framework.

Finally, the corrective articulated by the Swiss Supreme Court makes clear that a passive strategy of simply waiting for the limitation period to expire while keeping illicit funds untouched in an account carries significant legal risk, potentially converting otherwise lawful transactions into money laundering.