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International Business Crime & Fraud – Switzerland

posted 2 months ago

At Prager Dreifuss, we are working at the forefront of new developments based on our extensive experience in internal investigations and assisting parties with their criminal and civil claims in criminal proceedings. Our work has spanned fraud investigations in the insurance, banking and mining sectors. We are frequently mandated by companies when suspicions of wrongdoing arise, or are instructed by regulators to perform investigations and issue reports to the authorities.

Currently, we are involved in some high-profile white-collar cases, regularly also involving international aspects. In addition, we are seeing an up-tick in business related to monitoring and managing risks in the area of sanctions, as well as sanctions avoidance and prosecution authorities implementing criminal sanctions against companies taking sanctions too lightly.

Anti-money-laundering and KYC compliance and increasing requirements in client on-boarding, in addition to the prevention of terrorist financing, are issues that clients are also steadily faced with to ever-increasing degrees. Even in smaller companies with limited international exposure, these compliance hurdles, with their related criminal risks, are becoming frequent challenges for clients.

With Switzerland taking on the European Union’s sanctions against the Russian Federation, we have seen our clients suddenly faced with large-scale compliance risks of a whole new nature and extent. From client identification to product clearance and anti-avoidance measures, the war in the Ukraine has posed, and is still posing, hefty challenges to some of our clients.

In the wake of the recent jurisprudence by Swiss courts to require transparency about kick-backs in the financial sector, the Federal Tribunal decided – in a few instances – to allow damaged persons and companies to reclaim undisclosed kickbacks owed to them. Undisclosed commissions in mandate or employment relationship have come under increased scrutiny by management, and also by state investigators. The evolution of this jurisprudence started in the context of private law proceedings, but has quickly gained momentum and was expanded into other areas of law (administrative law, criminal law).

A further focus in Switzerland for private claimants is a strong push to discover and secure assets during the investigation phase. During the subsequent court proceedings, private claimants will try to demonstrate the paper trail from the initial proceeds of the crime to the final asset seized. In doing so, claimants may – in case of a conviction – profit from direct restitution through the criminal court. In such a scenario, the claimant’s criminal claim has preference compared to other creditors.

In the absence of a clear paper trail, the seized assets can still be applied to party costs of plaintiffs and for the satisfaction of the state’s compensation claim, which the plaintiff may request be attributed to it for its damages.

In Switzerland, as in other jurisdictions, we are seeing a steep increase in the case load of public prosecutors and courts dealing with criminal charges. Especially in the business sector, companies are burdened with growing regulatory requirements and compliance rules. The existence of such rules invariably leads to enforcement actions by regulators, and more often to investigations by the district attorney’s office. These proceedings are regularly complex, cross-border and time-consuming. Add to that the practice of accused parties to demand far-reaching sealing of documents and data, and the longwinded unsealing proceedings in court, and all this has led to longer investigations, longer trials and increasingly thorny accompanying issues, such as lengthy asset seizures.

The long duration of the proceedings has negative impacts on all parties. Prosecutors and courts face criticism, being blamed for delaying justice. Accused parties have to bear drawn-out periods of uncertainty and endure the mental pressures of prosecution and trials. Courts – in their sentencing – consider these long proceeding durations and discount penalties as a certain factor. This could undermine the authority of the prosecution to enforce the state’s prerogative to punish criminals. In an extreme scenario, certain crimes may no longer be prosecuted because of the statute of limitations, which again leads to public criticism and disillusionment with the criminal justice system.

Moves are afoot to mitigate the situation, i.e. by limiting the periods available to (and granted to) parties during the trial and by pushing for more oral hearings. A recent amendment dealing with sealing in the Criminal Procedure Code has aimed at making it more challenging to extend and defend the sealing of documents and data of an accused party. The new provisions set shorter time limits and introduce deemed withdrawals of sealing applications after certain periods of inactivity. Whether an acceleration will actually be achieved is, nonetheless, doubtful, as the circle of parties permitted to request sealing and oppose unsealing applications by the prosecution has been extended.

A further measure strongly advocated in legal practice is the introduction of non-trial resolutions, such as deferred prosecution agreements. To date, Switzerland does not have a similar instrument that could enable companies to make financial amends for past transgressions without incurring criminal conviction. Advocates of non-trial resolutions see this instrument as holding the potential to simplify the otherwise laborious criminal proceedings entities need to go through.

We see that both prosecuting authorities as well as party representatives are making use of digital instruments to assist in their case management, and are sieving through terabytes of data. The sheer amount of material that is available these days (especially in fraud and other financial crimes) does, however, still pose a significant challenge to all parties involved because, even with smart tools available, the final analysis and decision-making is still up to the prosecutors, attorneys and judges involved.

We are a Swiss-based law firm with offices in Zurich, Bern and Brussels, Belgium. In addition, we maintain a strong network with colleagues in other jurisdictions, with whom we interact on a regular basis.

We periodically interact with our clients and key partner counsel abroad, as the legal landscape evolves and develops in Switzerland. We keep our clients updated by way of our newspaper articles, newsletters and posts on our homepage and LinkedIn platform. Occasionally, we join internal programmes and share insights as well as new developments with in-house legal teams. Meanwhile, digital meetings are also becoming more frequent – as a means of relating pressing updates.

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