Advocacy for the toughening of economic criminal law in Switzerland

Rumors about the takeover of Credit Suisse (“CS”) follow one another and are not verified. But the fact is that CS’s stock has fallen steadily since 2007, from 81 francs in April 2007 to around 6 francs in mid-2022. The Financial Conduct Authority, the financial regulator in the United Kingdom, recently put CS on its list of institutions under surveillance because of its weak culture of governance and risk control.

Conversely, UBS has seen its share price remain at around 15 francs for a dozen years, after a virtual bankruptcy, narrowly avoided in 2008 then in 2009 thanks to the intervention of the Federal Council and with the American authorities to settle the dispute with the United States.

Read also our large format: How Credit Suisse lost control

Protecting Swiss companies too much

What to say? Admittedly, political and financial factors may justify the fall in CS shares, such as the end of banking secrecy, competition from places like Dubai, Singapore, etc.

But what strikes the practitioners of the bar is Switzerland’s desire to protect, again and again, “Swiss” companies, and in particular banks, from any legal “attack”. Including and perhaps especially when the attackers are foreign customers of these companies and banks.

Thus, the provision of the Swiss Criminal Code on corporate criminal liability (art. 102 PC) is probably one of the weakest in the Western world. It provides that the company can only be prosecuted if no culprit is found in the company (scenario 1), except in cases of terrorist financing, criminal organization or money laundering, as well as than corruption (scenario 2).

But, in any case, it is still necessary to prove an “organizational defect” of the company. Thus, a bank whose manager defrauds a client, commits unfair management, breach of trust or forgery of securities has no reason to fear the horrors of Swiss criminal justice, since precisely the culprit is the manager found everything.

Inadequate regulation, unsatisfactory application

And even in the event of conviction, the maximum fine is 5 million francs, with possible confiscation of the profits directly linked to the offence.

Corporate criminal liability is so difficult to implement in Switzerland that since its introduction in the Criminal Code in 2003, only 13 companies have been convicted throughout Switzerland in nearly twenty years: four for case 1 ( guilty not found) and nine for scenario 2 (financing of terrorism, criminal organization or money laundering, as well as corruption), which Transparency International’s 2021 report on the criminal liability of companies in Switzerland summed up in three terms: incomplete regulation, unsatisfactory application, insufficient transparency.

The only fear of a bank is to have to support possible civil actions on the part of the aggrieved client, which are moreover often suspended until the outcome of the criminal proceedings against the unscrupulous manager.

However, civil actions are most often extremely long and expensive for individuals, including and especially for individuals who have lost most of their fortune due to the turpitude of their manager. In particular, the legal costs to be advanced are often prohibitive, not to mention the high amounts to be deposited to guarantee the costs of the opposing party, the costs of lawyers, financial experts, etc. Individuals also often have to open parallel proceedings against their bank, which is usually reluctant, to obtain documentation or information that is due to them.

Swiss companies are losing customers

Criminal proceedings against managers are equally daunting. Most often prosecutors – especially cantonal – are not interested in investigating cases where “rich” are cheated. It even happens that prosecutors turn against the plaintiffs. They know about the long and complicated banking procedures, think that they interfere with the processing of their daily business and will be the object of delaying tactics. As a result, prosecutors procrastinate, pass cases, or even simply lack competence or interest in this type of case or procedure.

So: victory for Swiss banks and companies? No, because the result of this lack of Swiss sanctions is felt at two levels: the victims of Swiss companies turn to foreign jurisdictions, and confidence in Swiss companies is lost, and therefore the latter lose their customers.

Perhaps it is time for Swiss legislators and prosecutors to start seriously considering policing the economy. Ways of working exist. We still need the political will. It could also lift Credit Suisse stock!

Leave a Comment