Long proceedings and tactical game playing

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White-collar crime proceedings are complicated investigations with often many parties involved, at times hundreds of bank accounts and highly complex transactions; some-times they take place in several countries at the same time. They can last numerous years. Defendants delay the process by abusing mechanisms such as sealing of evidence and the right of appeal to buy time. These criminal investigations often end with a settlement or very mild sanctions.

Investigations into money laundering and bribery are generally very challenging and time-intensive. Elaborate structures involving a range of shell companies and other corporate entities as well as numerous bank accounts in lots of countries are used to conceal money laundering and corruption. In line with the Swiss Criminal Procedure Code, investigators must sometimes manage to see through legal business processes and prove that there is illegal activity taking place behind the façade. In cases of transnational economic crime, the investigating authorities also depend on the cooperation of their colleagues abroad. This compounds the difficulties they face, particularly in proceedings involving countries with weak governance structures.

Alongside at times lacking resources at the Office of the Attorney-General, proceedings are protracted for two reasons linked to procedural law:

  1. On the one hand, ‘sealing of evidence’ can temporarily prevent the law enforcement authorities from using records and other documents in the criminal proceedings.
  2. On the other hand, legislation governing international requests for mutual legal assistance provides the affected person with a right of appeal.

Both of these factors are uncontested elements of the rule of law and provide fundamental legal recourse under the basic principle of a fair trial. Nevertheless, they are often used by defendants to buy time during legal proceedings.

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  • Sealing of evidence procedures

    Sealing of evidence is anchored in Article 248 of the Swiss Code of Criminal Procedure and is known as an immediate measure. It enables a proprietor or other person who enjoys a protected right to documentation and property (e.g. bank documents or data carriers) to prevent the law enforcement authorities from searching them or using them in the criminal proceedings. It is also childishly easy to achieve – the brief and vague wording “sealing is demanded” will suffice to prevent the Office of the Attorney-General from accessing confiscated or retained evidence. In such a case, the investigative authorities then have to file a request for the removal of the seals with the Compulsory Measures Court and to wait for its legally binding ruling on the matter, before they are able to start their work – i.e. their investigation.

    Proceedings on the removal of seals take a long time, above all if the decision is referred to a federal court. According to a study, on average it takes 328 days for proceedings on the removal of seals to go through all the relevant entities; in cases of economic crimes it can take 397 days. In individual cases of extensive economic crimes, proceedings on the removal of seals have taken two to three years just to reach a first instance decision.

    Even in clear-cut cases, the right to seal evidence is used as a tactical game in a manner that borders on abuse of rights.

    Even if a request for evidence sealing is lodged without a valid reason it can severely delay criminal investigations and prevent potential evidence from being examined. In practice, evidence sealing has been increasing for years, mostly however with only limited success (according to the survey, the courts considered sealing of evidence in white-collar crime cases to be justified in only 6.7% of the first-instance proceedings).

  • The right of appeal in mutual legal assistance

    In the world’s globalised economy, crime does not stop at borders. In cases of bribery of foreign officials and in cases where white-collar crimes involve offences committed in several countries, the prosecuting authorities rely on evidence from abroad. To obtain it, they file mutual legal assistance requests. According to a 2020 report issued by the Swiss Federal Audit Office (SFAO), Switzerland receives on average over 2,300 requests a year. Exact figures on the number of requests for mutual legal assistance issued by Switzerland to other countries do not appear in any statistics or are insufficiently recorded – an issue for which the OECD recently criticised Switzerland. Nevertheless, the SFAO concluded that “Switzerland is highly solicited by other countries for assistance in economic matters, and is therefore more likely to provide mutual legal assistance than to request it”.

    Despite international pressure for acceleration, procedures relating to requests for mutual legal assistance in Switzerland remain slow. According to the report, in cases of economic crimes it can take a full year or even longer (on average 462 days) for a request to be processed – despite this, the quality of Switzerland’s legal assistance supposedly stands out as above average.

    The right of appeal is often one of the reasons why the process takes so long. The federal auditors even recognise that “the right of appeal is often used as a delaying tactic”. For there is little other reason for it to be used – appeals are only filed with the Federal Criminal Court in relation to 3-4% of requests for legal assistance. The Court then only approves 7% of the appeals. Approximately a quarter are referred to the Federal Court, which does not even address 90% and only approves approximately 3%.

    Historically, the right of appeal has been connected to banking secrecy. It was introduced alongside the Federal Act on International Mutual Assistance in Criminal Matters (Mutual Assistance Act, IMAC), when this bill was introduced in 1981. The right of appeal was introduced at the same time, because banks feared that the legal assistance provided by other countries would be abused to circumvent banking secrecy. However, following its entry into force it became clear that it was not mutual legal assistance itself that was being abused, it was rather the right of appeal that was serving to facilitate the defence of criminal interests. When IMAC was revised in 1996, the mutual legal assistance process was accelerated by limiting the role of the Federal Court. In addition, the option to successively dispute the summary ruling on whether to consider the case and subsequently the final ruling was removed. However, the revision did not introduce a deadline to limit the mutual legal assistance procedures to nine months.

    International mutual legal assistance presented and continues to present a challenge in the complex case of Petrobras (Lava Jato). The Brazilian investigations referred to the predicate offence of money laundering investigated in Switzerland. By some accounts, in the case of Petrobras, the Office of the Attorney-General pursued the strategy of providing the competent authorities in Brazil with spontaneous information on the availability of relevant banking documents on a regular basis, so that the Brazilian authorities could issue a request for mutual legal assistance to the Attorney-General’s Office. See (in German) the perspective of a Brazilian prosecutor on the cooperation.

Using tricks to settle cases

Unlike US law enforcement, Switzerland does not have its own mechanism for non-trial settlements. The Criminal Procedure Code does include accelerated proceedings, which are designated as Switzerland’s settlement procedure. Upon request by the accused and if they confess to the offence, the public prosecutor can approve accelerated proceedings. The public prosecutor and the accused person then reach a settlement on the content of the indictment, i.e. the alleged acts, the statutory provisions and the sentence. This is put to the criminal court for review, which can then either issue a legally binding ruling or reject it.

Within the framework of the consultation process on revising the Criminal Procedure Code, the Office of the Attorney-General requested a “Deferred Prosecution Agreement (DPA) for cases against corporations”. However, the Federal Council did not grant this request. One of its arguments was that “the proposal opened up the possibility for the accused person and the Office of the Attorney-General to consult on sanctions, indirect consequences, civil claims, etc. without the review of a court on the appropriateness of the settlement reached. This would mean the regulation would go further than those on accelerated proceedings".

This is interesting in view of the practice of the Office of the Attorney-General’s practices, which has so far processed charges against companies within the framework of summary penalty order proceedings without court trial. This means that it is not a criminal court, but the Office of the Attorney-General, that issues a ruling. The summary penalty order is categorised as simply a proposed ruling, because within a period of 10 days, the accused person and possible further entitled parties can file an objection against the summary penalty order. However, if the accused person refrains from objecting, the summary penalty order becomes a legally binding ruling – without judicial review.

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The Office of the Attorney-General circumvents judicial review

Summary penalty order proceedings are designed for clear-cut cases involving trivial offences. Pre-requisites for summary penalty order proceedings to be permitted include that the facts relating to the charge are admitted or sufficiently clear and that one of the following sanctions is sufficient: a monetary penalty or custodial sentence of a maximum of 180 fine-day and/or six months or a fine. In practice, it is a fine that companies are sanctioned with in summary penalty orders.

In numerous cases, during criminal investigations into companies, the Office of the Attorney-General has initially opened an accelerated proceeding. Then, shortly before the proceedings conclude, it has changed the proceeding type and issued a summary penalty order instead of presenting the negotiated indictment to the Federal Criminal Court. In doing so it circumvents judicial review.

A leading prosecutor openly stated that this is a conscious tactic used by the Office of the Attorney-General in a speech: “[…] this leads the OAG to implement accelerated proceedings at the request of a company, leading to an agreement which is ultimately recorded in a summary penalty order. This enables the company and the OAG, who have reached an agreement, to avoid having to seek approval of the Federal Criminal Court.”

This practice used by the Office of the Attorney-General is concerning from a rule of law perspective at the very least.

Untransparent rulings

An accelerated proceeding clearly stipulates that it falls to a court to issue a ruling. Whether an appropriate sanction can be imposed via a summary penalty order or not does not change this. Yet the practice is inconsistent for another reason. In 2017, the OAG itself decided to stop recognising reparations as grounds to not bring proceedings against a company (Article 53 of the Swiss Criminal Code). The reason it gave was that this clearly failed to serve the public interest, which in this context cannot be considered as low. However, sentences that are negotiated in a lack of transparency, handed down without a public trial and generally not published, do not meet this aspiration either.

Without external pressure this practice will not change, because none of those involved is particularly dissatisfied with it – neither the convicted companies nor the OAG. Therefore, as legislator, the parliament needs to clarify retrospectively that, within the framework of accelerated proceedings, negotiated settlements must be presented to the relevant criminal court for review.

Sanctions with no effect

If there is a conviction for bribery of foreign public officials or money laundering in Switzerland, one of the first things to notice is that the sanctions imposed are very mild by international standards. Particularly, the numerous suspended sentences, notably suspended monetary penalties, are irritating. The low fines imposed on companies have also come under criticism. The OECD’s Working Group on Bribery questioned whether the fines imposed and the limit of the fine in general are sufficiently effective, proportionate or dissuasive. In its October 2020 follow-up report to the country assessment, the OECD criticised that the fines “still fail to reflect the seriousness of the offences and the sums involved”.

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  • Is corruption only a petty crime?

    Three points stand out from the publicly available judgments on bribery of foreign officials. Firstly, the majority of the sanctions apply with probation, secondly there are many suspended monetary penalties and thirdly, the majority of judgments took the form of summary penalty orders. Even just the latter point should attract attention. The reason summary penalty order proceedings were introduced across Switzerland in 2011 was to relieve the burden on judicial authorities by allowing petty, everyday crimes to be processed rapidly. Their use in cases of bribery of foreign officials begs the question of whether that offence is a trivial matter. 

    Switzerland comes off in a negative light in the OECD experts’ report in this regard too. In their view, their assessment of sanctions that were imposed on natural persons in cases of bribery of foreign officials raised serious questions in relation to whether they are effective, proportionate and dissuasive. In addition, the Working Group indicated that few prison sentences were imposed despite the severity of the offence and the high responsibility of the accused person. The use of suspended fines is expressly criticised.

    The same conclusion was reached by the experts at the Financial Action Task Force (FATF) who regularly review the implementation of minimum standards on combatting money laundering.

    The general rules of sanctions law provide for the possibility to apply higher penalties in moderate and serious cases of bribery of foreign officials. However, this would require a change in mindset. Attitudes started to change over 30 years ago, but the process is far from complete. It is not surprising that at the end of the 1990s, bribes were still tax deductible as ‘useful expenses’, Switzerland still did not have a ‘clean’ money strategy and that the offence was viewed as trivial or a simply misdemeanour is not surprising. It is however imperative that, nowadays, the law enforcement authorities pursue money laundering and corruption consistently and that they impose dissuasive sanctions.

  • Low fines for companies do not act as a deterrent

    The maximum sanction of a fine of CHF 5 million provided for under corporate criminal law is low. The OECD’s Working Group on Bribery has repeatedly criticised this, on the basis that the level of the fine does not meet the requirements of the OECD Convention.

    In relation to legal persons, the OECD states that it is “hard to draw a definitive conclusion as to any change in the effective, proportionate and dissuasive nature of the sanctions” imposed on companies. The connection with forfeiture does not change this, especially when one considers the alleged facts and the at times exorbitant sums that were earned through the offence. The OECD experts also note that the fines handed down never reached the maximum amounts provided for in the law, although at CHF 5 million the maximum fine remains relatively low. Switzerland could increase this maximum sanction and not exceed those of other countries (see the table above).

    The Federal Council does not consider there to be cause for action, despite the international criticism.

    The government even had the nerve to note that, in the case of Gunvor, the OAG imposed a fine of CHF 4 million. It held that in light of this the current maximum sanction provided for in the law was not being used in practice.

    In this regard, the Federal Council is overlooking the fact that, for the fine imposed on the company to be determined, the seriousness of the offence and of the organisational inadequacies, the damage caused and the economic ability of the company to pay the fine must all be considered. In the aforementioned case of the summary penalty order against Gunvor, the OAG had started at the maximum sanction in light of the severity of the offence. However, it considered it appropriate to reduce the fine by a fifth due to the company’s efforts “since 2012 to improve the way it is organised and to prevent corruption by implementing measures based on recognised standards”.

    The Federal Council does however plan to review the legislative maximum sanctions as part of a possible harmonisation of administrative penalty procedures. It has stated that it does not exclude the option that the solution selected could have consequences for Article 102 of the Swiss Criminal Code in the medium term. Unfortunately, that does not sound like a real recognition of the problem and a strategy to improve the mechanisms relevant to the fight against white-collar crime.

    For company fines to have a meaningful deterrent effect, they must be increased to at least CHF 10 million. If CHF 10 million appears too low in individual cases, there also needs to be a possibility to impose a fine of up to 10% of the average revenue of the past three years. The Federal Council and Parliament would be well advised to legislate on further possible sanctions. The 1991 draft could serve as a template. This would also provide for: forfeiture of assets, directives, supervision, activity bans and even dissolution of the company.

  • Transparency of criminal proceedings and a corporate crime register

    Criminal convictions of companies are not entered into the Swiss Criminal Records; this is why there are no official statistics. The investigating prosecutor is therefore unable to know whether the accused company is a repeat offender. Trials at a court of first instance or a court of appeals are public as a matter of principle. However, this is not the case for summary penalty order proceedings without trial, even though these constitute the direct conclusion of OAG investigations. Summary penalty orders are also not systematically published even though nowadays many court judgments are.

    The OECD Working Group on Bribery recommended that Switzerland “publish, promptly and in conformity with the applicable procedural rules, certain elements of these summary punishment orders including the legal basis for the choice of procedure, the facts of the case, the natural and legal persons sanctioned (anonymised if necessary), and the sanctions imposed”. At the OAG, all legally binding summary penalty orders can be viewed within 30 days at one of its sites. However, there remains no publicly accessible database of judgments that details legally bindings rulings against companies.

    The system currently used for access is burdensome and has defects, particularly in relation to transparency around criminal proceedings. The fact that there is no criminal record of verdicts against companies is highly concerning, and not only from a perspective of transparency – companies that are repeatedly and mostly convicted of the same offence are not recorded as repeat offenders.

Switzerland does have the necessary criminal prosecution tools to fight money laundering and corruption; what it lacks is an express will to enforce them. In addition, in order for there to be a deterrent effect, judgments need to be published and accessible to the public. For only those who have to face the prospect of being caught will consider refraining from committing the offence. In addition, sanctions and above all company fines need to be increased. Politicians have a responsibility to finally recognise money laundering and corruption for what they are  – no trivial matter, but rather a global problem with an immensely destructive capacity.