Recent Amendments to Anti-Money Laundering Laws in Switzerland

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1 Recent Amendments to Anti-Money Laundering Laws in Switzerland UIA, International Association of Lawyers Countering the Biggest Risks to Business Héloïse Rordorf, LALIVE London, June 17, 2016

2 Outline I. Introduction II. Money laundering: tax fraud as predicate offence 1. Swiss legal framework against money laundering 2. Federal Act for Implementing the Revised FATF Recommendations of Specific risks for financial intermediaries III. Foreign Illicit Assets Act 1. Background 2. Key aspects 2

3 I. Introduction 3

4 I. Introduction 4

5 I. Introduction 5

6 II. Money laundering: tax fraud as predicate offence Swiss legal framework against money laundering 1990 Art. 305 bis Swiss Criminal Code (SCC) money laundering Art. 305 ter SCC insufficient diligence in financial transactions 1994 Art. 305 ter para. 2 SCC right to report 1997 Federal Act on Combating Money Laundering and Terrorist Financing (Anti-Money Laundering Act) 6

7 II. Money laundering: tax fraud as predicate offence Federal Act for Implementing the Revised FATF Recommendations of New Art. 305 bis SCC: 1 Any person who carries out an act that is aimed at frustrating the identification of the origin, the tracing or the forfeiture of assets which he knows or must assume originate from a felony or aggravated tax misdemeanour is liable to a custodial sentence not exceeding three years or to a monetary penalty. 1 bis An aggravated tax misdemeanour is any of the offences set out in Article 186 of the Federal Act of 14 December 1990 on Direct Federal Taxation and Article 59 paragraph 1 clause one of the Federal Act of 14 December 1990 on the Harmonisation of Direct Federal Taxation at Cantonal and Communal Levels, if the tax evaded in any tax period exceeds 300,000 francs. [ ] 3 The offender is also liable to the foregoing penalties where the main offence was committed abroad, provided such an offence is also liable to prosecution at the place of commission. 7

8 Federal Act for Implementing the Revised FATF Recommendations of 2012 Aggravated tax fraud as predicate offence to money laundering For direct taxes: Offence in relation to income or wealth taxes Use of a forged document with augmented evidentiary value ( titre ) More than 300,000 CHF evaded within a given tax period For indirect taxes: II. Money laundering: tax fraud as predicate offence Extension of the aggravated tax fraud under Art. 14 para. 4 Federal Act on Administrative Criminal Law 8

9 II. Money laundering: tax fraud as predicate offence Federal Act for Implementing the Revised FATF Recommendations of 2012 Tax fraud committed abroad as predicate offence to money laundering Offence punishable in the foreign State Fulfilment of Swiss requirements No retroactive effect but what about mutual legal assistance in criminal matters? Foreign tax authority as partie plaignante in criminal proceedings? 9

10 II. Money laundering: tax fraud as predicate offence Federal Act for Implementing the Revised FATF Recommendations of 2012 Amendments to the Anti-Money Laundering Act Extension of financial intermediaries due diligence and reporting duties Due diligence and reporting duties extended to individuals and entities that deal in goods commercially and in doing so accept cash (limit of 100,000 CHF for due diligence duties) 10

11 II. Money laundering: tax fraud as predicate offence Specific risks for financial intermediaries Art. 102 SCC: 1 If a felony or misdemeanour is committed in a corporation in the exercise of commercial activities in accordance with the objects of the corporation and if it is not possible to attribute this act to any specific natural person due to the inadequate organisation of the corporation, then the felony or misdemeanour is attributed to the corporation. In such cases, the corporation is liable to a fine not exceeding 5 million francs. 2 If the offence committed falls under Article[ ] 305 bis [ ], the corporation is penalised irrespective of the criminal liability of any natural persons, provided the corporation is responsible for failing to take all the reasonable organisational measures that were required in order to prevent such an offence. [...] 11

12 II. Money laundering: tax fraud as predicate offence Specific risks for financial intermediaries Corporate criminal liability: Art. 102 para. 2 SCC Reasonable organisational measures Organisational measures taken by financial intermediaries to prevent money laundering Moving target Individual criminal liability Financial intermediaries employees and governing bodies as garants 12

13 III. Foreign Illicit Assets Act Background Restitution of approx. 1,8 billion USD notably through mutual legal assistance in criminal matters (e.g. Marcos (Philippines), Abacha (Nigeria), Montesinos (Peru) cases) Issues with failing States : Mobutu (Democratic Republic of Congo) and Duvalier (Haiti) cases Art. 184 para. 3 Federal Constitution: Where safeguarding the interests of the country so requires, the Federal Council may issue ordinances and rulings. Ordinances must be of limited duration 13

14 III. Foreign Illicit Assets Act Background Restitution of Illicit Assets Act (Lex Duvalier) Shortcomings of Swiss law as illustrated during the Arab Spring (Mubarak and Ben Ali cases) Ukrainian crisis (Yanukovych case) Federal Act on the Freezing and the Restitution of Illicit Assets Held by Foreign Foreign Politically Exposed Persons (Foreign Illicit Assets Act, Lex Ben Ali) 14

15 III. Foreign Illicit Assets Act Key Aspects Freezing Preventive administrative freezing of PEPs assets (for purposes of mutual legal assistance): Loss of power occurred or is inexorable Level of corruption notoriously high Assets likely to have been acquired through corruption, misappropriation or other crimes Continuous administrative freezing of PEPs assets (for purposes of confiscation): Provisional freezing of assets within the framework of mutual legal assistance proceedings Failing States or No respect of the basic procedural requirements of the European Convention on Human Rights or the International Covenant on Civil and Political Rights Safeguard of Switzerland s interests Safeguard of Switzerland s interests 15

16 III. Foreign Illicit Assets Act Key Aspects Freezing Duty to report and to provide information Individuals or entities holding PEPs assets or with knowledge of the existence of such assets Report to the Money Laundering Office Switzerland 16

17 III. Foreign Illicit Assets Act Key Aspects Confiscation Following confiscation presumption of illicit origin of the assets of PEPs Inordinate increase of the wealth facilitated by the exercise of a public function Level of corruption notoriously high Exclusion of third parties rights on the assets Except rights in rem acquired in good faith Acquisition in a foreign country necessity of a decision recognizable in Switzerland 17

18 III. Foreign Illicit Assets Act Key Aspects Restitution Targeted measures to support the State of origin in its efforts to obtain the restitution of assets Technical assistance Transmission of (banking) information Restitution Financing of programmes of public interest 18

19 Thank you