The legal treatment of money laundering has been undergoing change since the 1990s. The introduction of the Anti-Money Laundering Act (AMLA) in 1998 was a major step forward. Since then, the implementing provisions (AMLO, AMLO-FINMA) have been regularly amended. In 2003, the Swiss Supreme Court issued a landmark ruling stating that an act of money laundering may give rise to civil liability towards the victim of the predicate offence. That same year, the federal legislature adopted the corporate criminal liability standard, which specifically targets cases of money laundering.
Thus, pursuant to Article 102(2) of the Criminal Code (CC), a company may be criminally convicted if an act of money laundering is committed within the company, in the course of its business activities and if the company has not taken “all reasonable and necessary organisational measures to prevent such an offence”.
The conviction of the company therefore requires that a natural person within the company has committed an act of money laundering and that the company failed to take all reasonable and necessary organisational measures to prevent such laundering.
For financial institutions, this last condition raises questions. What “reasonable and necessary” organisational measures must be taken within the company to protect it from criminal conviction? As everyone knows, no company is immune from an unscrupulous employee. Given this risk, what supervisory measures are expected?
Legal doctrine and case law (still relatively limited) seem to agree that the notion of “reasonable and necessary organisational measures” corresponds to the implementation of the legal obligations applicable to the company in terms of money laundering.
In short, if the company complies with the applicable anti-money laundering provisions (AMLA, AMLO, AMLO-FINMA, CDB, etc.), it will in principle be considered to have taken the required reasonable and necessary organisational measures and should avoid criminal conviction.
If this is not the case, i.e. if the company breaches an obligation, it exposes itself to the allegation that it failed to take all reasonable and necessary measures.
However, for such a breach to result in the company’s criminal conviction, a causal link must exist between the breach and the act of money laundering committed within the company.
This can be illustrated with a (fictitious) example. Suppose a bank has failed to properly identify the beneficial owners of certain business relationships. Assume further that an employee of the bank deliberately assisted a customer in concealing funds of criminal origin and circumventing the bank’s systems. However, the bank’s failure to identify the beneficial owners of certain business relationships is not at issue here: the act of money laundering committed by the employee concerns a relationship for which the beneficial owner had been properly identified. In such a case, the bank’s organisational shortcomings cannot form the basis for a criminal conviction under Article 102(2) CC (Swiss Criminal Code) for the employee’s money laundering offence. It cannot be considered that the bank failed to take all reasonable and necessary measures when the alleged organisational failures bear no connection to the employee’s offence. In the absence of other shortcomings, the company should avoid any criminal sanction. The employee, for his part, may of course be prosecuted and convicted.
As in any criminal proceedings, it is up to the prosecuting authority to investigate and establish the facts. In order to secure a conviction against the bank in our example, the Public Prosecutor would need to demonstrate that the money laundering offence would have been avoided had the bank taken all reasonable and necessary organisational measures. It should be noted in this regard that the Public Prosecutor has extensive investigative powers and can access all internal company documentation, including emails sent or received by its employees.
When a company is criminally convicted, it faces a fine of up to CHF 5,000,000. Additional measures may also apply, such as the confiscation of unlawfully obtained gains or the imposition of a compensatory claim corresponding to those gains (to ensure that crime does not pay).
In addition, the criminal conviction of a financial institution often triggers administrative consequences under FINMA’s authority, as well as commercial repercussions due to reputational damage.
The legal arsenal for combating money laundering is expanding and becoming more complex each year. Article 102 CC is an integral part of this arsenal, complementing and reinforcing it. This provision also increases the risks faced by financial institutions should an act of money laundering occur within their organisation. Strict compliance with prudential anti money laundering obligations substantially mitigates this risk.
Frédérique Bensahel
Partner, Geneva
Julien Le Fort
Associate, Geneva
