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For some time, Switzerland has generally ranked highly in perceptual surveys of corruption.[1] But while some may believe that “generally speaking, Switzerland has a comprehensive anti-corruption and anti-money laundering regulatory regime”[2], that regime has not kept pace with a number of other countries. Indeed, a 2021 report by the Council of Europe’s Group of States against Corruption (GRECO) stated that since the 2017 GRECO report on Switzerland, Switzerland had satisfactorily addressed only five out of the twelve recommendations contained in a 2017 GRECO report.[3]
Since then, however, Switzerland has moved forward on several fronts to bolster its anti-corruption and anti-money laundering (AML) regime. Three recent developments indicate that progress. First, on August 30, the Swiss Federal Council (the governing body of the Swiss government[4]) launched the consultation procedure on a bill to strengthen the country’s AML framework, including the introduction of a beneficial ownership registry.[5] Second, on September 28, the Swiss Attorney General filed an indictment against former Uzbek government official and prolific bribe-taker Gulnara Karimova and a co-conspirator for participation in a criminal organization, money laundering, and related charges.[6] Third, on December 6, the Swiss Attorney General filed an indictment against a leading global commodities trading company, Trafigura Beheer BV (Trafigura), and three individuals for bribery in connection with Trafigura’s activities in the Angolan petroleum industry.[7] This post will summarize and comment on these developments.
Anti-Money Laundering and Beneficial Ownership Bill
The Federal Council bill has three main components:
- First, a federal beneficial ownership registry would be created, in which companies and other legal entities in Switzerland will have to be entered, together with information on their beneficial owners. Certain legal entities, such as limited liability companies, sole proprietorships, associations and foundations, would be subject to simplified registration. This register, which would be non-public, would be managed by the Swiss Federal Department of Justice and Police. To ensure the quality of the register, an audit unit within the Federal Department of Finance (FDF) would carry out checks and, where necessary, issue penalties.[8]
- Second, AML due diligence rules would apply to certain consultancy activities (especially legal advice) that carry an elevated risk of money laundering. With regard to this component, the Federal Council commented that “[t]he structuring of companies or transactions with real estate are considered to be particularly risky” and that “[t]he position of the legal profession and lawyers’ and notaries’ duty of professional secrecy are respected.”[9]
- Third, the bill would add a series of additional measures to strengthen the anti-money laundering framework. These include (1) “measures to prevent sanctions under embargo legislation from being breached or circumvented”; (2) lowering the threshold for cash payments in precious metals trading from CHF 100,000 ($114,161) to CHF 15,000 ($17,124). Cash payments above the CHF 15,000 threshold could be made, but subject to certain due diligence rules. In addition, all cash payments in real estate business would be subject to AML due diligence rules, regardless of the monetary amount involved.[10]
After consultation on the bill, which ended November 29, the Federal Council intends to submit the bill to the Swiss Parliament in 2024.[11]
Karimova Indictment
The Karimova indictment is the latest in a series of enforcement actions by multiple governments to recover on the order of $1 billion in bribes that Karimova received during the tenure of her father, Islam Karimov, as President of Uzbekistan.[12] Multiple governments, including Switzerland, have been pursuing assets that Karimova dispersed in various jurisdictions. In 2022, however, the Swiss Federal Criminal Court Chamber of Appeal (FCCA) ruled, in a case involving efforts to confiscate $293 million in bribe payments to Karimova, that Karimova had not been an Uzbek public official at the time she received the bribes, and remanded the case for reconsideration.[13]
The Karimova indictment takes a much broader approach to holding Karimova accountable for her copious bribe-taking. It charges her, as well as Bekhzod Akhmedov, the former general director of the Uzbek subsidiary of the Russian telecommunications company Mobile Telesystems PJSC, with four separate offenses under the Swiss Criminal Code: participation in a criminal organization that pursues securing a financial gain by criminal means[14], money laundering[15], acceptance of bribes as foreign public officials[16], and forgery of documents.[17]
According to the Swiss Attorney General’s Office, the indictment alleges that
at least from 2001 until 2013, Gulnara Karimova developed and directed a hierarchical criminal organisation known as ‘The Office’, comprising several dozen persons and large number of companies. In Switzerland, this organisation allegedly began its operations in 2005, in particular in order to conceal the capital originating from its criminal dealings in Swiss bank accounts and safes and by purchasing real estate.
In view in particular of its size, its mode of organisation, its infrastructures, the scale of the assets that it held and the qualifications of certain of its members, ‘The Office’ conducted its criminal activities as a professional business, complying with mandatory regulations and observing a strict allocation of tasks, while also resorting to violence and intimidation. The investigations revealed references to a hundred companies established and used in order to guarantee that the entire structure remained opaque. These companies held bank accounts in various jurisdictions, in particular Switzerland.[18]
It further alleged that Karimova exploited her dual status as the daughter of the President and as an Uzbek public official, which allowed her to exercise unlimited influence over state officials when it came to allowing companies to enter and operate in the telecommunications sector.[19]
Trafigura Indictment
The Trafigura indictment charges three individuals — a former Angolan public official and a former intermediary and the former Chief Operating Officer of Trafigura[20] – and Trafigura. The former Angolan public official is charged with passive bribery of foreign public officials[21], for having accepted, between April 2009 and October 2011, bribes of more than €4.3 million and $604,000 from Trafigura, in relation to its activities in the Angolan petroleum industry. The former intermediary and senior executive are charged with to active bribery of foreign public officials[22], for their involvement in this corruption scheme.
Finally, Trafigura is charged with failing to take all reasonable and necessary organizational measures to prevent the payment of these bribes to a foreign public official.[23] According to the indictment, Trafigura’s internal regulations applicable between April 2009 and October 2011 allegedly were not in conformity with international standards on preventing and combating corruption and were not apt to prevent the high risk of corruption associated with Trafigura’s activities in the Angolan petroleum industry. Furthermore, it alleges that Trafigura’s internal regulations and international standards,
particularly in relation to due diligence and monitoring of the intermediaries’ activities, are alleged to have not been effectively implemented within the TRAFIGURA Group. As a result of this disorganisation, which is alleged to have manifested itself up to the highest level of the company, the above-mentioned offences of active bribery of foreign public officials would have been rendered possible.[24]
Observations
Each of these three actions is noteworthy in its own right The AML/beneficial ownership bill breaks significant ground in creating a nonpublic beneficial ownership registry, similar to the United States[25], and in extending AML due diligence rules to lawyers and other consultancy activities.
The Karimova indictment indicates the Swiss Government’s continuing dedication to holding Karimova accountable for her corrupt conduct, as the Swiss Attorney General has been investigating Karimova-related money laundering since 2012. It remains to be seen how the Attorney General’s Office will seek to prove Karimova’s status as a foreign public official, given the 2022 adverse ruling by the Swiss FCCA.
Finally, although the Swiss Attorney General previously issued a summary penalty order against another major commodities trader, Gunvor, for failure to prevent bribery of foreign public officials[26], the Trafigura case marks the first time that the Swiss Federal Criminal Court is being called on to judge the criminal liability of a company for bribery of foreign public officials.[27]
Companies and law firms doing business in Switzerland should take action to respond to each of these developments, particularly by beginning now to prepare for adoption and implementation of the beneficial ownership bill and by incorporating details about the Karimova and Trafigura indictments into intracorporate anti-bribery and corruption briefings and trainings.
Footnotes
[1] See, e.g., Transparency International, Corruption Perceptions Index 2022: Switzerland, https://www.transparency.org/en/cpi/2022/index/che; TRACE International, 2023 TRACE Bribery Risk Index Scores, available at https://www.traceinternational.org/trace-matrix.
[2] Nicole Gütling, Recent Reforms of Switzerland’s Anti-Corruption Laws: What they Mean for International Sports Organizations, (2017), available at https://scholarship.law.columbia.edu/public_integrity/35.
[3] See Group of State against Corruption, Fourth Evaluation Round: Addendum to the Second Compliance Report Switzerland 2 (May 11, 2023), https://rm.coe.int/fourth-evaluation-round-corruption-prevention-in-respect-of-members-of/1680ab2e3a.
[4] See Federal Council, The tasks, https://www.admin.ch/gov/en/start/federal-council/tasks.html.
[5] See Federal Council, Federal Council initiates consultation on strengthening the anti-money laundering framework, August 30, 2023, https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-97561.html.
[6] See Office of the Attorney General of Switzerland, Uzbekistan: Gulnara Karimova and the former director of a telecommunications company indicted in the Federal Criminal Court, September 28, 2023, https://www.bundesanwaltschaft.ch/mpc/en/home/medien/archiv-medienmitteilungen/news-seite.msg-id-97944.html.
[7] See Office of the Attorney General of Switzerland, TRAFIGURA BEHEER BV and three individuals referred to the Federal Criminal Court, December 6, 2023, https://www.seco.admin.ch/seco/en/home/seco/nsb-news.msg-id-99242.html.
[8] Federal Council, supra note 5.
[9] Id.
[10] Id.
[11] Id.
[12] See, e.g., United States Attorney’s Office, Southern District of New York, Former Uzbek Government Official And Uzbek Telecommunications Executive Charged In Bribery And Money Laundering Scheme Involving The Payment Of Nearly $1 Billion In Bribes, March 9, 2019, https://www.justice.gov/usao-sdny/pr/former-uzbek-government-official-and-uzbek-telecommunications-executive-charged-bribery; Gulnara Karimova Sentenced Again For Corruption, Financial Crimes, Radio Free Europe/Radio Liberty, March 18, 2020, https://www.rferl.org/a/gulnara-karimova-sentenced-again-for-corruption-financial-crimesbrib bribe/30495071.html.
[13] See Kristian Lasslett and Nadja Capus, Shadow state structures and the threat to anti-corruption enforcement: evidence from Uzbekistan’s telecommunications bribery scandal, Crime, Law and Social Change (October 19, 2023), https://link.springer.com/article/10.1007/s10611-023-10122-w; Hugh Miller, Ex-Uzbek Leader’s Daughter Wins Case Over Frozen $303 Million, Bloomberg News, July 22, 2022, https://news.bloomberglaw.com/white-collar-and-criminal-law/ex-uzbek-leaders-daughter-wins-case-over-frozen-303-million.
[14] Art. 261ter(1)(a), Swiss Criminal Code, https://fedlex.data.admin.ch/filestore/fedlex.data.admin.ch/eli/cc/54/757_781_799/20230123/en/pdf-a/fedlex-data-admin-ch-eli-cc-54-757_781_799-20230123-en-pdf-a-1.pdf.
[15] Art. 305bis, Swiss Criminal Code, supra note 14.
[16] Art. 322septies(2), Swiss Criminal Code, supra note 14.
[17] Art. 251, Swiss Criminal Code, supra note 14.
[18] Office of the Attorney General of Switzerland, supra note 6.
[19] Id.
[20] See Joe Wallace, Switzerland Charges Trafigura and a Former Top Executive With Bribery, Wall Street Journal, December 6, 2023, https://www.wsj.com/finance/commodities-futures/switzerland-charges-trafigura-and-a-former-top-executive-with-bribery-3a3814fc.
[21] Art. 322septies (2), Swiss Criminal Code, supra note 14.
[22] Art. 322septies(1), Swiss Criminal Code, supra note 14.
[23] Id.
[24] Office of the Attorney General of Switzerland, supra note 6.
[25] See, e.g., Financial Crimes Enforcement Network, Beneficial Ownership Information Reporting, https://www.fincen.gov/boi-faqs.
[26] See Office of the Attorney General of Switzerland, Commodities trader Gunvor held criminally liable for acts of corruption, October 17, 2019, https://www.bundesanwaltschaft.ch/mpc/en/home/medien/archiv-medienmitteilungen/news-seite.msg-id-76725.html.
[27] See Office of the Attorney General of Switzerland, supra note 7.
Jonathan J. Rusch is Director of the U.S. and International Anti-Corruption Law Program and Adjunct Professor at American University Washington College of Law; Adjunct Professor at Georgetown University Law Center; a Senior Fellow at New York University School of Law’s Program on Corporate Compliance and Enforcement; and Principal of DTG Risk & Compliance LLC. He is a former Deputy Chief in the U.S. Department of Justice’s Fraud Section, and former Senior Vice President and Head of Anti-Bribery & Corruption Governance at Wells Fargo.
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