In October 2003 Switzerland amended the Federal Penal Code (FPC) and enacted provisions exposing corporations to penal prosecution. With this step Switzerland took up the pace set by Anglo-Saxon and some European countries years ago.
A new article in the FPC, article 100 quarter (i), outlines a secondary penal responsibility of corporations, in those cases when a crime is committed within the corporation's scope of business, but the crime cannot be tied to an employee because of the corporation's lack of sufficient internal organization. In a numerus clausus of criminal activity such as organized crime, money laundering, bribery of authorities, or the financing of terrorism, the corporation also becomes primarily and cumulatively subject to penal prosecution if it fails to take the necessary and reasonable organizational measures to prevent the crime. This is outlined in article 100 quarter (ii).
In both cases the corporation's culpability is tied to organizational deficiencies. In cases of secondary culpability the deficiency is such that the perpetrator cannot be identified. In cases of primary culpability, although the crime is attributable to an individual, the corporation is at fault for failing to take appropriate and reasonable steps to prevent the crime.
Over the past decade, the Swiss government and the monitoring bodies of the financial markets put a tight framework of legislation in place aimed at preventing money laundering and the abuse of the financial markets for organizational crime or bribery. There is widespread consensus that financial institutions which comply fully with the rules of the Federal Banking Commission and of the self-regulatory bodies of professional organizations, as well as the present legislation, run little risk of violating article 100 quarter (i).
Were they to violate the article, they could face fines of up to CHF 5 million ($3.8 million).
But practitioners will be more concerned about what is meant by "the necessary and reasonable organizational measures to prevent wrongdoings" stated in article 100 quinquies (ii).
Although until today no investigation or court decision dealing with article 100 quinquies in the FPC has become public, it is expected that the new legislation will be of high practical importance. In particular, persons who suspect that they have suffered financial losses due to wrongdoings within a company have an interest in beginning a criminal investigation into the corporation. This would allow them to shortcut or even avoid civil procedures.
Corporations involved in a criminal investigation will be forced to make provisions in their financial statements for the commencement of the investigation. Depending on the importance of the matter and the exposure involved, and whether the company is listed or not, there may even be grounds for ad hoc publication.
The financial consequences for a corporation subjected to a criminal investigation should not be underestimated. Corporations doing business in Switzerland have a further reason to ensure that they are in full compliance with local laws and regulations.