Commentaries

Artificial intelligence (AI) can prove invaluable in the human resources management of a bank or financial services provider. Employers can use it to automate various tasks, such as sorting applications, assessing performance, issuing warnings and even dismissals. These practices raise various legal questions: to what extent can an employer rely on AI for such tasks? Can employees challenge the use of AI on them, or obtain explanations of the criteria used by AI? In Switzerland, there are no regulations specifically[...]

Since the revision of the Code of Criminal Procedure, which came into force on January 1, 2024, banking secrecy no longer constitutes a ground for sealing documents when invoked by a third party, i.e. a person not involved in the criminal proceedings. The Swiss Federal Supreme Court ruled to this effect in its ruling 7B_313/2024 of September 24, 2024, intended for publication. The Office of the Attorney General of Switzerland was conducting criminal proceedings for fraud and money laundering against[...]

The European Regulation on Artificial Intelligence (AI Act) has been in force since 1 August 2024 (see cdbf.ch/1359/). It applies both to artificial intelligence systems (AIS) and to general-purpose AI model (art. 2 AI Act). This commentary focuses on the definitions of these two key concepts in the application of the AI Act and attempts to highlight their characteristics and specificities. A. The concept of SIA According to art. 3 ch. 1 AI Act, an AIS is “machine-based system that is[...]

A bank can benefit from guarantee clauses stipulated in the standard contracts of suppliers of AI systems. These clauses provide for compensation in the event of infringement arising from the use by such systems of training data protected by intellectual property rights. This commentary examines the scope of such clauses, their conditions and the possible need to extend their benefit to third parties to the initial contract. The quality of the responses provided by AI systems depends in particular on[...]

In ruling 4A_394/2024 of 18 September 2024, the Federal Supreme Court confirms the inadmissibility of a clear-case application to debit the account of a client subject to sanctions, in order to pay his lawyer's fees. A client held several bank accounts in Switzerland, in particular with a bank whose group was also active in Europe and the United Kingdom. The client is subject to sanctions in connection with the conflict in Ukraine, and his assets have been frozen by Switzerland,[...]

Cross-border financial market supervision and effective international cooperation are essential for the stability and integrity of the world's financial markets. To this end, the Federal Council has just launched a consultation on amendments to the Financial Market Supervisory Authority Act (LFINMA), the Audit Supervision Act (ASA) and the Swiss National Bank Act (NBA) to adapt the Swiss legal framework to the current conditions for international cooperation. This commentary focuses exclusively on the proposed amendments to LFINMA. The preliminary draft seeks[...]

Recent advances in generative artificial intelligence (AI) have rekindled financial players' interest in chatbots for managing customer relationships. According to a report by the US Consumer Financial Protection Bureau (CFPB) published in 2023, around 37% of Americans interacted with a banking chatbot in 2022, and all the major US banks are using them. However, their deployment raises many questions. Some of these are not new, particularly concerning the management of data and subcontractors; others are more specific to the technology[...]

The members of the board of trustees of a pension fund must draw up the investment strategy and organise and supervise its implementation. If they fail to do so, in particular if they conclude a discretionary mandate without any investment strategy and without supervising the investment manager, the members will incur civil liability (9C_496/2022, 9C_503/2022, 9C_504/2022, 9C_505/2022). A pension fund for a nursing home in Fribourg decided to enter into a discretionary management contract with an asset management company. The[...]

ChatGPT and GenAI - these new words have been part of our daily lives since November 2022, and we no longer need to introduce them. The growing use of artificial intelligence (AI) in the banking sector raises complex legal and regulatory issues. How do you navigate the world of AI when you are active in the financial sector in Switzerland? The starting point is to understand the existing legal and regulatory framework. To date, there are few laws specifically governing[...]

The overview of the “ leading cases ” of the Swiss Banking Supervisory Commission (hereinafter: the Commission) for the1st half of 2024 is now available. Among the few decisions mentioned, we would like to highlight two. In the first ([533/60]), it is recalled that underart. 18 of the investigation regulations of December 16, 2019, the bank is obliged to cooperate in establishing the relevant facts when an investigation procedure is opened against it. In the case in point, the reporting[...]

FINMA may publish a press release concerning the closure of enforcement proceedings against a named subject, in particular to show the public that it is not inactive in the face of violations of financial market law (2C_682/2023 intended for publication). FINMA closes enforcement proceedings against a bank that has seriously violated money laundering regulations. A few weeks later, the regulator informs the bank of its intention to publish a press release on the proceedings six days later. The draft press[...]

In ruling 4A_57/2024, the Swiss Federal Supreme Court held that an arbitration award ordering the debtor of an outstanding loan to pay interest at a rate of 24% was not contrary to Swiss public policy within the meaning of Art. V ch. 2 let. b of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC). Two Chinese companies had entered into a loan agreement for a period of 2 months, with an interest rate of[...]

In a recent decision, the Swiss Federal Supreme Court ruled on the question of whether the person identified in form A as the beneficial owner of assets deposited in a bank account can claim ownership of these assets in enforcement proceedings on this basis alone (decision 5A_208/2023 of July 10, 2024). This ruling arose from taxation proceedings against B and C, in which the Geneva Cantonal Tax Administration (AFC-GE) requested - and obtained - the sequestration of three bank accounts[...]

The question has long been posed by legal scholars: what happens to a criminal prosecution brought against a company when the latter, in one way or another, disappears? The Court of Appeal of the Federal Criminal Court addressed this issue in a decision dated August 19, 2024 (CN.2024.18). It ruled that the takeover of one company by another - i.e., a merger by absorption within the meaning ofart. 3 para. 1 let. a FusG - did not extinguish the criminal[...]

In ruling ACJC/1002/2024 of 19 August 2024, the Geneva Court of Justice considers that the question of the obligation to return retrocessions in an execution-only relationship, which is controversial in the legal literature and the subject of divergent cantonal rulings, may remain undecided due to a valid waiver by the client. Since 2008, a customer and a Geneva bank have been bound by a simple bank custody agreement (execution only). The bank amended its general terms and conditions several times[...]

The Swiss Federal Supreme Court has upheld the immediate dismissal of a Ticino bank manager, initially on the basis of mere suspicion, on the basis of formal procedural rules (ruling 4A_399/2022 of June 3, 2024). The employee had been working since June 2008 as investment manager of a bank's Lugano branch, and then as manager of the branch from June 2013. On that date, the parties agreed, among other things, a salary of CHF 400,000 per annum with a minimum[...]

Federal Court decisions 7B_158/2023 and 7B_874/2023 of 6 August 2024 were handed down in the same case, by the2nd Criminal Court, in the context of a sealing procedure. The first, intended for publication, seems convincing to us, unlike the second. For once - and this is important - the criminal proceedings were not opened for money laundering but for breach of the law against unfair competition. In short, the Zurich Public Prosecutor's Office suspects an individual, who is understood to[...]

In ruling ACJC/201/2024 of February 13, 2024, the Geneva Court of Justice confirms the validity of a clause excluding the benefit of real discussion (beneficium excussionis realis), under which the bank is free to choose between taking action against the customer personally (and thus attacking his entire estate) or realizing the pledged assets in his bank account. The facts are as follows: On May 4, 2013, a Saudi customer entered into a framework credit facility agreement and a deed of[...]

The Federal Administrative Court (FAT) has confirmed that comparis.ch AG (Comparis) qualifies as an insurance intermediary within the meaning of Art. 40 para. 1 ISA on the basis of the services it offers and must therefore be entered in FINMA's public register of unrelated intermediaries (ruling B-5886/2023 of 5 July 2024). In September 2023, FINMA decided that Comparis was an insurance intermediary within the meaning of Art. 40 ISA and ordered it to be entered in the register of non-related[...]

On 20 August 2024, Switzerland enters a new era in bank transfers, with the introduction of Instant Payments. Around 70 banks (representing more than 98% of payments in Switzerland) will accept such payments ‘in real time’. The technical implementation of instant payments in Switzerland is based on the new ‘SIC5’ payment platform developed by SIX, the operator of the Swiss stock exchange, and the Swiss National Bank (SNB). Instant payments are coming late to Switzerland. In fact, this system is[...]

When the bank liquidates the customer's positions and the result is a negative balance, it is up to the bank to prove the losses. Otherwise, the bank does not prove the existence of its claim against the customer (judgment 4A_301/2023 of 16 July 2024). In 2011, a client used a Vaud bank's IT platform to speculate on fluctuations in the USD/CHF exchange rate. On 15 January 2015, the SNB announced that it was abandoning the CHF/EUR floor rate. This caused[...]

In a recent ruling 4A_26/2024 of 11 June 2024, the Swiss Federal Supreme Court was called upon to rule on the interpretation of a confidentiality clause contained in a settlement agreement between a bank and a private investigator. Specifically, the key question was whether the parties intended to protect secret information in the formal or material sense. In 2019, a company active in investigation and security services became involved in the "Khan affair", in which it was revealed that Mr[...]

The Swiss Federal Supreme Court has upheld the immediate dismissal of an employee due to his careless application of the bank's anti-money laundering rules (ruling 4A_67/2023 of 12 June 2024). The employee had been working in the Panamanian branch of a Ticino bank since July 2012. He received two warnings, the first on 19 June 2015 following an angry outburst towards an employee in the Legal & Compliance department, and the second on 24 July 2017 for his carelessness in[...]

On 26 July 2024, FINMA published Supervisory Notice 06/2024 on stablecoins. The communication covers the legal categorisation of stablecoins, the application of the anti-money laundering provisions, FINMA's practice with regard to default risk guarantees and the associated risks. This communication, which does not really contain anything new, is nevertheless a useful compendium of the Authority's practice developed since the publication of the Supplement to the Practical Guide for reporting issues relating to initial coin offerings (ICOs) on 11 September 2019.[...]

In a recent ruling on enforcement, the Federal Supreme Court ruled on the question of whether a personal guarantee for an unlimited amount, subject to foreign law, is compatible with Swiss public policy (ruling 4A_650/2023 of 13 May 2024). On 8 December 2010, A, domiciled in the United Arab Emirates, signed a personal guarantee contract in favour of an Emirati bank by which he guaranteed a loan granted by the bank to a company. The contract - subject to UAE[...]

After more than three years of legislative gestation, the European regulation on artificial intelligence has finally been published in the Official Journal. It is directly applicable to all EU Member States, without the need for transposition into national law. There are transitional arrangements for certain players and requirements (cf. timeline). The Regulation represents the first regulatory framework to apply generally to artificial intelligence systems (AIS), as defined below. This regulation marks a major turning point, also for Swiss financial services[...]

In its judgments 4A_574/2023 and 4A_576/2023 of 24 May 2024, the Swiss Federal Supreme Court has upheld a ruling by the Zurich Handelsgericht (HG210069-O) specifying the conditions under which a waiver of retrocessions is valid outside asset management. The Handelsgericht had left open the question of whether the relationship between the parties was one of investment advice or a simple account/custody account, since in both cases the bank had to return the retrocessions. In its ruling, the Federal Court did[...]

The Geneva Court of Justice recently handed down a ruling on international mutual assistance in civil matters (ACJC/483/2024), in which it refused to consider a letter rogatory as abusive and/or likely to undermine Swiss sovereignty or security (art. 12 al. 1 let. b CLaH70). Alice and Bernard are nationals of State F and have refugee status in Switzerland due to judicial and extra-judicial persecution by the authorities of F. In 2012, F requested mutual assistance in criminal matters from Switzerland[...]

The RGPD also protects the banking data of legal entities when the beneficial owner objects to the transfer of the data to the Department of Justice (judgment no. 141/23-II-CIV of 6 December 2023 of the Luxembourg Superior Court of Justice). A person holds bank accounts with the Luxembourg branch of a Swiss bank. He is also the beneficial owner of a company which has two bank accounts with this branch. Another company, of which the customer's ex-wife and son are[...]

There is nothing new about the fact that an asset manager who engages in churning is liable to a criminal conviction (disloyal management - art. 158 of the Swiss Criminal Code). In its ruling 6B_1118/2023 of 26 April 2024, the Swiss Federal Supreme Court analysed in detail the evidence that would allow a churning activity to be identified or ruled out, i.e. carrying out a large number of transactions with the sole aim of increasing retrocessions. Between 2003 and 2005,[...]