Commentaries

FINMA has just published its annual report, which reviews the year 2022 and outlines the priorities for supervision. These include issues and challenges posed by the current geopolitical context and inflation, money laundering supervision, climate risk and anti-money laundering supervision, and digitization of the financial sector. This last point is the subject of this commentary, which discusses FINMA's practice in relation to cryptoassets and takes stock of artificial intelligence (AI) in the financial sector. FINMA notes an expansion in the[...]

In a ruling dated December 1, 2022 (CA_2022.10), the Appeal Chamber of the Swiss Federal Criminal Court (TPF) found the director (A.) of a company (the issuer) guilty of failing to prevent tokens issued after an ICO from being transferred to participants' wallets, even though neither the issuer nor A. were affiliated to a self-regulatory organization (SRO) in accordance with the MLA. A. was convicted of having intentionally exercised a financial intermediary activity, in a professional capacity, in violation of[...]

A start-up relies on a guarantee from a fictitious bank to carry out a capital increase of around CHF 30 million. The auditor in charge of checking the increase report detects nothing. The Federal Administrative Court (FAT) saw this as a manifest lack of critical thinking and confirmed the withdrawal of the bank's authorization - albeit with a reduced duration - in ruling B-2245/2021 of January 27, 2023 (now in force). In 2016, Caroline - a certified auditor - was[...]

Following the deterioration in relations between a major IT service provider and a Geneva bank, the Court of Justice of the Canton of Geneva recently addressed various issues relating to an IT contract in a ruling dated October 4, 2022 (ACJC/1497/2022). In 2006, a Geneva bank decided to migrate its IT system. It entered into a series of contracts with a Zurich-based company, which was to carry out the migration and then operate the system. The contract is for a[...]

In a ruling 6B_899/2021 of January 26, 2023, handed down after a public hearing but not intended for publication, the Federal Court ruled that a lawyer who produces a six-page document containing a large amount12of information subject to banking secrecy in civil proceedings, without having taken full cognizance of it, commits a breach of banking secrecy (art. 47 al. 1 let. c LB) by possible fraud (art. 12 al. 2 phr. 2 CP). A banking establishment and one of its[...]

The measures adopted by the Federal Council to ensure the takeover of Credit Suisse by UBS represent a significant change of approach from the principles that guided the regulation of systemically important banks after the 2008 financial crisis. The scale of these changes is commensurate with the new crisis that the authorities are seeking to avert. It is all the more astonishing given that, despite the endless list of Credit Suisse defaults revealed in recent years, FINMA and the Swiss[...]

Can an employee who discloses to the media documents protected by professional secrecy and relating to the tax practices of multinationals be recognized as a whistleblower and thus benefit from the full protection of art. 10 ECHR? Yes, says the European Court of Human Rights, which found a violation of this provision by the Luxembourg authorities in Halet v. Luxembourg of February 14, 2023 (no. 21884/18). Between 2012 and 2014, several hundred tax rescripts and tax declarations highlighting highly advantageous[...]

In a ruling 1C_477/2022 of January 30, 2023, intended for publication, the Federal Supreme Court decided to suspend the international mutual assistance proceedings in criminal matters and to uphold the sequestration of funds ordered in Switzerland in June 2020 in execution of a request submitted by the Russian Federation in January 2020. The Federal Supreme Court is ruling on the appeal because it has to answer the general question of what should happen to requests for mutual legal assistance made[...]

Does the right not to incriminate oneself make it possible not to produce bank documents specifically requested by an administrative authority under threat of criminal sanction? No, answers the ECtHR unanimously in the De Legé case of October 4, 2022, no. 58342/15. The story begins with the theft of banking data concerning the assets of Dutch residents deposited with a Luxembourg bank. As a result of criminal proceedings, the Belgian authorities obtained the data, which they then passed on to[...]

When a foreign company holding a bank account has elected domicile with an agent in Switzerland in the context of an administrative assistance procedure, can the Federal Tax Administration (FTA) use the edict procedure to inform its beneficial owner of the existence of the procedure? The Swiss Federal Supreme Court answered this question in the affirmative in a ruling dated November 8, 2022 (2C_772/2021 and 2C_773/2021). The references of the company's bank accounts appeared on the list appended by France[...]

On December 16, 2022, the Federal Council published a Sustainability Report (Rapport) for the years 2022-2025, which takes stock of current measures and makes various recommendations to consolidate Switzerland's position in sustainable finance. Switzerland's strategy comprises fifteen new and existing measures in four areas: Business data on sustainable development: The collection of and access to quality information is a prerequisite for investors to be able to compare financial products and make informed investment decisions. The aim is to improve the[...]

In its recent activity and case law report covering the years 2017 to 2021, the Supervisory Board of the Agreement on the Swiss Banks' Code of Conduct with Regard to the Exercise of Due Diligence (CDB) reminds us at the outset that the provisions of CDB 20 apply only if a new business relationship is opened, or a repetition of due diligence obligations occurs, after January 1, 2020 (art. 69 para. 1 and 70 para. 2 CDB 20). As a[...]

New international standards and strong developments in the field of digitalization. These are the two factors cited by FINMA to justify the revision of its Circular 08/21 on operational risks. Adopted on December 7, 2022, Circular 2023/1 will come into force on January 1, 2024. The new circular distinguishes between the global management of operational risks and the management of specific operational risks. The latter include those related to information and communication technologies (ICT), cyber risks, critical data and, finally,[...]

To what extent can a bank be held liable for the fraudulent conduct of a pseudo-independent asset manager towards the latter's clients when they have no contractual link with the bank (TF 4A_603/2020 of November 16, 2022)? In 1999, a financial intermediary opened an account in his own name with a Swiss bank. He then opened an account in his company's name in 2004. He declares that he is the beneficial owner of the assets deposited. The accounts were to[...]

On November 23, 2022, the Federal Council (FC) adopted the implementing ordinance on climate reporting by large Swiss companies. From January 1, 2024, reporting on climate issues must be integrated and published as part of the report on non-financial issues referred to in Art. 964a to 964c CO. I. Scope of application The scope of the FC Ordinance is defined by Art. 1 para. 1 of the Ordinance, which refers to Art. 964a of the Swiss Code of Obligations. Large[...]

On November 28, 2022, the Council of the European Union approved the Corporate Sustainability Reporting Directive (CSRD). What is this directive, and to what extent are Swiss companies - including banks and financial institutions - affected by it? The CSRD replaces the Non Financial Reporting Directive (NFRD) adopted in 2014. The new directive introduces a number of important new features. This commentary will confine itself to a brief overview of the CSRD, with a particular focus on its extraterritorial scope.[...]

Since September 1, 2020, banks have had to notify FINMA within 24 hours of successful cyber attacks. On December 2, 2022, the Federal Council proposed to Parliament the introduction of a new obligation to report cyberattacks, also within 24 hours, but this time to the Swiss National Center for Cybersecurity (NCSC; cf. art. 74a ff of the draft Information Security Act [P-LSI]). Why this additional obligation? Because it will apply to all critical infrastructures, including banks, insurance companies, financial market[...]

On November 10, 2022, FINMA published its annual risk monitoring report. This report provides information on the seven risks that FINMA considers significant for the financial industry. These include interest-rate risk, credit risk for mortgages, credit risk for other loans, yield spread risk, risks associated with cyber-attacks, anti-money-laundering and sanctions risk, and risk associated with difficulties in accessing foreign markets. Most of the risks mentioned are directly or indirectly linked to this year's tense geopolitical and economic situation. In its[...]

How can the fight against money laundering and the principle of transparency be reconciled with the right to privacy and data protection? The European legislator has failed to strike the right balance in allowing any person access to the register of beneficial owners of companies, according to the European Court of Justice's (CJEU) ruling C-37/20 and C-601/20 of November 22, 2022. In May 2018, the European legislator adopted its 5th Money Laundering Directive (Directive 2015/849 as amended) to make information[...]

On September 28, 2022, the European Commission published its proposal for a directive adapting the rules on non-contractual civil liability to the field of artificial intelligence (P-DIA). It includes rules to facilitate access to evidence on high-risk artificial intelligence (AI) systems, so that claimants are able to prove the various requirements of an extra-contractual civil action under their national law. Could this proposal have a major impact on financial institutions employing artificial intelligence systems? The proposal in no way alters[...]

Can obtaining a COVID credit fraudulently lead to criminal consequences, and if so, what are they? In ruling 6B_295/2022, the Swiss Federal Supreme Court upheld the conviction of a greedy entrepreneur for money laundering. The ruling also provides an opportunity to discuss other criminal offences that may be relevant. A quick (re)contextualization before turning to the case at hand: in March 2020, the COVID-19 pandemic strikes with full force. To help companies affected by this crisis, on March 25, 2020,[...]

The world of sustainable finance seems to be in a constant state of flux. New products, neologisms and acronyms follow one another at a pace that can make your head spin. On October 12 alone - by way of example - the G7 expressed its support for a whole series of international initiatives in this field, and the Swiss Confederation issued its first "green" bond. Legal and regulatory news is no exception to this effervescence, and there are already dozens[...]

If the bank executes unauthorized transactions, should the customer file a claim for enforcement or damages? This depends on whether the fraud is internal or external, as stated by the Swiss Federal Supreme Court in ATF 149 III 105 (ruling 4A_407/2021). The facts can be simplified as follows: a relationship manager, in charge of a bank's Turkish desk, carries out transactions (Forex operations, investments, transfers, etc.) on the accounts of several customers, without having received prior orders. In order to[...]

Not comparing an order received by e-mail with one received by post? A serious error, according to Federal Court ruling 4A_425/2021. Following the death of a customer, a Swiss bank required the heirs to send the bank account instructions by post, in order to obtain the signatures of all the heirs. In practice, the account manager has regular telephone conversations with the deceased's son. The latter tells him that the heirs must pay EUR 141,599.85 to the notary in charge[...]

What could Kim Kardashian, Nabilla and the Swiss Federal Supreme Court possibly have in common? Not much, a priori. However, the promotion of online trading courses and cryptoactives concerns all three. The first two have been fined, one for promoting a website offering online trading courses, the other for promoting a cryptoasset. Both failed to inform their subscribers that they were being remunerated for their publication by the companies in question. For its part, the Swiss Federal Supreme Court recently[...]

The Swiss Federal Supreme Court has handed down its ruling (TF 4A_601/2021 of September 8, 2022) in a case followed with some trepidation by practitioners, but without providing a federal jurisprudential answer to the question of whether retrocessions received in the context of an execution-only relationship are subject (or not) to the duty of restitution. The suspense was at its height, as the Federal Supreme Court had the opportunity to consider, for the first time to our knowledge, the scope[...]

The end of the summer saw the publication of two Federal Supreme Court rulings concerning civil claims by adhesion to criminal proceedings (6B_1310/2021, summarized in Lawinside.ch/1231 and 4A_417/2021, commented in Lawinside.ch/1232). This case law is of practical importance in banking disputes, where the question regularly arises as to which procedure customers should initiate to assert their civil claims against a bank and its employees. The Court of Criminal Law first ruled that the notion of "civil claims" in art. 122[...]

On the one hand, the head of the US desk who encourages his employee, a senior manager, to prospect for US customers, despite internal rules to the contrary. On the other hand, this executive, who is trained and informed of the risks associated with US persons, continues to travel to the USA to meet potential customers. Following an investigation that lasted almost four years, involving thousands of allegations and the hearing of almost forty witnesses, the Swiss Federal Court weighed[...]

The Swiss Federal Supreme Court recently clarified the application of the rules on the disclosure of holdings in collective investment schemes (art. 120 ff. LIMF) in a ruling 2C_546/2020 of August 18, 2022, intended for publication. In particular, it held that the parent company of a group composed of collective investment schemes must disclose the latter's holdings on a consolidated basis. At issue in this case were two foreign-based financial services companies. The first (the controlled company), based in the[...]

The Asset Management Association Switzerland (AMAS) has published a voluntary sustainability self-regulation aimed at improving the framework conditions for the creation and management of sustainable collective investment schemes (CIS). This self-regulation will come into force on September 30, 2023, and will impose binding guidelines for financial institutions - members of AMAS - that produce and manage PCCs in relation to sustainability. AMAS thus complements the Swiss Bankers Association's self-regulation of sustainability criteria in customer advice (commented in cdbf.ch/1241). For the[...]