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24 October 2016
On May 30 2016 the Federal Tribunal made some significant clarifications regarding the scope of protection provided by the nemo tenetur privilege(1) in penal investigations against corporate entities.(2)
In the context of an investigation against a Swiss bank for suspected failure to take all reasonable measures to prevent money laundering, the bank refused to voluntarily comply with a disclosure request of the Attorney General's Office for a memorandum which the bank had prepared on the findings of an internal investigation to respond to a regulatory query by the Swiss Financial Market Supervisory Authority (FINMA). The prosecuting authority thus issued a search warrant on the bank's premises and seized the memorandum. The bank requested the document to be sealed, based on the argument that by virtue of the nemo tenetur principle, the prosecuting authorities should not be allowed to make use of the bank's own work product emanating from an internal investigation for regulatory purposes.
While the first-instance court refused to unseal the memorandum, the Federal Tribunal, on appeal by the Attorney General's Office, took the opposite stance.
The investigation concerned the bank's relationship with Musa Aman, a Malaysian politician allegedly involved in a US$90 million corruption scandal. Pursuant to press reports, the bribe payments were collected through accounts maintained with the bank's offices in Singapore and Hong Kong.
The bank came under scrutiny of the Swiss authorities on the basis of Article 102(2) of the Penal Code, read in conjunction with Article 305bis of the code (money laundering). Article 102(1) provides that:
"if a felony or misdemeanour is committed in an undertaking in the exercise of commercial activities in accordance with the objects of the undertaking and if it is not possible to attribute this act to any specific natural person due to the inadequate organisation of the undertaking, then the felony or misdemeanour is attributed to the undertaking."(3)
The provision further states that in the event that the offence qualifies as bribery:
"the undertaking is penalised irrespective of the criminal liability of any natural persons, provided the undertaking is responsible for failing to take all the reasonable organisational measures that were required in order to prevent such an offence."(4)
In parallel to the penal investigation, FINMA asked the bank by email (hence outside a formal regulatory enforcement procedure) to furnish a report on the bank's internal compliance processes in connection with the case at hand, and to provide a respective assessment of legal and reputational risks. In order to establish the facts pertinent to comply with FINMA's request, the bank carried out an internal investigation. The results of the investigation were laid down in an internal report which described in a structured manner the procedures applied by the bank's officers to secure compliance with applicable laws and regulations (including internal regulations) on the prevention of money laundering. The report was transmitted to FINMA in memo format by way of response to the aforementioned request.
The Attorney General's Office asked FINMA for a copy of the memorandum on the basis of Article 38 of the Federal Act on the Swiss Financial Market Supervisory Authority, which provides for a duty of regulatory and penal authorities to cooperate and coordinate their proceedings. However, FINMA declined the request, arguing that prevailing regulatory interests such as securing unrestricted cooperation of financial institutions would prohibit FINMA from sharing the results of the bank's internal investigation with the prosecuting authorities.
The tribunal confirmed that, as a general rule, legal entities, like individuals, may rely on the nemo tenetur privilege as a matter of Swiss law (Article 113(1) of the Code of Penal Procedure). However, referring to previous case law,(5) it recalled that the privilege should be applied restrictively concerning information which a legal entity is obliged to obtain, keep and record based on administrative (notably regulatory) laws, as it is typically the very purpose of such obligations to ensure access to information for regulatory and penal authorities (consid 8.1 and 8.3.3).
While prosecutors must not exercise pressure or measures of enforcement against a suspected offender to compel it to establish or surrender evidence or to otherwise contribute to its conviction, it is admissible to employ coercive measures (eg, search warrants) to access and seize evidence which already exists and is under the control of the suspected offender. This applies in particular to documents which the concerned party is obliged to draw up, keep and place at the disposal of authorities in the course of ordinary business or in the context of regulatory proceedings, hence for purposes other than a penal investigation (consid 8.3.1 and 8.3.2).
In this regard, the tribunal noted that FINMA had not exercised pressure on the bank to draw up the memorandum at issue, but rather invited the bank as a matter of regulatory routine to look into the case and report its findings to FINMA (consid 8.10 and following). It further found that the memorandum elaborated on specific steps that had been taken by the bank to comply with 'know your customer' and anti-money laundering rules, hence on matters which the bank was obliged by law to document and share on request with prosecuting authorities pursuant to Articles 7(1) and (2) of the Federal Act on Combating Money Laundering and Terrorist Financing (consid. 8.18).
The tribunal concluded that the bank was not in a position to invoke the nemo tenetur privilege in order to prevent the Attorney General's Office from accessing information collated by its own internal investigation. The prosecuting authority had the power to seize the respective report and make use of it as evidence against the bank. The decision, however, also confirmed that a bank involved in a penal investigation as a suspected offender may refuse voluntary disclosure of evidence to prosecuting authorities, and that the nemo tenetur privilege would prohibit prosecutors from answering any such refusal by improper compulsion.
Legal entities which are facing potential criminal liability pursuant to Article 102 of the Penal Code may generally not rely on the nemo tenetur principle as a basis to prevent prosecuting authorities from accessing work products of an internal investigation. Protection could, if at all, be secured only by entrusting the investigation to an external legal professional who could then invoke legal profession privilege, and by ensuring that the result of the investigation qualifies as a work product of such external legal professional eligible for privilege.
Where a company is subject to laws providing for a duty to investigate and keep records about certain matters, the company cannot avoid establishing relevant reports on the argument that those reports may eventually be used against it as evidence to impose penalties.(6)
For further information on this topic please contact Bernhard Loetscher orAxel Buhr at CMS von Erlach Poncet Ltd by telephone (+41 44 285 11 11) or email (email@example.com or firstname.lastname@example.org). The CMS von Erlach Poncet website can be accessed at www.cms-vep.com.
(1) Nemo tenetur se ipsum accusare vel prodere – the privilege is considered an aspect of fair trial as protected by Article 6 of the European Convention on Human Rights. It is expressly stipulated in Article 14(3)(g) of the International Covenant on Civil and Political Rights (December 16 1966), as well as in Article 113(1) of the Code of Penal Procedure:
"The accused may not be compelled to incriminate him or herself. In particular, the accused is entitled to refuse to make a statement or to cooperate in the criminal proceedings. He or she must, however, submit to the compulsory measures provided for by the law." (Government's informal translation.)
(3) Government's informal translation, cf www.admin.ch/opc/en/classified-compilation/19370083/index.html#a102.
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