Legal framework

Since the first major case involving illicitly acquired assets of politically exposed persons (PEPs) – the case of the former Philippine ruler Ferdinand Marcos in the 1980s – Switzerland has been developing a robust legal mechanism to protect itself against illicitly acquired assets entering the country. The cornerstones of this mechanism are prevention and repression.

In a bid to prevent illicitly acquired assets– from entering the Swiss financial centre, Switzerland has devised a system based largely on the two pillars of prevention and repression.

Prevention

The first step entails preventing that illicitly acquired assets of PEPs enter Switzerland.

The strict provisions of Swiss anti-money-laundering legislation oblige Swiss banks and all other financial service providers to identify not only the contracting party, but also the economic beneficiary. Moreover, the Swiss Money Laundering Act provides for enhanced due diligence in dealing with PEPs.

Money laundering

Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector

Banks and other financial intermediaries are required by law to report all suspicious transactions to the Money Laundering Reporting Office Switzerland (MROS) and to block immediately any account where there is suspicion of money laundering. Swiss banking secrecy provides no protection against the prosecution of criminal offences either in Switzerland or in the context of international mutual assistance in criminal matters.

Money Laundering Reporting Office Switzerland (MROS), Federal Office of Police fedpol

Combating corruption in those states with which Switzerland has cooperation agreements is a high priority of Swiss foreign and development policy. For example, specific measures are implemented in the context of programmes on good governance. All cooperation contracts contain clauses on preventing corruption.

Repression

If illicitly acquired assets of PEPs enter the Swiss financial centre despite the extensive precautions taken, Switzerland strives to identify assets of criminal origin efficiently and return them to the country of origin. The following instruments serve this purpose: 

  • Precautionary freezing of assets
    Even before criminal proceedings have been initiated to provide legal clarification of the origin of potentially illicitly acquired assets, suspicious assets can be frozen to prevent their withdrawal.
    FDFA: Freezing of assets
  • Mutual legal assistance and criminal investigations
    Before illicitly acquired assets of PEPscan be frozen or returned to their country of origin, their illicit origin must be proved in legal proceedings either in the country of origin or in Switzerland. International mutual legal assistance in criminal matters is a pivotal instrument in this context, enabling states, amongst other things, to exchange evidence.
    Federal Act on International Mutual Assistance in Criminal Matters
    International Mutual Legal Assistance in Criminal Matters, Federal Office of Justice
  • Use of released assets
    Once a final legal ruling has been delivered on the confiscation of illicitly acquired assets of PEPs, Switzerland and the other countries concerned look for ways of returning these assets. Switzerland takes great care to ensure that the returned assets are used to benefit the population concerned and that they do not flow back into illicit channels.
    Restitution of illicitly acquired assets

Further development of the legal framework

Switzerland is constantly developing its legal framework. On 1 July 2016, a new bill on freezing, confiscating and returning of illicitly acquired assets of PEPs entered into force. The Federal Act on the Freezing and the Restitution of Illicit Assets held by Foreign Politically Exposed Persons (Foreign Illicit Assets Act, FIAA) allows the precautionary freezing of illicitly acquired assets in view of a possible collaboration in the field of mutual legal assistance. It puts in place specific measures to support requesting states in their efforts to repatriate the illicitly acquired assets – especially by providing legal support or seconding experts. In the event that the mutual legal assistance proceedings do not succeed, the FIAA enables the Federal Council to initiate administrative proceedings in view of a possible confiscation and restitution of the assets. The new bill increases the transparency, the calculability and the legal certainty when dealing with illicitly acquired assets of PEPs.

The Federal Act on the Freezing and the Restitution of Illicit Assets held by Foreign Politically Exposed Persons (Foreign Illicit Assets Act, FIAA)

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