Switzerland

Switzerland Corruption Report

Snapshot

Switzerland_250x249.jpgCorruption does not impede business in Switzerland. Interactions with public officials are transparent, and corruption is not common to any particular public sector. Bribery in the private sector is a concern given the large number of business headquarters in the country and the importance of financial institutions. The Swiss Criminal Code criminalises active and passive bribery and the bribery of foreign public officials, while bribery in the private sector is criminalised under the Unfair Competition Act. A company can be criminally prosecuted and ordered to pay a fine of up to CHF 5 million for acts of corruption committed by individuals working on its behalf. Although the notion of facilitation payments does not exist in Swiss anti-bribery laws, authorities have clarified that they are considered illegal under most circumstances. Gifts and hospitality can be considered illegal depending on the value, intent and benefit obtained.

December 2015
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Judicial System

Judicial corruption is not a problem in Switzerland. The organisation of the judiciary differs between cantons, and specialised commercial courts are located in Zurich, Bern, St. Gallen and Aargau. The court system is independent, competent and fair, and is considered effective in settling commercial disputes and providing strong protection of private property rights (GCR 2015-2016; ICS 2015). Swiss citizens do not believe the judicial system is corrupt (GCB 2013). Switzerland is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police

Businesses do not face any corruption risks when dealing with the Swiss police, and the police force enjoys a high level of public trust (GCB 2013). The reliability of police services to protect companies from crime is considered very high (GCR 2015-2016). Isolated incidents of police corruption do occur, but the government has effective mechanisms to investigate and punish abuse (HRR 2014).

Public Services

Companies are not likely to encounter corruption when obtaining public services in Switzerland. Swiss public institutions are among the most effective and transparent in the world, and the regulatory environment is transparent, non-discriminatory and encouraging for investors (GCR 2015-2016; ICS 2015). It is not considered burdensome to deal with government administrative requirements (permits, licences, reporting, etc.), and companies report that irregular payments and bribes almost never occur when obtaining public utilities, business permits or licences (GCR 2015-2016). Switzerland has also eased the process of starting a business by introducing online procedures (DB 2015).

Tax Administration

The Swiss tax administration is not affected by corruption, and the legislation on direct taxes of the confederation, cantons and townships prohibits the tax deductibility of bribes (ICS 2015). Paying taxes is significantly less time consuming on average compared to other OECD countries (DB 2015). Being the world’s largest financial center, Switzerland has been criticised for not implementing the necessary measures to prevent tax evasion and money laundering. In one case, Credit Suisse pleaded guilty to helping US citizens evade taxes. The bank reached a settlement with US prosecutors, who had pressed the criminal charges to pay USD 2.5 billion in penalties (FitW 2015). 

Customs Administration

Burdensome procedures, tariff barriers and technical standards and requirements are among the main constraints for importing and exporting in Switzerland. Very few companies consider corruption at the borders as a problematic factor for trading, and the transparency and efficiency of the border administration is very high (GETR 2014). Public polls reveal that bribery almost never occurs during interactions with customs services (GCB 2013). Trading across boarders in Switzerland is less time-consuming, yet more costly on average compared to other OECD countries (DB 2015).

Public Procurement

Swiss public procurement is not influenced by corruption. Foreign bidders may encounter difficulties accessing public tenders as requirements vary between cantons, and local authorities are reported to show preference for local suppliers because of tax benefits (ICS 2013). Companies report it being uncommon to pay bribes to win contracts in Switzerland, and procurement officials are very unlikely to show favouritism when deciding contracts (GCR 2015-2016). 

In one corruption case, a top manager at State Secretariat for Economic Affairs (SECO) received bribes and gifts worth several tens of thousands in return for awarding favourable contracts at inflated prices to specific IT companies. One of the granted contracts was reportedly worth USD 6.3 million. The SECO employee was dismissed, and the Office of the Attorney General ordered a pre-trial detention of one of the business managers involved. Two others are being investigated (HRR 2014The Local, Jan. 2014), and the case is still pending. 

Natural Resources

The risk of corruption in the Swiss natural resource sector is low, and the country is recognised for enforcing effective environmental regulations, providing water treatment and protecting biodiversity (GCR 2014-2015). The government is highly engaged with various initiatives to improve the governance of natural resource extraction, including financial and governing support to the Extractive Industries Transparency Initiative (EITI). The EITI aims at improving the accountability of the expenses and profits deriving from the oil, gas and mining industries around the world. It has also contributed to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, which assists producers in fulfilling their duties under the Dodd-Frank Act, and has launched the Better Gold Initiative to promote sustainable value chains for gold extraction and trade (EITI, Feb. 2014).

Banking Sector

Switzerland is home to an estimated 30 percent of the global offshore wealth, so tax evasion and money laundering are very important issues in the banking sector (FitW 2015). Banks in Switzerland are not required to disclose the identity of individuals who control and benefit from companies with Swiss bank accounts, making it easier for corrupt officials and businesspeople to hide proceeds of crime (TI, Sep. 2014). The Financial Market Supervisory Authority regulates and supervises financial institutions and enforces the Anti-Money Laundering Act, which includes customer due diligence and record requirements. Recurring scandals and multiple money laundering cases have triggered criticism of Swiss authorities and financial institutions for being too lenient in their monitoring efforts to ensure that proper due diligence is being performed (SWI, Sep. 2014).

Both praise and criticism have been directed to Switzerland's efforts in revising its secrecy regulations. Switzerland has recently signed a tax transparency agreement with the European Union to put an end to bank secrecy for EU residents. The agreement will be enforced in 2018 to allow both sides to start sharing data on EU resident's financial accounts (RT, May 2015). The Federal Council recently passed the Federal Act on Expanding Criminal Liability for Breaches of Professional Confidentiality. This has increased the penalties for whistleblowers breaking Swiss secrecy laws from three to five years imprisonment (The Wall Street Journal, July 2015). Rudolf Elmer, involved in one of the more reported whistleblower cases on banking secrecy, ended up being fined USD 51,700, payable if another crime is committed. Rudolf Elmer was charged for submitting confidential client data to the website WikiLeaks (The Wall Street Journal, Jan. 2015). Elmer claims that he was pursued to reveal the public financial data on politicians accused of corruption, along with companies linked to Bin Laden's family, shady arms brokers and Mexican officials linked to drug dealers (Tax Justice Network, July 2015).

Legislation

The Swiss Criminal Code criminalises active and passive bribery and bribery of foreign public officials. Bribery in the private sector is criminalised under the Unfair Competition Act, which also prohibits abuse of officeextortion and money laundering. Bribing Swiss and foreign public officials is punishable by up to five years' imprisonment, while private sector bribery carries sentences of up to three years’ imprisonment. A company can be held criminally liable under the Criminal Code for acts of corruption committed by individuals working on its behalf. A company that 'has not undertaken all requisite and reasonable organisational precautions' required to prevent the corrupt act is subject to criminal prosecution and a fine of up to CHF 5 million (SECO). Criminal liability can lie with management, staff and those who otherwise act on a firm's behalf. Swiss authorities allow the use of different investigative procedures to uncover bribery offences, including observation, searches of electronic data and freezing and investigation of bank accounts (GRECO, 2012). The notion of facilitation payments does not exist under Swiss law (P3R 2011), but authorities have clarified that small facilitation payments are considered illegal if they lead a public official to breach his or her duties or influence the power of discretion (COE 2013). Gifts and hospitality can be considered illegal depending on the value, intent and benefit obtained. Swiss law discourages civil servants from accepting any advantage that can influence the impartiality of their services, but the limit set on gifts given to public employees varies between departments and cantons (ICS 2015). The government enforced anti-corruption laws effectively (HRR 2014). Despite GRECO recommendations, Switzerland has still no legislation concerning the transparency of party funding (GRECO, Aug. 2015). The law on federal staff makes reporting on corrupt practices an obligation of federal office holders. The country lacks specific laws on the protection of whistleblowers.

Switzerland is a signatory to the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (UNCAC) and the Council of Europe’s Civil and Criminal Law Conventions against Corruption and is a member of the Group of States Against Corruption (GRECO).

Civil Society

Freedoms of speech and of the press in Switzerland are constitutionally guaranteed and respected by the government (FitW 2015). Although the market is dominated by the large state-owned broadcasting corporation and private news conglomerates, the media environment is generally free and diverse (FitW 2015). The Swiss media environment is considered 'free' (FotP 2014).

Civil society organisations (CSOs) in Switzerland enjoy the necessary conditions for development, and can participate in policymaking and legislative processes. Various CSOs and universities are actively involved in anti-corruption work and awareness-raising activities, making important contributions to the fight against corruption (NISA 2012).

Sources

Topics: Europe & Central Asia