Swiss Hand over Banking Information

German prosecutors in Munich will receive new banking documents to aid their investigation of the engineering company, Siemens AG.  The Federal Criminal Court in Switzerland recently rejected an appeal that sought to prevent banking information from reaching the German prosecutors, who are examining whether embezzlement and bribes took place with Siemens contracts in Malaysia.

The Swiss Criminal Court found that US$300,000 was paid through Swiss bank accounts to Malaysia between 2004 and 2005.  Siemens sought to become the exclusive supplier of a mobile phone company in Malaysia, and the court stated in its ruling that some of the money may have been paid as bribes to Malaysian police and secret service.  The Swiss criminal authorities launched their own investigation in 2005 to determine whether Siemens channelled money into secret accounts for bribes to secure lucrative contracts.  A total of US$95.5 million in Siemens accounts in Switzerland has been blocked pending the investigation.

It has been well reported that Siemens has faced a series of international corruption investigations and legal proceedings in numerous jurisdictions around the world, leading to a US$1.6 billion settlement with the US and German authorities in December 2008.  The company has since agreed to pay a further US$100 million over the next 15 years to the World Bank to support global anti-corruption work, to submit to a four year debarment of its Russian subsidiary, Siemens Russia, following a World Bank investigation into corruption in the World Bank financed Moscow Urban Transport Project, and to agree to a voluntary two year shut-out bidding on World Bank business.  It has also recently published a Notice of Annual Shareholders’ Meeting to be held in Munich on 26 January 2010 stating its intentions to agree settlements with regard to the responsibilities of former members of its Managing and Supervisory Board and with its insurers to provide coverage to compensate for losses resulting from and in connection with the acts of corruption.

This is not the first time the Swiss Criminal Court has ruled that banking information should be handed over to authorities in another country in connection with corruption allegations.  In October 2009 it ruled that Switzerland should hand over banking documents to Argentina in a corruption investigation linked to former President Carlos Menem and French defence company Thales. 

Furthermore, in 2002 and 2003, Switzerland handed over to Nigeria banking documentation relating to ‘Abacha funds’, relating to the former military head of Nigeria, Sani Abacha, that were frozen there.  The Swiss authorities have since gone a step further, with the Federal Office of Justice ordering the transfer of the greater part of US$500 million of ‘Abacha funds’ that were frozen in Switzerland to an account at the Bank for International Settlements in favour of Nigeria.  In Switzerland, assets may be returned to a foreign state in exceptional cases, such as where frozen assets are obviously of criminal origin.  The Office of Justice also ruled that the criminal origin of 7.7 million Swiss Francs (US$6.68 million) of the assets was only probable, and ordered that this amount be transferred to an escrow account in Nigeria, to which the Nigerian authorities would have no access until a corresponding seizure order had been issued.  The ‘Abacha funds’ still remain in Switzerland subject to appeal with the Swiss Federal Supreme Court. 

Companies and individuals should note that the Swiss authorities are increasingly likely to hand over to the enforcement authorities of other countries information and funds that have been frozen that relate to corruption.

Sam Eastwood is a litigation partner and Head of the Business Ethics and Anti-Corruption Group and Chris Campbell-Holt is a researcher at Norton Rose LLP, http://www.nortonrose.com/. Chris was a member of the Secretariat of the Woolf Committee that was appointed by BAE Systems’ Board to report on BAE’s ethical policies and processes. Sam can be contacted on +44(0)20 7283 6000 or by email: sam.eastwood@nortonrose.com.

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