Having focused on the enforcement of sanctions by Australia and Ukraine in the past weeks, we now turn our attention to the sanctions enforcement trends in Switzerland.
- What are the recent sanctions enforcement trends in Switzerland?
The State Secretariat for Economic Affairs (“SECO“) is responsible for the enforcement of violations under the Federal Act on the Implementation of International Sanctions (“Embargo Act“; accessible here) and thus also for violations under the Ordinance on Measures in connection with the situation in the Ukraine (“Swiss Ordinance“; accessible here), which refers to the Embargo Act as far as enforcement is concerned (Art. 32 of the Swiss Ordinance). SECO may also refer particularly serious cases (e.g., in the event of commercial intent or very severe violations) to the Office of the Attorney General of Switzerland.
Apart from the enforcement of violations, SECO plays a significant role in both the continuous revision as well as the interpretation of the Swiss Ordinance, which is the primary source of Swiss sanctions against the Russian Federation. The FAQ on ‘Sanctions against Russia’ by SECO (accessible here; only available in German, Italian and French) primarily focus on the financial sanctions.
As of today, SECO does not regularly inform on ongoing and closed sanctions enforcement proceedings under the Swiss Ordinance. However, in response to a political inquiry from the Swiss Federal Parliament (the corresponding media release of March 2, 2023 is available here), the responsible Federal Councilor informed about the proceedings conducted by SECO by then. Thus, since the beginning of March 2022 (the point in time the Swiss Ordinance came into force), 21 administrative criminal proceedings have been opened due to violations of the provisions in the Swiss Ordinance. According to SECO, these proceedings foremost affected sanctioned goods. In addition, SECO had requested the Office of the Attorney General of Switzerland to conduct an investigation in one case. As of the beginning of March 2023, one penalty notice and nine discontinuation orders have become legally binding.
Since SECO does not publish penalty notices in connection with violations under the Swiss Ordinance, it is not possible to obtain more detailed information on the subject matter of such proceedings. However, the enforcement trends are clearly directed at the low hanging fruits, i.e. violations of product controls (detected and reported by the Swiss Customs Administration) and violations of financial sanctions (detected by asset freeze and other reports).
- What are the maximum penalties for violations?
Art. 9 of the Embargo Act, which deals with felonies and offences committed by individuals (Verbrechen and Vergehen), states that the intentional violation of most provisions in the Swiss Ordinance (Arts. 2-6, 9-15, 17-20 and 22-30) may be punished with imprisonment of up to one year or monetary penalty (of up to 180 daily penalty units of a maximum of CHF 3,000 each; Art. 9 para. 1 Embargo Act). For severe violations of said provisions, the penalty is imprisonment of up to five years, which may also be combined with a monetary penalty (of up to CHF 1,000,000, corresponding to 333 daily penalty units of a maximum of CHF 3,000 each [rounded]; Art. 9 para. 2 Embargo Act). If the violation is caused by negligence, the punishment is a monetary penalty of up to 90 daily penalty units (of a maximum of CHF 3,000 each; Art. 9 para. 3 Embargo Act). According to Art. 10 of the Embargo Act, which deals with misdemeanors committed by individuals (Übertretungen), the violation of other provisions of the Swiss Ordinance (Arts. 16 and 21) may be punished with a fine of up to CHF 100,000 (Art. 10 para. 1 Embargo Act). A violation by negligence may result in a fine of up to CHF 40,000 (Art. 10 para. 3 Embargo Act).
- Is there a mechanism by which companies can submit a voluntary self-disclosure of possible violations to mitigate penalties?
Not formally. There is neither a statutory basis (such as, e.g., a provision in the Embargo Act) nor has SECO adopted any formal practice in this regard. However, voluntary self-disclosures have been applied in practice both under Swiss export controls legislation and sanctions ordinances and have in effect led to mitigation of penalties.
- Do you anticipate increased coordination on enforcement matters with allies?
To date, Switzerland has cooperated with the G7 countries on an informal basis and has so far declined to join the Russian Elites, Proxies, and Oligarchs (“REPO“) Task Force, just recently in an official statement of the Federal Council. There has been criticism of SECO’s position in this regard. However, SECO has commented (here) that “Cooperation at the technical level is running smoothly, and Switzerland therefore sees no need to formally join the REPO Task Force at present. Should membership prove to be in Switzerland’s interest in the future, the Federal Council may re-evaluate the situation”.
However, SECO has informed that it is in close and regular discussions not only with the European Commission, but ultimately with all member states of the European Union and intends to maintain such continuous exchange on an informal basis.
- What is one thing that you would recommend companies do now to get ready for increased enforcement?
As is the case with most sanctions regimes worldwide, companies should identify any existing touch points between their business operations and Switzerland which may trigger the application of Swiss sanctions. While Switzerland still formally applies the principle of territoriality for the geographic scope of application of Swiss sanctions, there are many instances in practice where Swiss sanctions may be triggered. If Swiss sanctions apply, companies should not simply rely on any conclusions drawn under, e.g., the EU sanctions regime (although it is very similar to the Swiss sanctions regime, which, however, is implemented autonomously), but carefully analyze what implications the Swiss sanctions provisions have on their business activities. As the Swiss sanctions environment continues to evolve dynamically alongside Western sanctions, such analysis must be carried out on a regular basis or in the context of an ongoing sanctions screening framework.