I. General

1 Art. 38 AMLA was introduced as part of the Federal Act for Implementing the Revised FATF Recommendations of 2012 and thus with the first-time coverage of dealers by AMLA. The provision came into force on 1 January 2016. Initially, a ban on cash payments of more than CHF 100,000 and criminal liability for merchants accepting such amounts in cash were proposed. This plan was rejected on various grounds. The offence established in Article 38 AMLA is therefore a legislative compromise.

2 The provision aims to ensure that dealers comply with their due diligence obligations in the fight against money laundering. In other words, it is intended to ensure that private individuals participate in the administration of justice by complying with the provisions of the AMLA that apply to them (for the purpose of the AMLA, see OK-Nagel, Art. 1 AMLA N. 1 ff.). It is not the violation of the dealer's obligations under Article 8a of the AMLA that is penalised, but the failure to appoint an auditor to check that dealers comply with these obligations (see below, N. 7 et seq.). In addition to violating the duty to check, dealers may also be liable to prosecution if they violate the duty to report (see OK-Hutzler, Art. 37 AMLA and OK-Nagel, Art. 15 AMLA).

3 In the event of criminal proceedings under Art. 38 AMLA, the FDF is responsible for prosecuting and judging violations (see Art. 50 para. 1 and Art. 1 para. 1 let. f FINMASA), whereby the AACA applies (Art. 1 AACA). The general section of the SCC applies on a subsidiary basis. If the accused requests a court ruling, the Federal Criminal Court is responsible (Art. 50 para. 2 FINMASA in conjunction with Art. 21 para. 1 DDA).

II. Objective elements

A. Persons liable

4 The punishable offence under Article 38 AMLA is the failure to appoint an auditor to verify that a dealer within the meaning of Article 2 para. 1 AMLA is complying with the obligations under the AMLA. This makes Article 38 AMLA a special offence that can only be committed by a dealer within the meaning of Article 2 para. 1 let. b AMLA. For a potential group of perpetrators, reference can thus be made to the comments in the commentaries on Art. 2 para. 1 AMLA and Art. 8a AMLA. In a nutshell, dealers (and thus potential perpetrators within the meaning of Art. 38 AMLA) are persons who engage in commercial goods trading within the meaning of Art. 13 et seq. AMLO, i.e. the purpose is an independent economic activity aimed at making a permanent profit, in the course of which one or more goods worth more than CHF 100,000 are sold for cash in a single transaction without involving a financial intermediary (Art. 8a. Para. 4 AMLA e contrario). Persons who are not dealers themselves may, where applicable, be involved as participants in the intentional offence (para. 1); instigators and accomplices are punishable under Art. 50 para. 1 FINMASA in conjunction with Art. 5 VStrR.

5 If Art. 38 AMLA is violated in a business operation, any natural person who, when managing the affairs of a sole proprietorship or otherwise in the course of business or official duties for another – actively or by omission – (Art. 50 para. 1 FINMASA in conjunction with Art. 6 para. 1 VStrR). In addition, principal's liability may apply in accordance with Art. 6 para. 2 Due Diligence Act. Within the company, the executive body is generally responsible for commissioning an audit firm. This responsibility can be delegated, but not the authority to do so (see OK-Nagel, Art. 15 AMLA N. 4). In the case of a joint-stock company, the board of directors would be responsible for the mandate on the basis of the catch-all competence of Art. 716 para. 1 CO, provided that this competence has not been transferred to another body (e.g. the executive board). The bodies that have been assigned the responsibility and bear the responsibility can be punished in accordance with Art. 38 AMLA.

6 Art. 102 SCC cannot be applied in the event of a violation of Art. 38 AMLA (without the fulfilment of other criminal offences), since this offence is an infraction. The punishment of a legal entity as the perpetrator within the meaning of Art. 38 AMLA is therefore excluded. According to Art. 6 of the AACA, the natural persons acting for the company are to be punished. At most, subsidiary default liability under Art. 7 of the AACA in conjunction with Art. 49 of the FINMASA may be applied.

B. Offence

7 The offence under Article 38 AMLA is the failure to commission an audit or to allow an audit to be carried out, and thus a violation of the duty to commission an audit firm (Article 15 AMLA). It is therefore a genuine offence of omission. The offence begins and is simultaneously completed as soon as the auditor should have been appointed pursuant to Art. 15 AMLA at the latest in order to ensure a proper and timely audit. However, the law does not state that the audit of dealers must be carried out annually. Accordingly, in practice it may be difficult to accuse a merchant of violating Art. 15 AMLA – in our opinion, it is unclear when this violation begins. EXPERTsuisse and Wyss take the view that the audit should be carried out at the latest when the merchant would have to have an audit of the annual financial statements carried out if they had to carry out an audit in accordance with the CO. This would mean that, for example, the audit of a joint-stock company would have to be carried out within six months of the end of the financial year (in line with Art. 699 para. 2 CO). This view seems logical, but it is questionable whether this analogy is sufficient to actually hold a culpable dealer criminally liable. In our opinion, this seems at least questionable due to the lack of a legal basis for the temporal aspects (nulla poena sine lege, Art. 1 SCC; see also OK-Nagel, Art. 15 N. 9).

8 Since the beginning and the end of the offence coincide, it is not possible to distinguish between the attempt (or threshold of the offence) and the completion. An attempted violation of Article 38 AMLA would not be punishable, as the penal provision only constitutes an offence.

9 Art. 38 AMLA does not cover non-compliance with the due diligence requirements for dealers in accordance with Art. 8a. AMLA or non-fulfilment of the obligations towards the auditors in accordance with Art. 15 para. 3 AMLA, including the provision of false information and the non-disclosure of documents or information. In the event of false information, the right is reserved to prosecute for document fraud (see Art. 251 SCC).

III. Subjective elements of the offence

A. Intent (para. 1)

10 Pursuant to Art. 38 para. 1 AMLA, anyone who wilfully violates the duty to mandate an audit firm in accordance with Art. 15 AMLA shall be punished. Thus, intent is required, which at least constitutes conditional intent, i.e. the trader must decide to remain inactive by considering the realisation of the offence to be possible and accepting it. The (conditional) intent must relate to all objective elements of the offence, i.e. the offender must have intent with regard to his qualification as a dealer, the existence of the testing obligation and the non-fulfilment of the commissioning obligation. The offender does not need to be fully aware of the legal aspects of the duty to conduct due diligence. It is sufficient for him to be a layperson and to make a parallel assessment that makes him aware that he is violating a legal duty.

B. Errors

11 The following errors are possible:

a) The offender fails to recognise the situation that triggers the applicability of Article 38, para. 1 AMLA. This is a factual error that precludes a penalty under Art. 38 para. 1 AMLA. If this error could have been avoided with due diligence, a penalty is possible under Art. 38 para. 2 AMLA.

b) The offender does not realise, even though he has correctly understood the facts of the case, that he is subject to Art. 15 AMLA. In this case, it is a matter of an error of law. Errors of law are cautiously assumed by courts and only if they are unavoidable. If they are unavoidable, an error of law is not punishable due to lack of guilt. If the error of command is avoidable, this will lead to a reduction in sentence.

c) The offender is not aware of the prohibition (so-called error of prohibition). The potential offender must be aware of the reference standards (chain of reference from Art. 38 AMLA to Art. 15 AMLA to Art. 8a AMLA) at least in terms of the injustice. Due to the general mistrust of cash transactions and the public debate in the media about the corresponding due diligence obligations of traders, an error of prohibition is unlikely to occur.

C. Negligence (para. 2)

12 Pursuant to Art. 38 para. 2 AMLA, anyone who fails to fulfil an obligation within the meaning of Art. 15 AMLA, but does so through negligence, shall be liable to the penalties provided by law. Negligence may mean that the offender (i) fails to consider the consequences of his conduct resulting from a lack of caution in breach of duty (so-called unconscious negligence). Acting in breach of duty means that the offender fails to exercise the caution that would be expected of him in the circumstances and in his personal circumstances. However, negligence may also be deemed to exist if (ii) the offender, having recognised the consequences, fails to take them into account. This is known as conscious negligence.

IV. Criticism of the offence

13 The design of Art. 38 AMLA has been criticised by some scholars as falling short on the one hand, and as overshooting the mark on the other. This is because the actual aim should be to ensure that dealers comply with their due diligence obligations under the AMLA. However, an auditing requirement is not demonstrably suitable for inducing dealers to comply with their due diligence obligations, or it degenerates into an end in itself. The criminal liability for not appointing an auditor could lead to the bizarre result that dealers would fulfil all the due diligence requirements applicable to them under Article 8a of the AMLA but still be liable to prosecution. Dealers would thus be punished for not having their due diligence checked by an auditor. In this regard, according to voices in the doctrine, the penalty is excessive. Conversely, it could result in a dealer violating the due diligence requirements but having commissioned an auditor to carry out the audit and thus remaining unpunished. These examples show that a lesser degree of wrongdoing would be punished more severely.

14 In our opinion, the points of criticism from the literature listed above are generally understandable. However, in practice it is unlikely that a dealer who has consciously violated the duties will be audited. The punishability of not commissioning an auditor seems to be a legislative compromise (see above, N. 1), which has some undesirable consequences (probably not considered by the legislator). In our opinion, the question of whether criminal liability is necessary at all is justified, particularly with regard to the offence of negligence within the meaning of Art. 38 para. 2 AMLA. However, it is common practice in financial market law to punish those subject to the law for not obtaining licences or not carrying out audit procedures and to allow FINMA's supervisory instruments to be applied. For example, FINMA can explicitly use the supervisory instruments in accordance with Art. 29–37 FINMASA by law against persons who do not belong to a self-regulatory organisation (see Art. 20 para. 1 AMLA), and the criminal provisions of Art. 44 FINMASA may also apply. Traders do not require a licence or affiliation to a self-regulatory organisation, which is why FINMA's supervisory instruments cannot be applied to them due to the lack of an express legal provision. The fact that traders, unlike financial intermediaries, are not covered by the provisions of Article 305^ter, para. 1 SCC (lack of due diligence in financial transactions) suggests that they may be liable to prosecution. This offence applies expressis verbis only to ‘anyone who professionally accepts, holds, invests or helps transfer assets belonging to third parties and fails to exercise due diligence in determining the identity of the beneficial owner’. The definition of Art. 305^ter para. 1 SCC is thus linked to the definition of Art. 2 para. 3 AMLA and only covers financial intermediaries (see OC commentary on Art. 2 para. 3 AMLA). In our opinion, it would appear appropriate to at least make punishable the intentional violation of the audit requirement or of compliance with the due diligence requirements. From our point of view, the latter would have been preferable. However, the question of criminal liability for dealers and its design is complex and not easy to answer.

V. Criminal penalty

15 A dealer who intentionally violates the obligation under Article 15 AMLA to engage an audit firm shall be punished with a fine of up to 100,000 francs. If he acts through negligence, he shall be punished with a fine of up to 10,000 francs. Both intentional and negligent conduct are thus designed as offences under Art. 103 et seq. SCC. In the literature, it is criticised that the strong gradation of the penalties (up to ten times the amount of the fine for intent compared to negligence) does not take sufficient account of the borderline between conditional intent and negligence. Furthermore, the level of the penalty for the offence of intent is criticised. A fine of up to CHF 100,000 is disproportionate in view of the fact that it is an offence punishable by an act that does not actually enable money laundering.

16 If a fine of no more than CHF 50,000 is considered (and the investigation of the persons liable to prosecution requires investigative measures that would be disproportionate in view of the penalty imposed), the business operation may be ordered to pay the fine.

VI. Concurrent offences

17 If a dealer violates both the duty to verify in accordance with Art. 15 AMLA and the duty to report in accordance with Art. 9, para. 1^bis AMLA, he is liable to prosecution in accordance with Art. 37 and Art. 38 AMLA. The two offences are genuinely concurrent. The Federal Supreme Court has affirmed that the clarification and reporting obligations of Art. 6 and Art. 9 AMLA establish a guarantor obligation for financial intermediaries and that money laundering by omission can therefore take place within the meaning of Art. 305^bis in conjunction with Art. 11 SCC. However, the ruling has been heavily criticised in legal literature. In line with the Federal Supreme Court ruling, the reporting requirement under Article 8a of the AMLA and the requirement to appoint an auditor would have to establish such a duty of guarantee for dealers. If a trader, by failing to appoint an auditor, is also abetting money laundering (and is therefore liable to prosecution under Art. 305^bis SCC), it is debatable whether this constitutes a genuine or a non-genuine (ideal) concurrence.

VII. Limitation

18 The prosecution limitation period is seven years (Art. 52 FINMASA). The enforcement limitation period, on the other hand, is five years according to Art. 11 para. 4 VStrR. Art. 38 AMLA is a continuing offence, which is why the statute of limitations only begins to run when the violation of Art. 38 AMLA ceases (i.e. as soon as there is no longer an obligation to mandate an auditor in accordance with Art. 15 AMLA, or an audit firm is (belatedly) appointed).

VIII. Insurability

19 In practice, the question sometimes arises as to whether insurance (e.g. professional liability insurance or directors‘ and officers’ liability insurance, which cover pure financial losses and do not cover property damage or personal injury) can cover fines imposed under AMLA. This question arises in particular from the fact that many insurers offer cover for penalties and fines imposed on a governing body (directors and officers liability insurance) or an employee (professional liability insurance). These extensions of cover are subject to the proviso that the insurance of such penalties and fines is legally permissible. Conversely, certain insurers explicitly exclude penalties or fines in their terms and conditions of insurance.

20 Within the limits of the mandatory provisions of the VVG and the restrictions on content pursuant to Art. 19 para. 2 and Art. 20 para. 1 CO in conjunction with Art. 100 VVG, insurers are in principle free to design their contracts as they wish. According to Art. 20 para. 1 CO, contracts are null and void if they have an impossible or unlawful content or are contrary to good morals.

21 According to case law, the fine is of a highly personal nature, which is why it is not accessible to a contractual agreement that obliges a third party to pay the fine in whole or in part, and is therefore unlawful within the meaning of Art. 20 para. 1 CO. It is to be qualified as a non-compensable reduction in the assets of the person fined under civil law. The same applies if someone is fined under criminal law due to their own fault. According to doctrine, there is an ‘unwritten prohibition of coverage’ with regard to the insurance of public law fines. In the doctrine, in connection with fines for data protection violations, it is sometimes argued that, depending on the insurance, it is possible to insure fines for negligence. Some hold the view that these fines can neither be insured nor passed on to the companies concerned, nor can they be paid by them. However, the question of whether AMLA or FADP fines can be insured has not been decided by the highest court.

22 In our opinion, the above-mentioned case law can be readily applied to fines under Article 38 AMLA. Fines under Article 38 AMLA do not constitute a compensable financial loss within the meaning of substantive liability law and do not give rise to an insurance claim under directors‘ and officers’ liability insurance or professional liability insurance. The agreement of a financial obligation for fines pursuant to Art. 38 AMLA is unlawful and therefore void within the meaning of Art. 20 para. 1 CO. They are therefore not insurable and cannot be passed on to the insurance company. A corresponding claim for compensation by the policyholder against the insurance company would not be enforceable. Furthermore, the fines should remain strictly personal in accordance with Art. 38 AMLA, as otherwise the punitive function would be thwarted. A possible assumption of the fines by the insurance company could, under certain circumstances, be qualified as criminally relevant favouring in accordance with Art. 305 SCC. In our opinion, it is irrelevant whether the fine was imposed for intent (Art. 38 para. 1 AMLA) or negligence (Art. 38 para. 2 AMLA). One argument in favour of such a distinction is that Art. 14 VVG allows the insurer to refuse or reduce benefits in accordance with certain degrees of fault. The distinction based on the degree of fault could only be relevant for further compensation payments by the insurance company (e.g. advance of defence, court or expert costs), especially since standard market insurance conditions generally exclude intentional violation of legal provisions in any case. This exclusion is partly mitigated by the granting of legal protection, in that the insurance company bears the costs of defence, or by an extension of cover in the event of gross negligence, in that the insurance company waives its right of reduction under Art. 14 para. 2 VVG. Finally, costs incurred by a dealer in connection with participating in criminal proceedings under Art. 38 AMLA are insurable. In our view, the same applies to legal costs imposed on a dealer; these are also insurable.

This article reflects the personal opinion of the authors and does not bind their employers.

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