Fraud and accounting fraud, blackmail, money laundering, insider trading, insolvency offences, industrial espionage, corruption, product piracy, cartel agreements and embezzlement: the list of offences that fall under the umbrella of white-collar crime goes on and on. Economic crime is getting more and more complex, international and digital. What all these offences have in common is the fact that trust is breached and controls and preventive measures fail. Economic ecosystems are built on trust and only function if those involved can rely on one another. The problem is that studies show that 60% of people are only as honest as circumstances require. So, opportunity really does make the thief.
Switzerland’s business and financial world doesn’t just attract investors, it attracts criminals too. Particularly vulnerable to their machinations are money-based businesses such as banks and insurance companies, whose products and services are already in the form of money and don’t have to be converted first. From individual operators to criminal organisations, white collar criminals are an extremely creative bunch. Here’s an overview of the most frequent crimes:
- Bribery and corruption are among the most common forms of economic crime. Corruption stunts the development of entire regions, preventing fair competition and distribution of resources. A third to a half of aid destined for developing countries evaporates on its way to those that need it.
- With 85 out of a possible 100 points, Switzerland comes third best along with Finland, Sweden and Singapore in the Transparency International ranking of public-sector corruption. Even so, business in this country isn’t immune to the effects of bribery and corruption either: in the last 24 months, more than one quarter of Swiss companies have been asked to pay a bribe, and 20% have lost a business opportunity to a competitor they believe to have been bribed. The mean direct loss attributable to each incident of fraud in Switzerland was more than five times the global figure.[1]
- Identity theft is when someone acts under a false name to gain financial advantage. It’s one of the commonest tricks for siphoning off a steady stream of cash or triggering transactions.
- Blackmail is when someone tries to enrich themselves unlawfully by, for example, threatening violence or major damage such as erasing data. A classic example was the hacking attack on the office supply wholesaler Offix in July 2019.
- Industrial espionage involves stealing ideas, knowledge or data and capitalising on them by selling them. Swiss business is famous for its know-how, the quality of its products and its innovation. Swiss companies are an attractive target for some foreign intelligence services and private criminals for acquiring technologies or business secrets.
[1] PwC’s 2018 Global Economic Crime and Fraud Survey – Swiss results
The voice of the law
Practically all international organisations have issued guidelines and standards to combat white collar crime. The World Bank, for example, has clear rules for funding development projects. In 1997, the OECD issued its Anti-Bribery Convention, and since then has launched diverse principles and initiatives to combat the shadow economy and economic and tax crime, including the 15-point Base Erosion and Profit Shifting (BEPS) action plan.
Switzerland, too, is combating economic crime, endeavouring to create an adequate legal framework in addition to technical aids and interdisciplinary cooperation between experts and the authorities. The legislation includes the following:
- Article 102 of the Swiss Penal Code allows criminal action to be taken against an undertaking that has not taken all the necessary and reasonable organisational measures to prevent felonies such as money laundering and corruption (so-called corporate criminal liability).
- Following the 2016 revision of the anti-corruption law, the payment of bribes to private individuals will be officially investigated. For a long time, it was a criminal offence only if it involved bribing officials.
- On 1 July 2016, the Federal Act on the Freezing and the Restitution of Illicit Assets held by Foreign Politically Exposed Persons (Foreign Illicit Assets Act, FIAA) came into force.
- In August 2018, the Swiss Federal Council extended the cooperation agreement with Europol to include offences such as insider trading, financial market manipulation and crimes against the financial interests of European countries.
Perception vs reality
Prominent cases such as the FIFA corruption scandal are quickly associated with Switzerland. After all, this country does manage around two-thirds of the world’s private wealth and is home to well-known global companies. Switzerland is particularly heavily exposed in connection with money laundering.
The weight companies themselves give to economic crime depends directly on their perception of individual issues. Perceptions of white-collar crime lag behind its actual occurrence. This is because economic crime is hard to recognise and understand. Regulated industries such as financial services and insurance, telecoms and pharma are better versed in these matters because the law already requires them to do more to combat this type of crime. The same applies to companies that are on the radar of US legislators.
Crime evolves in line with technological progress
Internationalisation and the rapid development of digital technologies have given a whole new dimension to economic crime. Two hundred years ago, bank robberies happened on horseback; later robbers held up armoured vehicles. These days, faceless hackers steal precious data in the shadows of the virtual world. What all these actions have in common is that they’re forbidden. The types of offence evolve as technology changes. Ultimately the technology is only a means to an end.
Unlike other forms of fraud, cybercrime isn’t an offence in its own right, but a tool for committing other economic crimes. Forty-one per cent of Swiss companies polled perceive cybercrime as the greatest threat. More than a fifth reported that a cyber-attack had been used against their organisation as a means of embezzling assets. Even so, only just over half of companies in Switzerland have a cybersecurity programme in place, which is well below the global average (see PwC’s 2018 Global Economic Crime and Fraud Survey – Swiss results).
Putting a stop to economic crime
Organisations can take a variety of approaches in response to economic crime:
