In 2016, the Swiss Financial Market Supervisory Authority or FINMA detected serious violations of supervisory provisions on the part of Banca della Svizzera Italiana and ordered the confiscation of SFr95 million (€86.7 million). The Swiss Federal Administrative Court in St Gallen has now found fault with this.

The court, in the words of its own website, "considers the calculation of the amount to be seized incomprehensible and refers the case back to FINMA."

Between 2011 and 2015, Banca della Svizzera Italiana or BSI (now part of EFG) repeatedly broke the Swiss Anti-Money-Laundering Act, the Banking Act and corresponding ordinances. It seriously contravened supervisory provisions indirectly linked to the corruption scandal surrounding the Malaysian sovereign wealth fund 1MDB (1Malaysia Development Berhad). These transgressions occurred both in the context of BSI's responsibility to oversee its branch in Singapore and through its own transactions.

FINMA and the four serious violations

As a consequence of enforcement actions, FINMA accused BSI of four serious breaches of supervisory law: not being 'duly diligent' enough to prevent money laundering, not keeping documents when it should have done, not managing risks appropriately and not guaranteeing proper business conduct. FINMA thought that it was impossible for BSI not to have known that it was committing these faux pas. The fact that many transactions amounted to many millions of Swiss francs apiece, plus the involvement of politically exposed people or PEPs should have led it to investigate rigorously.

In its decision of 23 May 2016, FINMA guessed that BSI had generated SFr95 million in illegal profits and ordered the confiscation of this amount "to ensure the restoration of compliance with the law." The court has now found this estimate to be incomprehensible.

A compensatory arrangement between two cases

Article 35 Financial Market Supervision Act (FINMASA) authorises FINMA to estimate the extent of the assets to be confiscated if the amount cannot be ascertained or requires a disproportionate effort to be ascertained. The court has written in its judgment: "According to the practice, the impossibility or unreasonableness of determining an exact figure can only refer to individual elements regarding profit or expense. Accordingly, the estimate must be limited to individual calculation factors.

"Furthermore, the confiscation has to correspond to the actual profit generated by the infringement. However, FINMA also justifies the amount of SFr95 million with its renouncement to implement a seizure in another corruption case involving BSI’s Brazilian customers. According to the [court] it is not clear why, instead of performing exact calculations, FINMA is making a kind of compensatory arrangement between two cases. The [court] thus partially upholds the appeal lodged by BSI and refers the decision back to FINMA."

FINMA can appeal against the judgement in the Federal Supreme Court, if it so chooses.