Due diligence measures intended to document business relationships and to combat the misappropriation of public funds by politically exposed persons (PEP) ("Due diligence requirements on business partners").
In its report on commodities in 2013, the Federal Council acknowledged the problem of embezzlement of commodity rents and the crucial role played by Swiss companies “in unstable regions where the rule of law is weak” with “little transparency” in the market, where “[e]ndemic corruption and theft … undermine[s] both the enactment and enforcement of national laws and respect for international norms and standards.” In its report, the Government also noted the elevated risk of corruption in the sector and underlined that the sector is “exposed to a particularly high risk of corruption, due to a number of different factors (e.g., the high amounts of financial resources involved, and operations in countries where the rule of law is compromised, etc.).” These risks are particularly elevated where transactions involve politically exposed persons (PEPs), as the report explained:
"The activities of individual companies domiciled in Switzerland and engaged in commodity trading can represent a challenge in terms of Swiss foreign policy. This is the case, specifically, for commodity companies that are owned by politically exposed persons or by governments that exhibit deficiencies in the areas of democratic or human rights."
In accordance with the CA and CMSAA, ROHMA has enacted several measures aimed at combatting the embezzlement of rents from commodities and corruption.
ROHMA’s measures aimed at combatting the embezzlement of commodity rents and corruption
ROHMA has three types of specific measures at its disposal to combat the misappropriation of commodity rents and corruption:
o 1. Measures requiring companies active in the commodity sector to carry out due diligence procedures with respect to their business partners and to obtain permission prior to conducting any business with PEPs.
o 2. Measures requiring companies active in the commodity sector to publish lists of their beneficial owners.
o 3. Anti-corruption measures.
These measures are detailed below.
General principles
- In general, companies active in the commodity sector must know exactly who their partners are, identifying the beneficial owners of the companies with which they enter into business relationships, and take all necessary measures to ensure proper business conduct.
- In all cases, business relationships with PEPs are to be considered as carrying an increased risk.
- PEPs are considered to be persons who occupy important public positions abroad: heads of state or government, high-level regional or national politicians, senior officials of the administration, judiciary, military and parties at national or regional level, the highest organs of state enterprises of national importance, companies and people who are close to the above-mentioned persons for family, personal or business reasons.
1. Due diligence measures to be carried out by Swiss commodity companies on business partners (“know your business partners”) and reporting obligations with regard to business conducted with PEPs
a. Companies must request names, addresses, and a copy of the relevant identity documents (e.g. passport) copies of all natural persons that own or control 10% or more of the companies with which they are entering into business. Companies to request updates from their business partners within 30 days for any changes to this information and cross-check those informations.
b. Companies to enquire as to the involvement whether direct or indirect of any politically exposed persons PEPs in the ownership or operation of the business partner. ROHMA has to be notified about any changes within 30 days.
c. Companies are actively required to assess any information received and to take further action should indications suggest that the information is false or that further relevant information is being withheld. This requirement includes making further requests for information or, where strong indications of PEP involvement and no information has been provided to this effect by the business partner, termination of business relationship.
d. For extractive activities, companies are to provide the information set out at a-c above to ROHMA 60 days prior to its commencement. ROHMA will either provide consent for the commencement of the activity or advise that consent has either been withheld or refused within 30 days of receipt of the above information. Consent may be refused completely or may be withheld pending receipt of further information. Where further information is required, ROHMA will clarify its exact requirements with the company. Where the requested further information is supplied, ROHMA will assess that information within 30 days of receipt and advise the company whether it consents to the commencement of the activity. Where the requested further information is not or cannot be supplied, ROHMA may refuse consent.
e. For trading activities, companies are to provide the information set out at a-c above to ROHMA on a monthly basis. ROHMA will either approve or prohibit transactions. It reserves the right to any further action to be taken, including making careful examinations of contentious transactions.
2. Measures requiring companies active in the commodity sector to provide full lists of the beneficial owners to ROHMA for publication
According to the Commodities Act, all commodity companies caught by the CA must provide a list of their beneficial owners to ROHMA. The following information must be provided to ROHMA prior to the granting of a license:
- Full details of all beneficial owners holding 10% or more of the share or votes of a subjected commodity company (name, date of birth, copies of all passports, details of all residential property whether owned or rented) whether listed or unlisted.
- Full details (name, date of birth, copies of all passports, details of all residential property whether owned or rented) of all board members, management members, officers or other persons with the capacity to make decisions.
- ROHMA may refuse to grant a licence when reputational risks for the Swiss commodity hub seem to be too high.
- ROHMA must be advised of any changes to the above information within 14 days of such change being made.
When concluding business transactions, commodities companies are required to appear with their actual names. Commercial operations performed using the name of a third party ("name lending") are prohibited by the CA.
3. Anti-corruption measures
Like all Swiss companies, companies in the commodities sector and their foreign subsidiaries are required to comply with the Swiss law on corruption, in particular the criminal provisions on active and passive bribery of Swiss or foreign public officials (art. 322ter to 322octies Criminal Code).
Pursuant to art 102 al. 2 CP, companies are responsible for corruption offenses that occur due to a lack of organization.
The following measures apply specifically to companies with a license granted by ROHMA:
- Companies must provide a declaration confirming that neither the company nor anyone acting on its behalf has been or will be engaged in acts of bribery of foreign public officials or representations of international organisations whether before, during or after undertaking the activity. The company must also confirm that none of its directors, managers or anyone acting on its behalf has been in the last five years, nor is in the process of being, prosecuted for bribery.
- If the directors are unable to sign the declaration or only give it in part, then “enhanced due diligence” must be carried out to establish whether any corruption-relevant situation exists in connection with the activity. Where, following further investigation, a suspicion is confirmed, the license application must be declined and the criminal authorities must be informed.
- Companies must have good internal organization in order to prevent the risk of corruption (among others, an internal code of conduct, an independent compliance division, regular internal and external audits of the anti-corruption procedures, and procedures for "whistleblowers"). ROHMA regularly reviews these procedures and may impose sanctions against companies that do not have sufficient internal organization.