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Swiss Banking Community and Financial Intermediaries Should Welcome Recent Supreme Court Decision on "Gag Orders"

March 2006

There are few banks in Switzerland which have not been confronted with legal measures that essentially ban them from informing clients of the existence of an investigation concerning their account(s). Generally imposed in the context of cantonal or national investigations (mainly for money laundering or financing of terrorism) or in connection with the execution of an international request for assistance in criminal matters, such bans became a major tool frequently relied upon by investigating magistrates. Furthermore, prior to the Swiss Supreme Court decision of 25 July 2005 (ATF 131 I 425) no one questioned the legitimacy of such measures. However, in this seminal decision the Supreme Court, while upholding the legality of such bans, also ruled that they cannot be imposed without limitation. That is, they cannot be for an indefinite period and must be limited in time. While the decision has been welcomed and generally viewed by the banking industry as a move in the right direction, uncertainty still remains to the extent that the court gave no firm ruling of a permissible definitive time period for such measures. Thus, the issue of a "permissible time period" must be decided on a case-by-case basis.

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