Switzerland

Details

  • Service: Advisory, Consulting, Forensic
  • Type: Press release
  • Date: 2/4/2014

Fraudsters target the public sector and financial institutions 

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If fraud is committed in Switzerland, perpetrators think big. This is the picture painted by the latest figures reported in the KPMG Forensic Fraud Barometer: In 2013, the total loss as a result of white-collar crimes rose 66.8% year-on-year to CHF 830 million despite a slight decline in the number of cases. Financial institutions and commercial enterprises were hit particularly hard and compared to 2012, there was a strong increase among public authorities.
In 2013 Swiss courts closed a total of 58 cases of white-collar crime. This represents a decline of 9.4% from the previous year (64 cases). The significantly higher total loss amount is primarily attributable to four crimes involving losses in excess of CHF 125 million each. As in 2012, the majority of the 2013 cases pertained to embezzlement (20 cases) and criminal mismanagement (12 cases). Similarly, perpetrators’ statements indicated once again that the main use of criminally-obtained assets was to bridge financial gaps and to finance the perpetrator’s own lifestyle which included gambling and the purchase of luxury goods.

Four particularly serious cases

The total loss incurred in 2013 was inflated considerably by four major cases.

 

  • In abbreviated proceedings in April, Geneva’s criminal court convicted a former bank employee of the embezzlement of CHF 134.4 million, whereby it should also be mentioned that fraud and money laundering were listed among the charges in this case which dated back to 2011.
  • During the same month, a criminal court in the Canton of Schwyz convicted the main perpetrator in absentia in a case of foreign exchange fraud. The victims in this case were several hundred investors with total losses amounting to CHF 125 million. 
  • The Supreme Court of the Canton of Zurich also had to hear a case of foreign currency fraud in May. According to the charges, the loss caused by a former bank director came to a total of CHF 150 million. The perpetrator used falsified foreign currency exchange transactions and trading to embezzle client money.
  • In Bellinzona in October, six senior executives of a foreign state-owned company were found guilty of either aggravated money laundering and fraud or of aiding and abetting these crimes. Losses in this case amounted to CHF 150 million.

Fewer cases in Zurich

As in the previous year, most cases of white-collar crime were heard by courts in the Canton of Zurich with a decline in the total number of cases (from 30 to 21). With losses amounting to CHF 252.8 million, the canton also tops the list in a regional comparison. In second place in terms of total losses sustained was the Canton of Ticino (CHF 188.5 million). The considerably smaller number of cases here (5) compared to the Canton of Zurich is particularly striking. The situation is similar in Western Switzerland where losses from just two cases came to a total of CHF 134.4 million. At CHF 6.5 million, Northwestern Switzerland reported the lowest total losses.

Executives cause greatest damage

In 2013, as well, it was primarily employees in executive positions who were convicted of white-collar crimes and, as a group, caused the largest total loss, namely CHF 501.7 million. On the other hand, there was a year-on-year decrease in the number of lower-ranking employees involved (6 cases) and none of the cases were linked to organized crime. A strong decline was also seen in the damage caused by customers. This amount dropped from CHF 31.1 million (2012) to CHF 1 million (2013). Noteworthy here is the fact that the victims in all three cases of customer-perpetrated crimes in which a conviction was obtained were financial institutions. “Executive employees frequently have more opportunities to commit fraud since they have more detailed knowledge and simpler access to crucial business data,” explains Anne van Heerden, Head of Forensic at KPMG Switzerland.

Greater losses sustained by commercial enterprises and financial institutions

Commercial enterprises and financial institutions were involved in a smaller number of crimes (12 cases) than in the previous year (21 cases). In both victim categories, however, there was a significant increase in the total losses sustained which fits into the picture emerging throughout Switzerland: namely higher losses through a smaller number of cases. In 2013, financial institutions represented the hardest-hit group of victims with total losses reaching CHF 369 million; in the previous year this group had still ranked third in the statistics with losses of CHF 70.7 million. Particularly striking is the drastic increase in losses sustained by commercial enterprises as a group, from CHF 29.6 million in 2012 to CHF 167.6 million. This growth can be attributed to the case of embezzlement, fraud and money laundering mentioned earlier which was committed by a former bank employee (CHF 134.4 million). For the first time, investors were no longer the hardest-hit group of victims.

Public sector a popular victim

Compared to the previous year, the number of cases involving public authorities as victims rose some 80% to 18 cases. With eight cases each of social insurance fraud and criminal mismanagement, these were the most common crimes within this category of victims. A glance at the perpetrators in these cases reveals that the majority of the criminal activities were committed by civil servants either at the senior management level (7 cases) or holding positions as employees (3 cases).

Not all cases go to court

Practice has shown that companies affected by white-collar crime do not by any means take all cases to court. Consequently, KPMG assumes that the number of unreported cases is large and expects the total number of cases to continue to grow. This expectation is also based on the fact that white-collar crimes are usually only discovered after two to three years and the presumed clustering of cases in the aftermath of the financial and economic crisis.

Typical perpetrator was male

Some 82.7% of all crimes were committed by men or groups of men (48 cases). Only four cases involved just women. Public authorities were the victims of criminal mismanagement in two of these while embezzlement and investment fraud were committed in the other two. One striking aspect of these cases is the relatively low value of the average loss incurred, namely CHF 178,000. Six other crimes were committed by mixed groups or pairs of perpetrators.

White-collar crime by region/geographical distribution

By region

 

White-collar crime broken down by perpetrator

 

By perpetrators

 

Note: the “Other” category comprises perpetrators that cannot be assigned to any other group of perpetrators. In 2013 this included welfare cheats, legal representatives and independent asset managers, for example.

 

White-collar crime broken down by victim

 

By victims

 

Note: the “Other” category comprises victims that cannot be assigned to any other group of victims. In 2013 this included customers, relatives, foundations, tenants and non-commercial homeowners, for example.

Methodology

The KPMG Forensic Fraud Barometer is based on cases of white-collar crime that were closed by a Swiss criminal court during the year under review in which losses amounted to at least CHF 50,000 and which were reported in Switzerland's main daily and weekly newspapers.

 

Simone Glarner

Simone Glarner

Head of Media Relations

+41 58 249 55 71

Forensic

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