1. ABA International 2009 Spring Meeting, Washington DC, 17 April 2009 Internet Gambling : Liability of the Banker in Switzerland Presented by Saverio Lembo*, Attorney, Bär & Karrer SA Geneva, Switzerland * In collaboration with Anne Valerie Julen Berthod, Attorney, Bär & Karrer SA, Geneva, Switzerland

2. www.baerkarrer.ch 2 Contents I.Preamble II.Money laundering : legal framework and analysis III.Relationship between the right and the obligation to report IV. Implications of a report V. Banker’s liability VI. Statistics

3. www.baerkarrer.ch Internet Gambling Ltd Listed on LSE X= CEO and shareholder Account Liotard CALVIN Bank Geneva Information at the disposal of the Bank: Press articles Indictments issued by DOJ Warrant against X dividends $$$ I. Preamble

4. www.baerkarrer.ch 4 List of indicators (FINMA Money Laundering Ordinance 1) I. Preamble

5. www.baerkarrer.ch 5 Indicator A39 “Client of financial intermediary has been prosecuted for a criminal offense, corruption or embezzlement of public funds.” I. Preamble  Business relationship presents a higher money laundering risk  Obligation of special clarification

6. www.baerkarrer.ch 6 Art. 305bis No. 1 Swiss Criminal Code (“SCC”) “Whoever commits an act suited to frustrate the determination of the origin, the discovery or the confiscation of assets that he knows or should know derive from a crime, shall be punished with imprisonment or a fine.” II. Money laundering : legal framework and analysis

7. www.baerkarrer.ch 7 Analysis The perpetrator : anyone The offense : obstruction of the prosecution  high suspicion : use of off-shore companies and complex account activity  low suspicion : adequate identification of account holder and beneficial owner, no withdrawals The subject matter of the offense : proceeds from illicit activity (paper trail) II. Money laundering : legal framework and analysis

8. www.baerkarrer.ch 8 The prior offense : classified as a crime under Swiss law - notion of crime : offenses punishable by a more than three years prison sentence (Art. 10 II SCC) - relationship with other countries (dual criminality)  situation under US law (racketeering conspiracy, scheme to defraud by mail, tax evasion)  situation under Swiss law (tax evasion, Federal Act on lottery and professional betting, fraud?) The subjective element of the offense : willful participation II. Money laundering : legal framework and analysis

9. www.baerkarrer.ch 9 The obligation to report Art. 9 No. 1 Anti-Money Laundering Act (“AMLA”) “A financial intermediary must immediately file a report with the Money Laundering Report Office as defined in Article 23 (“MROS”) if: a. he knows or has reasonable grounds to suspect that assets involved in the business relationship: 1. are connected to an offence in terms of Article 260ter §1 or 305bis SCC, 2. derive from a crime, 3. are subject to the power of disposal of a criminal organization, 4. are used to finance terrorism (Art. 260quinquies No. 1 SCC) b. he interrupts the negotiations aiming to set up the business relationship in reason of reasonable doubts according to let. a.” III. Relationship between the right and the obligation to report

10. www.baerkarrer.ch 10 III. Relationship between the right and the obligation to report The right to report Art. 305ter No. 2 SCC : “The persons envisaged in paragraph 1 (whoever professionally accepts, takes into custody, invests or helps to transfer assets belonging to a third party) are entitled to notify the Money Laundering Report Office of any indices leading to the suspicion that assets derived from a crime.”

11. www.baerkarrer.ch 11 IV. Implications of a report Freezing of the assets by the financial intermediary for maximum 5 working days  consequences on the management of the assets Prohibition to inform the client or any third parties that a report has been made for maximum 5 working days (Art. 10a AMLA)  what if the report is made by an asset manager? Exclusion of Liability (Art 11 AMLA)

12. www.baerkarrer.ch 12 Competence of the MROS (Art. 23 AMLA) In case of no decision to maintain the freezing of the assets within 5 days, the freezing of the assets and the prohibition to inform stop (Art. 10 No. 2 AMLA) Databank GEWA of the MROS  access to this databank by the FIUs recognized by the Egmont Group Other criteria IV. Implications of a report

13. www.baerkarrer.ch 13 V. Banker’s liability Administrative law Art. 37 AMLA : violation of the reporting obligation - willfully: fine up to CHF 500‘000.- - through negligence: fine up to CHF 150‘000.- Art. 29 to 37 FINMASA (Federal Act on the Swiss financial market supervisory authority) : prohibition from practicing a profession, confiscation, revocation of license Civil law No civil liability in case of violation of the reporting obligation (ATF 134 III 529)

14. www.baerkarrer.ch 14 V. Banker’s liability Criminal law Art. 305bis SCC : imprisonment up to 3 years or fine up to CHF 1’080’000.- (more severe punishment in serious cases) Art. 102 No. 2 SCC : criminal liability of companies  not through negligence  possible civil liability (ATF 129 IV 322) Private self control mechanisms For banks : penalty up to CHF 10’000’000.- (Art. 11 CDB 08)

15. www.baerkarrer.ch 15 VI. Statistics +126 (+36%) ‏ 476350 Total +97 (+110%) ‏ 18588 Art. 305ter No. 2 SCC (right to report) ‏ +29 (+11%) ‏ 291262 Article 9 AMLA (obligation to report) ‏ variationYear 2007Year 2006 Overview of MROS statistics 2007

16. www.baerkarrer.ch 16 VI. Statistics 621’531137’365 Middle amount (not transferred) 1’470’6591’418’281 Middle amount (transferred) 1’318’3921’158’803 Middle amount (total) 8.5%68’989’9132.5%22’802’604 Amount in the reports not transferred 91.5%747’094’61196.1%885’007’579 Amount in the reports transferred to criminal auth. 100%816’084’524100%921’248’716 Total amounts Available amount of the assets at the time of the reports percentAbsolute value percentAbsolute value 2006 2007 Overview of MROS statistics 2007

17. www.baerkarrer.ch 17 VI. Statistics Home canton of reporting financial intermediary

18. www.baerkarrer.ch 18 VI. Statistics Home canton of reporting financial intermediary

19. www.baerkarrer.ch 19 Offices Geneva Bär & Karrer SA 12, quai de la Poste CH-1211 Genève 11 Tel. +41 (0)58 261 57 00 Fax +41 (0)58 261 57 01 geneve@baerkarrer.ch Lugano Bär & Karrer SA Via Vegezzi 6 CH-6901 Lugano Tel. +41 (0)58 261 58 00 Fax +41 (0)58 261 58 01 lugano@baerkarrer.ch Zug Bär & Karrer AG Baarerstrasse 8 CH-6301 Zug Tel. +41 (0)58 261 59 00 Fax +41 (0)58 261 59 01 zug@baerkarrer.ch Internet www.baerkarrer.ch Zürich Bär & Karrer AG Brandschenkestrasse 90 CH-8027 Zürich Tel. +41 (0)58 261 50 00 Fax +41 (0)58 261 50 01 zuerich@baerkarrer.ch