“They took my money, I’ll file a complaint.” The reflex is understandable. It is often wrong. A loan that is not repaid is not, in itself, fraud: it is first a civil matter. The difference turns on one word, deception. And it governs everything that follows: which procedure to bring, and which one has a chance of bringing the money back.
Is an unrepaid loan fraud?
As a rule, no. When you lend money (a loan for consumption, art. 312 CO), the borrower becomes its owner and undertakes to return the equivalent. If they do not repay, they breach their obligation: you hold a claim, not an offence. Delay, financial difficulty, even a degree of bad faith in performance do not suffice. Criminal law does not punish the mere failure to pay one’s debts.
For there to be fraud, something more is needed. And it happens before the funds are handed over.
When does an unpaid debt become fraud (art. 146 SCC)?
Fraud under art. 146 of the Swiss Criminal Code supposes that the perpetrator, with a view to unlawful enrichment, deceived the victim by false statements or by concealing true facts, and that this deception led the victim to act against their financial interests. Applied to a loan: it is not the non-repayment that counts, but the state of mind and the means used at the outset. Did the borrower, at the time of the loan, already intend not to repay, and did they use a stratagem to obtain the funds? That is the whole question.
Deception: the word that tips the balance
Not every lie is fraud. Case law requires deception (Arglist): a scheme, a construction, a fabric of lies that the victim could not reasonably unmask, or whose verification was not to be expected of them. A borrower who produces false documents, invents guarantees, sets up a fictitious situation or exploits a relationship of trust to disarm the usual checks, deceives. One who merely promised in good faith and then could not pay does not. Between the two lies the entire criminal debate, and the fate of your complaint.
Fraud or misappropriation?
The two are confused, wrongly. Fraud (art. 146 SCC) concerns funds obtained by deception. Misappropriation (art. 138 SCC) concerns assets entrusted for a specific purpose and diverted from it: money given to be invested, held, or passed on, then kept or used otherwise. The qualification is not academic: it determines the constituent elements to be proven and, therefore, the strength of your file. Qualifying accurately from the outset is what separates a complaint that is followed up from one that is shelved.
Debt enforcement, civil, criminal: how to actually recover?
Three tracks, not equivalent. Debt enforcement (LP) is the direct route to recover an undisputed or established claim: a payment order, then, if the debtor objects, the lifting of the objection before the civil court. The civil action establishes and quantifies the claim where it is contested. The criminal complaint, where deception is present, adds leverage the civil track does not offer: seizure of assets, tracing, and a pressure that often reopens negotiation. The intelligent strategy frequently combines them rather than choosing.
And the lawyer’s fees, does the other side pay them?
In the civil proceedings, the losing party is in principle ordered to pay costs and a contribution to the winning party’s legal fees, though that contribution rarely covers the full bill. In the criminal proceedings, if you act as a private claimant and prevail, the convicted person may be ordered to compensate you (art. 433 CrimPC). Neither is automatic nor complete, but both are argued, and a well-built file improves the outcome.
Legal basis
Loan for consumption: art. 312 CO. Fraud and the requirement of deception (Arglist): art. 146 SCC. Misappropriation: art. 138 SCC. Recovery: Federal Act on Debt Enforcement and Bankruptcy (LP). Compensation of the private claimant: art. 433 CrimPC.
About the author
Matthias Traussnig is an attorney at the Geneva Bar and founder of Sentinel Legal. Holder of the CAS in Digital Finance Law from the University of Geneva, he practises criminal law, economic crime and technology law.
On this type of case
Sentinel Legal acts in economic crime and debt recovery in Geneva and French-speaking Switzerland, from qualifying the case correctly to recovering the funds: +41 22 512 76 00 or via the contact form.