US commission accuses Switzerland of hiding Russian assets

Swiss anti-cor­rup­tion expert Mark Pieth has giv­en tes­ti­mo­ny to an influ­en­tial United States gov­ern­ment com­mis­sion that accus­es Switzerland of hid­ing Russian assets. He said that Swiss lawyers have free rein to help oli­garchs obscure the trail of their funds.

The Commission for Security and Cooperation in Europe, oth­er­wise known as the Helsinki Commission, has issued hard-hit­ting crit­i­cism of Switzerland’s per­ceived role in hid­ing Russian assets.

“Long known as a des­ti­na­tion for war crim­i­nals and klep­to­crats to stash their plun­der, Switzerland is a lead­ing enabler of Russian dic­ta­tor Vladimir Putin and his cronies. After loot­ing Russia, Putin and his oli­garchs use Swiss secre­cy laws to hide and pro­tect the pro­ceeds of their crimes,” the body stated.

The Commission’s hear­ing on Thursday heard tes­ti­mo­ny from Pieth, Miranda Patrucic, deputy edi­tor in chief at the Organized Crime and Corruption Reporting Project, and Bill Browder, a financier who accus­es Swiss pros­e­cu­tors of botch­ing a Russian mon­ey laun­der­ing inves­ti­ga­tion involv­ing the death of his lawyer, Sergei Magnitsky.

Pieth told the Commission that lawyers take advan­tage of Swiss legal loop­holes to thwart efforts to track Russian assets.

“Help hide funds”

Here is his tes­ti­mo­ny in full:

“We know that Switzerland is a small coun­try. At the same time, it hosts a con­sid­er­able finan­cial resort and is prob­a­bly the biggest com­mod­i­ty-trad­ing hub in the world.

At the same time, this coun­try has a long tra­di­tion of secre­cy. In short, it is one of the biggest off­shore havens in the world.

I am par­tic­u­lar­ly inter­est­ed in the role of intro­duc­ers and enablers – fre­quent­ly lawyers hid­ing behind attor­ney-client priv­i­lege. Now, there is noth­ing wrong if they act as tra­di­tion­al lawyers defend­ing their clients’ inter­ests. On the oth­er hand, it is equal­ly clear that lawyers invest­ing mon­ey for their clients are not act­ing as lawyers: they are finan­cial operators.

The Panama Papers, Pandora Papers and oth­er leaks have shown, how­ev­er, that there is a sec­tor in-between, those who, with­out touch­ing mon­ey, are involved in cre­at­ing mon­ey-laun­der­ing struc­tures (shell com­pa­nies, off­shore accounts etc.). They are not cov­ered by AML [anti-mon­ey laun­der­ing] leg­is­la­tion. And yet they help to hide funds of for instance Russian oli­garchs, as those leaks have shown.

To give an exam­ple, the Russian cel­list [Sergei] Roldugin, a school time friend of Putin, sud­den­ly obtained one fourth of Bank Rossiya and one fourth of a Russian tank man­u­fac­tur­er – the per­sons help­ing him access and hide these assets are a law firm in Zurich (the names can be supplied).

Such struc­tures impede banks and author­i­ties in deter­min­ing the true ben­e­fi­cial own­ers of the assets. They are a real dan­ger for the suc­cess of the sanc­tions regime against Russia.

So, what should we be doing?

In Switzerland, only in March 2021 Parliament has refused to sub­ject these enablers to AML leg­is­la­tion, under pres­sure by indus­try lob­by­ists. Of course, if we have clear proof of sanc­tions bust­ing and mon­ey laun­der­ing Swiss author­i­ties could inter­vene – but as Bill Browder’s exam­ple has shock­ing­ly demon­strat­ed, law enforce­ment may be incom­pe­tent and some­times partisan.

While wait­ing for Switzerland to take renewed efforts to reg­u­late enablers, the US has a role to play: Obviously, where these enablers under­cut US sanc­tions, the DOJ [the Department of Justice] could inter­vene. In a more direct way, you could put the enablers, whose names are known, on the sanc­tions list or you could sub­ject these lawyers to a visa ban.

Overall, I think there is mer­it in Bill’s sug­ges­tion to review the law enforce­ment rela­tions between the US and Switzerland if the new Attorney General should not under­stand the mes­sage the Magnitsky case is sending.”

Diplomatic reaction

When Russia invad­ed Ukraine, the ini­tial Swiss response was not to impose sanc­tions as it might vio­late the Alpine nation’s pol­i­cy of neu­tral­i­ty. But the Swiss gov­ern­ment was forced into a u‑turn fol­low­ing domes­tic and inter­na­tion­al pres­sure, and now enforces European Union sanc­tions against Russian indi­vid­u­als and entities.

The Swiss author­i­ties have so far frozen CHF7.5 bil­lion ($7.7 bil­lion) of assets. Yet the Helsinki Commission, which is fund­ed by the US gov­ern­ment but acts inde­pen­dent­ly, remains unim­pressed. Although it has no for­mal deci­sion-mak­ing author­i­ty on the world stage, the Helsinki Commission, made up of 18 US par­lia­men­tar­i­ans and rep­re­sen­ta­tives from the US Departments of State, Defense, and Commerce, wields some influ­ence on US for­eign policy.

Swiss media report that the pub­lic accu­sa­tions of the Helsinki Commission have caused con­ster­na­tion in the Swiss gov­ern­ment. The Luzerner Zeitung news­pa­per report­ed that Swiss Foreign Minister Ignazio Cassis object­ed to the state­ments with a tele­phone call to his US coun­ter­part Antony Blinken.

Swiss gov­ern­ment spokesper­son André Simonazzi strong­ly reject­ed the alle­ga­tions of the Helsinki Commission.

“Switzerland imple­ments all the sanc­tions that have been decid­ed by the Federal Council and the EU. Switzerland has no rea­son to be ashamed of the way it applies sanc­tions by inter­na­tion­al com­par­i­son,” he told pub­lic broad­cast­er RTS

The Helsinki Commission

The Commission for Security and Cooperation in Europe was found­ed in 1976 with the stat­ed inten­tion of defend­ing human rights across the world and to ensure that this objec­tive is includ­ed in US for­eign policy.

The body, which is com­prised of Republican and Democrat politi­cians, describes itself as “an inde­pen­dent US gov­ern­ment com­mis­sion that advances American nation­al secu­ri­ty and nation­al inter­ests by pro­mot­ing human rights, mil­i­tary secu­ri­ty, and eco­nom­ic coop­er­a­tion in 57 countries”.

It arose from the Helsinki Accords of 1975 that set mil­i­tary and ter­ri­to­r­i­al terms and a dis­pute res­o­lu­tion mech­a­nism between the Soviet Union and the West dur­ing the Cold War. The body’s unof­fi­cial name of the Helsinki Commission derives from this birth.

The Organization for Security and Co-oper­a­tion (OSCE), of which Switzerland is a mem­ber, was also estab­lished after the Helsinki Accords. The Helsinki Commission coop­er­ates with OSCE but is a sep­a­rate organisation.

Original source of arti­cle: www.swissinfo.ch/eng