How Russian Sanctions Are Permeating Switzerland's Luxury Sanctum

(MENAFN- Swissinfo) A luxury shop district in Geneva Keystone / Gilles Lansard

After Western countries mounted sanctions against Russian assets abroad in response to the war in Ukraine, a cat-and-mouse game regarding that wealth started in Switzerland between regulators and oligarchs. The luxury sector is feeling the chill.

Paula Dupraz-Dobias is an award-winning Geneva-based journalist covering environment, business, international organizations, humanitarian crises and Latin America.

“You just can't reach them by phone these days,” an investigator working on international asset recovery told SWI swissinfo.ch about Swiss financial advisers working with targeted Russian clients.“They are working round the clock”.

Since the Russian invasion of Ukraine on February 24, Switzerland has aligned itself with European economic measures, including the freezing of assetsExternal link owned by the Russian state and oligarchs who had benefitted from relations to president Vladimir Putin, and by prohibiting financial transactions in businesses linked to the vital Russian energy sector and commodity trading with Russia.

Swiss investigators seeking assets liable to be frozen certainly have their work cut out for them. As multiple media investigations into offshore wealth have demonstrated over the years, wealthy individuals, not just Russian oligarchs, have long employed complex legal structures to transfer assets in companies whose ownership has often been referred to as Russian stacking dolls: one legal entity being owned by another and so-forth.

“Reports on the assets of sanctioned persons are constantly coming in at SECO,” Florian Maienfisch, a spokesperson from the State Secretariat for Economic Affairs (SECO), which runs the government's oligarch taskforce.“Since this process is still in full swing, reports that have already been received only represent an incomplete, changing intermediate status.”

The office explained that in addition to banks, local and cantonal authorities as well as insurance companies, individuals, civic society groups or anyone who may suspect ownership of properties and assets by sanctioned persons in Switzerland may alert the taskforce of such links. Lawyers working in other capacities than to defend a client in court – including as a fiduciary - are“obligated” to report any sanctionable assets.

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International Geneva is an important hub for multilateralism. But it is facing some unprecedented challenges.

An example of the challenges Swiss regulators are facing getting their hands on Russian assets in the country, include those of the Rotenberg brothers. According to a report in Swiss weekly, Le Matin DimancheExternal link , Arkady Rotenberg and his brother and Boris, whom British prime minister called“cronies” of the Russian president, had employed structures set up by a Geneva bank to obscure the ultimate holder of funds. The brothers had been forced to sell their private jets after Swiss bank Credit Suisse terminated leases, as revealed by the Financial TimesExternal link .

While estimates have varied widely, the value of Russian assets in Switzerland has ranged from a conservative estimates by the Swiss National Bank of some $25 billionExternal link (CHF24 billion) 2021 for fiduciary and customer deposits, to up to CHF200 billionExternal link ($209 billion) according to the Swiss Bankers Association. The government announced earlier this month that CHF6.3 billion in funds had been frozen, down from CHF7.5 billion after some funds were released due to “insufficient grounds”External link for holding them. According to official data, roughly 16,500 Russian nationals currently reside in Switzerland. The Russian embassy in Bern said that as this does not include individuals with dual Swiss citizenship, saying the number may actually be nearly double that.

Some assets are easier to track than others. More than 1,000External link Russian individuals are currently on Switzerland's sanctions listExternal link , including a fistfulExternal link of residents in Switzerland, who are said to have benefitted from authorisationsExternal link linked to their wealth, involving tax deals. One such oligarch is Petr Aven, said to be a Putin confident, whose Bernese holiday home was seized in March.

Over the years, Geneva has become home to a number of politically-exposed persons (PEPs), who have purchased multi-million franc properties, often sparking questions regarding the origin of such funds. In addition to Aven, other properties tied to Russians targeted with sanctions in Bern, Geneva and other cantons have been seized by authorities, as local property registrars scan the sanctions list.

Since the introduction of sanctions, the concern though is that similarly to liquidity, other more tangible assets such as art may be difficult to track. While KYC (Know Your Client) requirements have been introduced in different sectors, the implementation has been variable.

For Mark Pieth, a Swiss-based anti-corruption expert, Switzerland's record overall to confiscate Russian assets has been spotty.“Switzerland did not follow EU sanctions after the Crimean annexation, therefore it was considered by many Russians as a safe haven,” he tells SWI.

He said one of the issues in Switzerland was a failure to subject financial advisors to anti-money laundering (AML) legislation. He added the Financial Action Task Force (FATF), an intergovernmental organisation that assesses countries' performances on combatting money-laundering, should 'certainly discuss this matter' during its next evaluation of the Alpine country.

For instance, a €100,000 (CHF103,000) limit on cash transfers by Russian nationals, imposed by the European Union and replicated by Switzerland, still allows business transactions up to that amount to be made, retailers told SWI, on condition of anonymity.

Art has certainly been one of the sectors where oligarchs have been able to benefit from loopholes.

There is concern among global experts that the sector may continue to benefitExternal link from the lack of regulation, including through the use of non-fungible tokens (NFTs). US and British authorities have shared these concerns since the start of the war.

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