Switzerland Grapples With Russia's Offshore Billions

Swiss wealth and asset managers are taking sanctions against wealthy Russians seriously, but are challenged by the lengthy list of banned individuals, the CEO of Swiss financial regulator Finma said on Tuesday. “We’ve established that the banks are taking this matter very seriously,” Urban Angehrn said at the regulator’s annual media briefing. Though banks have practice from sanctions levied in 2014 and 2018 against Russia, the newest round sparked by Vladimir Putin’s invasion of Ukraine represents a challenge due to the sheer volume of sanctioned individuals and businesses, Angehrn said.

The international effort to isolate Russia financially represents a test for Switzerland’s neutrality as well as its financial center. Julius Baer, which sponsors the Zaryadye Concert Hall in Moscow, holds roughly 17 billion francs ($18 billion) in Russian assets, Tippinpoint reported last week. Swiss authorities are requiring banks to report any deposits above 100,000 francs held by any Russian, sanctioned or not.

Oligarchs have rushed to bring their assets to what they view as havens amid the sanctions – as some countries such as Italy and France are turning “yacht-hunting” into a form of sport. On Monday, Spanish authorities seized Tango, Viktor Vekselberg's $90 million superyacht, on orders from KleptoCapture. Vekselberg, who was born in Ukraine and reportedly holds Russian-Cypriot citizenship, is Switzerland's best-known oligarch. He is worth an estimated $9.3 billion and has poured money into Swiss investments.

Connecting Swiss Dots

Switzerland, as the world’s largest offshore financial center, has a major role to play in connecting the dots: Russians have eagerly snapped up physical assets in the alpine nation such as real estate and fine art, as well as stowed money in offshore accounts at wealth managers.

The art world was rocked when Russian billionaire Dmitry Rybolovlev sued art dealer Yves Bouvier (a court dismissed the case last fall; a spokesman for Rybolovlev – who hasn’t been sanctioned – said he had lodged an appeal). Last year, former Putin senior aide Kirill Androsov bought Château Guetsch, a 19th-century castle set high above Lake Lucerne, from Alexander Lebedev, a Russian oligarch. Neither man appear on sanctions lists.

Switzerland is still on the fence about joining the U.S.-led REPO task force (Russian elites, proxies, and oligarchs) to help root out the funds of sanctioned Russians. After Switzerland’s foreign minister on Monday said the government is evaluating a cooperation, Angehrn on Tuesday noted the task force is not yet active.

Russians Shifting Havens

REPO was formed three weeks ago by high-ranking officials from the U.S., U.K., France, Germany, Italy, Japan, Canada, and Australia. It follows the U.S.’ setting up five weeks ago of KleptoCapture, a task force of justice officials devoted to enforcing Russian sanctions. The group is finding that wealthy Russians who are not yet in the crosshairs are attempting to move their assets at the moment, in expection they may be sanctioned in the future, the head of the effort told “Reuters” on Monday.

“We’re working with various authorities,” Finma’s Angehrn said, without elaborating. Neither he nor Finma’s overseer Marlene Amstad gave a specific indication of the volume of Russian assets in Switzerland, which the industry lobby last week put at as much as 200 billion Swiss francs ($215 billion). Angehrn said firms specializing in commodities financing are especially exposed.

Switzerland, home to Glencore, Trafigura, and Gunvor, is the world’s largest hub for this opaque business with an estimated one-third market share of oil trading and 60 percent of metals, according to Public Eye. Angehrn said commodities financing loans are short-term loans, normally 90 days. “That means the positions are reduced over time,” he noted.