Russian banks and oligarchs are grappling with the fallout from Swiss sanctions that have now frozen billions of francs in assets in bank vaults.
This content was published on March 3, 2022 – 14:46
The Swiss National Bank puts the current value of Russian assets in Switzerland at around 10 billion francs ($11 billion). But the Neue Zürcher Zeitung The newspaper estimates that the real figure, including the assets of five sanctioned oligarchs (who have not been named), could be as high as 150 billion francs.
On Monday, the Swiss government bowed to domestic and international pressure by freezing Russian assets sanctioned in accordance with the European Union. Russia has imposed capital controls, limiting the amount of money that can be moved out of the country.
Some sections of the media have speculated that the sanctions have prompted wealthy Russians to desperately try to withdraw funds or put them in the names of relatives. The banks decline to comment on the basis of customer confidentiality.
The oligarchs are extremely wealthy and can rely on very sophisticated financial advisers. The Panama Papers ExposedExternal link in 2016 exposed a network of offshore lawyers, advisers and trust funds that smoke the trail of funds and obscure the true ownership of assets.
But this does not always protect them from the consequences of sanctions. Although he denied having influence in the KremlinExternal linkRussian industrialist Viktor Vekselberg had to reduce or cut his ties with Swiss companiesExternal link after being named on a United States sanctions list in 2018.
Post Finance, the financial arm of Swiss Post, then closed his personal bank account. Vekselberg protested, arguing that Post Finance is obligated by law to provide basic services to all Swiss residents. Switzerland’s highest court only recently upheld his legal challengeExternal link.
Damage to reputation
Banks have gotten used to navigating global sanctions, but sometimes they get it wrong. In 2014, French bank BNP Paribas was fined $9 billion, while in 2019 Standard Chartered was forced to pay $1.1 billion for breaching US-imposed measures. . In 2009, Credit Suisse was fined $536 million for violating sanctionsExternal link.
In this case, no bank would want to risk reputational damage by being perceived as having indirectly supported Russia’s invasion of Ukraine. Although Switzerland only imposed an asset freeze on February 28, it is likely that Swiss banks would have already observed the European and American sanctions put in place a few days earlier.
“Banks have reportedly closed since the introduction of US sanctions,” Peter V. Kunz, director of the Institute of Business Law at the University of Bern, told Swiss public broadcaster SRF.External link. “No Swiss bank wants to be caught in the crosshairs of the US authorities.”
The introduction of sanctions may result in the removal of transactions or loans that a bank has entered into on behalf of a sanctioned customer. Even before the latest round of sanctions, Credit Suisse reportedly discounted the risk of oligarchs defaulting on loans made to buy yachts, jets and real estateExternal link. the FinancialTimes saw documents alleging defaults caused by ‘US sanctions against Russian oligarchs’.
Shortly after the article was published, the bank allegedly asked hedge funds and other investors to destroy documentsExternal link regarding oligarch yacht loans. Credit Suisse later issued a statement indicating that the request for destruction of documents was not related to sanctions against the Russians.
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