[Joint House and Senate Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
117th Congress Printed for the use of the
2nd Session Commission on Security and Cooperation in Europe
Russia's Swiss Enablers
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
May 5, 2022
Briefing of the
Commission on Security and Cooperation in Europe
______________________
Washington: 2023
Commission on Security and Cooperation in Europe
234 Ford House Office Building
Washington, DC 20515
202-225-1901
csce@mail.house.gov
http://www.csce.gov
@HelsinkiComm
Legislative Branch Commissioners
SENATE HOUSE
BENJAMIN L. CARDIN, Maryland STEVE COHEN, Tennessee
Chairman Co-Chairman
ROGER F. WICKER, Mississippi Ranking JOE WILSON, South Carolina Ranking
Member Member
RICHARD BLUMENTHAL, Connecticut ROBERT B. ADERHOLT, Alabama
JOHN BOOZMAN, Arkansas EMANUEL CLEAVER II, Missouri
MARCO RUBIO, Florida BRIAN FITZPATRICK, Pennsylvania
TIM SCOTT, South Carolina RUBEN GALLEGO, Arizona
JEANNE SHAHEEN, New Hampshire RICHARD HUDSON, North Carolina
TINA SMITH, Minnesota GWEN MOORE, Wisconsin
THOM TILLIS, North Carolina MARC A. VEASEY, Texas
SHELDON WHITEHOUSE, Rhode Island
Executive Branch Commissioners
Department of State to be appointed
Department of Defense to be appointed
Department of Commerce to be appointed
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Russia's Swiss Enablers
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May 5, 2022
Page
COMMITTEE MEMBERS PRESENT
Hon. Steve Cohen [D-TN], Co-Chairman 13
Hon. Roger Wicker [R-MS], Ranking Member 14
COMMITTEE STAFF PRESENT
A. Paul Massaro, Senior Policy Advisor, Commission on
Security and Cooperation in Europe 1
PARTICIPANTS
Bill Browder, Head, Global Magnitsky Justice Campaign 2
Miranda Patrucic, Deputy Editor in Chief, Regional and Central
Asia, Organized Crime and Corruption Reporting Project 4
Mark Pieth, President of the Board, Basel Institute on Governance 6
Carlo Sommaruga, Member of the Council of States Representing
the Canton of Geneva, Switzerland 10
Russia's Swiss Enablers
----------
May 5, 2022
Commission on Security and Cooperation in Europe
Washington, DC
The briefing was held from 10:01 a.m. to 11:02 a.m. via
videoconference, A. Paul Massaro, Senior Policy Advisor, Commission on
Security and Cooperation in Europe, presiding.
Mr. Massaro: [In progress]--Commission of the U.S. Government. We
focus on human rights, democracy, and the rule of law around the world.
In this context, I, Paul Massaro, focus on fighting corruption--
fighting global corruption, particularly the corruption that has made
possible this brutal genocidal invasion of Ukraine. So we have come to
focus a lot on the individuals and institutions that have made this
possible--the so-called enablers of corruption who have been accepting
blood money for decades, really.
This elite capture that has been made possible, the strategic
corruption and the capture of Western elites, so that we were unable to
respond at various junctures and deter Putin. Essentially one could
understand the Russian invasion of Ukraine as a failure of deterrence
over the long term, and the success of Russia's strategic corruption
policy. Of course, the bravery of the Ukrainians has stopped that now.
It is made us wake up and look at ourselves in the mirror. If not for
their brave resistance, who knows. We would probably still be deep in
this enabling.
Switzerland in particular has been well-known as a money laundering
hub for a very long time. A recent report, the Swiss banking lobby says
that Switzerland holds more than $200 billion in Russian wealth, at
this time when we are trying to crack down on the oligarchs and Russian
blood money around the world. Now, Switzerland has joined Western
sanctions. That is encouraging, but today we want to talk about the
money--the Russian money in Switzerland, the Swiss enabling
environment, Swiss banks, and so on and so forth. I think we have some
really strong panelists to help us do that.
We are first going to hear from Bill Browder, the head of the
Global Magnitsky Justice Campaign, who is going to speak about the
Magnitsky investigation, particularly the money--the stolen money that
was exposed by Sergei Magnitsky, of course, the Russian whistleblower
who was killed for standing up to the brutal Putin regime, and how that
money actually ended up in Switzerland, and then for years sort of sat
there, and now threatens to be returned to the thieves that stole it.
Then we are going to hear from Mirandu Patrucic--Miranda Patrucic.
Excuse me, Miranda. The deputy editor in chief, regional and Central
Asia, at OCCRP, the Organized Crime and Corruption Reporting Project,
on their recent project, Swiss Secrets: Looking into Credit Suisse, one
of the two largest banks in Switzerland that has enabled many different
dictators, murders, torturers, thugs around the world, and taken their
money, hid it, helped them launder it. With a focus on, of course,
Russian oligarchs.
Then finally we are going to hear from Mark Pieth, president of the
board of the Basel Institute on Governance, on how it looks from within
Switzerland, what can change within Switzerland, and how this kind of
Swiss enabling environment can be combatted. So the course of a
briefing--a Helsinki briefing is we will first hear from our panelists,
about 5 minutes each. Then we will open it up to questions. So please,
this is a very interactive format. We hope that everyone will ask
questions. If you have a question, please put it in the chat. I will
read it out. I will start by asking a couple questions of my own, maybe
one or two. Then we will go to the audience. So please, start thinking
of questions now.
With that, I would like to hand it off to Bill.
Mr. Browder: Great. Paul, thank you, and grateful for the Helsinki
Commission to be hosting this event. It is very relevant. I have seen
with my own eyes how important this discussion on Switzerland is, and I
want to talk you through some of the--some of the things that we have
seen, which really raise a lot of disturbing questions about
Switzerland.
Before I do that, I wanted to just say that 5 minutes is a very
short amount of time. I have prepared a very long briefing document,
and I would like permission, if possible, to submit that for the record
so that--for those who watch this, they can then look and learn more
about our case and what happened in Switzerland, if that is acceptable
to you.
Mr. Massaro: I have no standing to say this, but without objection
so ordered.
Mr. Browder: [Laughs.] Thank you.
Let me begin by saying that since the murder of Sergei Magnitsky on
November 16, 2009, it has been my objective to get justice for Sergei,
and one of the aspects of justice that most people who are probably on
this call know about is the campaign to get Magnitsky sanctions imposed
in different countries around the world. It all started with the
Helsinki Commission in the United States. Senator Cardin, Senator
Lieberman, Senator McCain, Senator Wicker proposed the Magnitsky Act,
which became a law in December 2012. Now we have 34 other countries
that follow.
A part of our campaign which is less well known but equally
important is to say who got the $230 million that Sergei Magnitsky
exposed and was killed over? It was our intention to make sure that
every person who profited from this crime did not profit after it was
discovered, and so we launched what has now been, I guess, a 12-year
investigation into the money laundering. Over the course of those 12
years, different people and different institutions have come forward.
The OCCRP has been a very valuable investigator into this crime, and
through their research have found a number of things.
Then we have had other individual whistleblowers come forward. in
2010, a whistleblower, a man by the name of Alexander Perepilichny, who
was a member of the criminal enterprise that--the criminal enterprise
that stole the $230 million that Sergei Magnitsky exposed--he fell out
with his criminal compatriots. He came to us with a bunch of Swiss bank
statements. Those Swiss bank statements showed us that about $11
million from the $230 million had come into the accounts of a man who
was the husband of the tax official who authorized the illegal $230
million tax refund.
Her name was Olga Stepanova. Her husband was a guy named Vladen
Stepanov. He was able to show us, through the documents that he had and
other documents that we were able to gather, effectively a straight
line from Russia to Switzerland to his account. So the person who
approved the tax refund sends the money to her husband at Credit
Suisse. Pretty clear. We took this information to the Swiss attorney
general in 2011 and we filed a formal complaint. The Swiss attorney
general immediately opened a criminal case and started investigating
and freezing money.
They froze those accounts, and then they froze accounts belonging
to a man named Dmitry Klyuev, who was head of the Klyuev organized
crime group that was head of this whole enterprise, and they froze
accounts belonging to a guy named Denis Katsyv, who owned a company
called Prevezon, which also features in another big part of our
investigation. So the accounts were all frozen. A major investigation
was launched. A quite competent prosecutor was assigned to the case, a
woman named Maria-Antonella Bino. She started investigating and taking
various actions. She brought me in for questioning. She brought
Perepilichny in for questioning. She eventually brought Stepanov in for
questioning.
Then a new attorney general was brought into the Swiss prosecution
service, a man name Michael Lauber. Michael Lauber took over, Maria-
Antonella Bino quit, and then Lauber brought one of his dear friends
from the past, a man named Vinzenz Schnell, who is a Russian-speaking--
probably the most senior Russian-speaking person in the Swiss Federal
police, to join his service, and particularly to investigate the
Magnitsky case in Switzerland. The moment that Schnell came onto the
team, all investigative actions effectively ground to a halt. Nothing
happened. We would write in on a regular basis saying things needs to
be done, that needs to be done, and as a victim in a Swiss criminal
case, you have the right to actually ask for things to be done. They
just completely ignored every request we made. No progress was made. No
more major interrogations. No more mutual legal assistance. Nothing.
Years and years went by, and then we discovered something
interesting, which was that Vinzenz Schnell was not inactive, he was
just active in a different area. He was active in going on hunting
trips that were fully paid for by Russian oligarchs in Russia. He went
on two hunting trips in the Yaroslavl region, and then he went on a
grand hunting trip to Kamchatka, where he had to fly all the way across
the country, then take a private helicopter to do bear hunting in the
mountains of Kamchatka. All paid for by his Russian hosts and Russian
oligarchs.
We learned that on the hunting trip to Kamchatka, Vinzenz Schnell
discussed with his Russian counterparts how to get rid of the Magnitsky
case. He then came back to Switzerland, and he summoned a Swiss
politician, a man named Andreas Gross, who had been one of the people
investigating the Magnitsky murder, who had put together a very
detailed report on the Magnitsky murder for the Council of Europe. He
summoned him in order to try to discredit a Swiss politician. A Swiss
police officer was trying to discredit a Swiss politician as a favor or
a service to his Russian handlers, in order to dismiss this case.
Schnell was discovered, and he was eventually fired. He was
discovered by a different branch of the--of the Swiss police. He was
eventually fired. Then his prosecution--he was being prosecuted as well
for bribery--his prosecution was then handled by his friend Michael
Lauber, the head of--the attorney general. Michael Lauber, who was in
trouble on his own. He had his own troubles, because of coziness with
the Russians connected to the FIFA investigation. He basically threw
the fight in terms of his prosecution of Vinzenz Schnell. He dropped
almost all the charges, replaced them with nonserious charges.
Vinzenz Schnell was eventually convicted of very minor charges, did
not spend a single day in jail, had a very minor fine applied to him
which would then go away if he did not commit the same crimes in a new
period of time. Then the most shocking part of the whole story was we
get a letter from the Swiss prosecution office saying that they are
going to return almost all the money that had been seized over those 10
years to the Russian crooks. So the head of the organized--Dmitry
Klyuev, the head of the Klyuev organized crime group, was going to get
100 percent of his money back. Katsyv--Denis Katsyv, from the Prevezon,
was going to get something like 99 percent of his money back. Then the
husband of the tax official was going to get, like, 70 percent of his
money back. In total, $16 million was going to go back to the Russians.
Now, at this point, Lauber has been fired. Schnell has been fired.
Their compatriots in the prosecution office carry on with this plan to
give the money back to the Russians. So we filed an appeal with the
prosecutor's office. They reject us. In fact, they tried to kick us off
the case as victims, saying that we were--we had nothing to do with
this. We were not victims at all, and then a new prosecutor comes in, a
new guy, whose name is Stefan Blattler, not to be confused with Sepp
Blatter, who was the head of FIFA, and the new prosecutor was
interviewed just a few days ago, on the 29 of April, and he says--he
has: The past is no longer an issue. He just wants to look to the
future. He has little desire for reforms. This is in Blick, a Swiss
newspaper.
I guess we should point out that this is just one story. I just
want to read quickly--and I have probably gone over time--but just
quickly summarize a few of the other stories out there. Which is that
the--in 2017, $60 million was--that had been frozen, that belonged to
the former Minister of Agriculture Yelena Skrynnik, has been returned.
Twelve million dollars that belonged to the former Deputy Minister of
Agriculture Alexei Bazhanov has been returned by the Swiss prosecutor's
office. Eighty million belonging to a guy named Alexander Udodov has
been returned, and $176 million that belonged to Akriche was returned.
These were all under Lauber.
Then you also have the case was dropped against Sepp Blatter, the
head of FIFA. The case was dropped against a Colombian businessman who
was part of the Maduro regime. The case was dropped against Mubarak's
son. The case was dropped against King Juan Carols of Spain. The case
was dropped against Gadhafi's son. There is something seriously rotten
in Switzerland, and in my opinion, my recommendation, is that the U.S.
review the mutual legal assistance treaties that are currently
negotiated with Switzerland, come up with something that reflects the
fact that there is either a criminality or a gross incompetence in law
enforcement in Switzerland, because this cannot be allowed to continue.
We cannot support this and just look the other way. Thank you.
Mr. Massaro: Thank you very much, Bill. It is a fascinating, useful
testimony. So now we would like to hear from Miranda Patrucic of OCCRP.
Let us talk about the banks.
Ms. Patrucic: Thank you very much for having me. My organization,
Organized Crime and Corruption Reporting Project, was part of the big
global effort to review over 18,000 Credit Swisse accounts that
partner, Suddeutsche Zeitung, has obtained. It was the largest leak
ever from a major Swiss bank, What was interesting about it is that,
you know, even though Switzerland and Credit Suisse have been pledging
for years, even decades, basically, that they will crack down on
illegitimate funds, what we have discovered that, and particularly
Credit Suisse, has catered to criminals, dictators, intelligence
officials, sanctioned parties, and political actors.
Our leak did not include a comprehensive list of Russians. It did
include some names, and for example, one of the--one of the individuals
we looked into was Alisher Usmanov. We discovered through the Credit
Suisse leak that it had--his sister was a beneficiary, according to the
records, of 27 accounts. Including accounts which at one point held,
like, $2 billion. So huge, tremendous amounts of money. We have also
reviewed FinCEN files, which basically showed us that banks have been
flagging transactions that Usmanov and his companies have been running
through Credit Suisse for years. Yet, they were--they continued to--his
money continued to flow through these banks.
What is it that is so attractive about Swiss banks? One thing is
definitely secrecy. Swiss banks and Switzerland are basically protected
with the draconian banking secrecy law, which basically promised to
send any journalist or whistleblower who exposes wrongdoing within
Swiss banks to jail. Also, they have a high reputation. What is
interesting two sets--almost two sets of rules. This is something that
we got speaking with former and current employees in the banking
center. Basically, what they told us, there is a set of laws for rich.
For example, if you have $1 million that you are bringing to the bank,
you are going through extensive due diligence process. If you are what
is called ultra-high net worth individual, and you bring, let us say,
$20 million, basically the set of rules that applies to you is very
different.
We have also learned that the bank basically has a very toxic
corporate culture, which is designed to basically maximize the profit
and bonuses, which means that the employees are tied to that new money,
which basically incentivizes them to look the other way. Basically, the
whole system is based on plausible deniability. So if you do not find
something or if you do not look and do not find something, that is
good. We have also discovered that the--basically, no head of the Swiss
bank has ever been jailed. Any punishment, any kind of fines that are
imposed on these banks are basically treated as a cost of doing
business, and, for example, if you think about the $1.3 billion penalty
that was imposed on Credit Suisse, that was even tax deductible, which
is completely counterintuitive in terms of a fine. [Laughs.]
We have looked into, you know, the bank itself and its client. When
you see that, you know, with a plain Google search the bankers could
have found that these types of clients are not the clients to have in
the bank, and yet they chose to keep them and basically bank with them
for years. It really speaks to what kind of bank it is, and the whole
irony of the situation is that you have, you know, clients from
countries with a very poor legal system and lax oversight who basically
come to Switzerland because it is pure, it is well-managed, it is
reliable. Are basically able to conduct business there, and basically
safeguard their money--very often ill-gotten money--and basically
preserve it.
So that is my introduction.
Mr. Massaro: Great. Thank you so much, Miranda. The tax-deductible
penalty is really something that gets me.
Now we will hear from Mark. Please, Mark.
Mr. Pieth: Yes. Thank you, Paul. Just to let you know, I am
speaking as a professor of criminal law, but I have been a member of
the FATF and also a long-time president of the OECD Working Group on
Bribery.
Now, the small country Switzerland, as you know, and has been just
pointed out by Miranda, hosts a considerable financial resort. It is
probably the world's biggest trading hub for commodities, but this is
not all. It is a country a long tradition of secrecy. In short, it is
one of the biggest offshore havens in the world. Now, my particular
interest is--are the role of introducers and enablers. Frequently we
are talking of lawyers who are hiding the assets of their clients
behind the attorney client privilege.
Now, we have to be careful because, I mean, also in the U.S. if you
are defending a client from litigation or so, of course you have
attorney-client privilege. That needs to be respected, but the other
hand is that if you are investing money for your client, you are not an
attorney. You are a financial operator, but what people do not realize
is that between those elements there is a segment, a gray zone, if you
want, that is not falling under the anti-money laundering legislation.
The Panama Papers, Pandora Papers, and other leaks have shown us
that those lawyers have been using that gray zone to create money
laundering structures with shell companies, offshore accounts, anywhere
in the world. They would not be under the anti-money laundering
legislation. You would ask, well, what is the big issue? What is the
big problem? Let me give you an example. Many of us know that Putin has
this school-time friend Roldugin, a famous cellist, supposedly.
What happens? In Panama Paper, you can see that Roldugin suddenly
obtains a very formidable stake of Rossiya Bank, a bank we all know
about, and a stake in a Russian tank company, costs $200 million, and
of course, he says at the same time--Roldugin says, I am a cellist. I
am a musician. I am not a businessman. When we followup in the papers,
we stumble over an introducer in Zurich. I will not give the name here,
but I know it and I can pass it onto the committee if they want it.
My point is, such structures impede that banks but also the
authorities actually determine the true beneficial owner of the assets.
These guys are a real danger for the success of sanctions--of the
sanctions regime against Russia, because only this introducer knows who
actually owns that money. It surfaces as some kind of fantasy name in
Panama or in British Virgin Islands.
The question is, what should we be doing? Now, starting with
Switzerland, Switzerland only in March 2021 has in parliament refused
to subject these enablers in that gray zone to the AML, to the anti-
money laundering legislation, under pressure of the industry lobbyists,
especially Geneva lawyers. Of course, if we have clear proof in
Switzerland that actually such a lawyer has been laundering money,
sanctions-related money. Then Swiss authorities could intervene, but,
as Bill Browder's example has shockingly demonstrated just a moment
ago, law enforcements might be incompetent or, worse, partisan.
Now, while waiting for Switzerland to take renewed efforts to
regulate its enablers, I think the U.S. has a role to step in. First of
all, where the enablers undercut U.S. sanctions, take Roldugin. It is a
very clear case. The DOJ could actually start action and as soon as
these guys leave the country they could be put into extradition--on
remand for extradition, and sent to the U.S. Maybe in a more direct
way, we could up the enablers on the sanctions list themselves as
accomplices, if you want, and again, I am saying we know the names.
That is the easy part, and you could also consider putting these
lawyers under a visa ban to the U.S. That would definitely also hurt
them.
Now, overall, I think there is merit in Bill's suggestion to review
the law enforcement relations between the U.S. and Switzerland,
especially if the new attorney general should not understand the
message of the Magnitsky case. We do not know that for sure yet. There
are indicators that he is just carrying on as the other guy. If he does
not understand, and I would not give him too much time, I think we
should really start considering are these law enforcement relations
between the two countries really well balanced? Thank you very much.
Mr. Massaro: Thank you. I see we have been joined by our ranking
senator, Senator Roger Wicker. Senator Wicker, would you like to say a
few words? So we will give him the floor when he is able to get the
technology working.
I actually wanted to followup on that, Mark, because prior to the
conversation beginning we would talked briefly--and I just want to say,
everyone, please be putting questions in the chat. I see we have a few
questions already. We want to move to the question and answer phase
now, but we talked briefly about the REPO Task Force, the Russian
Elites Proxies and Oligarchs Task Force, the new DOJ Task Force
KleptoCapture, and so on and so forth. There is a big initiative now,
multilateral initiative, to hunt down these assets. Just today we have
seized a yacht in Fiji. I mean, there has been a lot of successes here.
This is, you know, the real deal.
One would think that in order to be successful in this we would
have to work with Swiss law enforcement in some capacity, given how
much of this money is in Switzerland. I am curious as to your thoughts
as to how one balances the need to understand, you know, what is
happened here with Swiss law enforcement, but also the need to work
together on this, and we have in the past, right? We have worked on--
for example, the FIFA investigation is actually a pretty good example
of a time when a lot of people got arrested at the U.S. request.
Mr. Pieth: Well, Paul, I think it is a very good question because
obviously the administration--your official administration is not
necessarily following your narrative--your introduction you gave today.
They are using much more careful words. Why? Well, it is my
interpretation they want the Swiss to participate in those task forces.
The Swiss officials in Switzerland are under terrific pressure at the
moment by the--by parliament in Switzerland and by the general public
to join task forces, including the REPO Task Force.
The delicacy of the thing is, though, once everybody is happy and
joined, suddenly the Swiss will be--will be confronted with demands.
They will be demanded: Can you break through bank secrecy? Can you
break through attorney-client privilege at those sensitive points? It
might well be that Switzerland finds itself trapped. That it, at very
delicate points, cannot simply break its secrecy provisions.
Mr. Massaro: I see, so do you need--do you need reform before you
can work with these guys? You know what I am saying?
Mr. Pieth: I am not so sure. I think most of it--most of what we
have to do in Switzerland is not necessarily about law, except what I
mentioned about enablers. There we have to change the law. There is a
lot of--there are a lot of possibilities in financial supervisory
legislation that are there--that is there. The question there, the
challenge there is whether the existing financial supervisory
authorities can muster the courage to clamp down on banks and on
lawyers. I think what we are seeing--and that is, again, the story Bill
has told, and also that Miranda has said. There is a lack of courage
there.
Mr. Massaro: Mmm hmm. Mmm hmm. Let us actually turn back to Bill,
because I have a question here, Bill. Could you talk a little bit about
what you think the U.S. authorities should do now? I know you have
mentioned the MLAT idea. They say secondary sanctions, stop cooperating
with Swiss law enforcement. What do you think?
Mr. Browder: Thank you, Paul, and thank you, Mark. Just, first of
all, let me put something in perspective. There are some people inside
the U.S. Government that do not want to rock the apple cart with
Switzerland because they have frozen $7 billion of oligarch funds in
Switzerland. They are saying, look, these guys are doing something. Let
us--you know, we should be really happy. Well, the way I look at it is,
you know, purely on a mathematical basis. Seven billion dollars is a
lot of money in absolute terms, but Switzerland is one of the main
destinations for dirty Russian money. They use Swiss banks. The Swiss
Bankers Association in March disclosed that around $200 billion of
Russian money sits in Switzerland.
It seems to me that it is kind of a--it is almost like--I would
almost say it is slightly insulting that they have only frozen $7
billion. That our be three and one half percent of the oligarch money.
Based on my experience--and my experience, of course, is just in one
case. But based on that experience, it would lead me to believe that
the Swiss, you know, are knowingly turning their head the other way
when it comes to some of the other oligarchs. You know, who are their
favorite oligarchs? Who are the oligarchs that have been greasing the
wheels of finance in Switzerland?
I think that Switzerland has got a big problem. I think that it is
something that--you know, and they do not ever seem to solve these
problems until there's a major scandal. I mean, you know, look at the--
you know, the Nazi gold--the whole story about taking gold from Jewish
refugees and then not giving it back to their descendants. I mean, that
was just an unbelievable scandal. Then they are--you know, basically
every time there is a major corruption scandal in a country,
Switzerland always shows up.
You know, there are worse things you can do to Switzerland than
just say we are going to renegotiate your mutual legal assistance
treaty. We could--we could put Switzerland on the FATF blacklist. There
is a lot of different things that we can do to basically, you know,
acknowledge where Switzerland stands in this whole thing. Switzerland,
you know, them joining the REPO Task Force means nothing. The only
thing that means something is if they actually start acting.
Sitting on task forces, you know, conducting investigations, all of
those types of things are really easy to do for a noncompliant law
enforcement agency. I think that Switzerland needs to get serious.
Otherwise, Switzerland should not be given the validation that it is
given by the United States and by other governments. Some of those
things should show up in these classifications of blacklists and so on.
Mr. Pieth: Can you give me--
Mr. Massaro: That is great. Yes, I saw the finger, Mark. Please.
Mr. Pieth: Yes. Very short. The problem is with this 7 to 200
billion dollars, it is been apples--comparing apples and pears. Because
the 200 billion dollars are Russian assets in Switzerland held by Swiss
financial operators. The 7 billion dollars are certainly oligarchs. The
problem is the list is growing. So we are--we will probably see more
that is going to be--that is going to be covered.
I see an additional problem, by the way. I mean, the--our
shareholders--shareholdings by Russians in corporate interests in
Switzerland. That is another huge domain. Zug is your place. So you
have 80 percent of Russian oil traded in Geneva. So you have yet
another, let us say, aspect of coziness, if you want--a cluster of
coziness. So assets is only one problem. There is much more to it.
Mr. Massaro: Right. I mean, that is a great point, because the
energy dependencies, the way that Russia has weaponized its natural
resources, as well as, you know, the fact that there really is no, you
know, large-scale, independent business, per se, everything is attached
to the Putin regime, is really significant. So thank you for
highlighting that.
We have another question here. Miranda, maybe you could take a shot
at this one. I mean, why the strict Swiss bank secrecy laws? You know,
where did this come from and why has nothing been done about it,
despite the fact that we have had now, as has been highlighted, you
know, 70 years of Swiss bank secrecy, and 70 years of scandals?
Ms. Patrucic: The reason you have secrecy is because that is what
is so attractive about placing your bank in Switzerland. Switzerland
has a long tradition of neutrality, and that basically was what drew
people to put money in Switzerland in the first place. If you go back
through history--so, when they first upped their secrecy was in the
banking act from 1934. At the time, they basically promised to jail any
bank employee who would disclose confidential customer information.
Then what happened in 2008 during the financial crisis, and after
one of the employees of UBS bank shared the data with U.S. authorities,
what happened is they actually changed the law and even made it more
strict. In this way, they basically can criminally prosecute, and
increased the prosecution from, like, 6 months to 3 years. Now it is
even more dangerous for anybody to leak this information.
Why did they do this? I mean, imagine if Switzerland started to
share the information, or started to release the information? Who would
come to Switzerland and place their money there? You have a lot of
competing havens. You have Dubai, which is one of the places which both
offer the corporate secrecy and banking secrecy. A lot of money would
be going in that direction. Switzerland wants to be competitive and
basically preserve what is so attractive about it--you know, the
secrecy itself.
I wanted to add one point to the previous discussion, which was
that recently Switzerland introduced a draft law which would basically
enable bankers to set up trusts for their clients. You know, one of our
reporters went undercover and actually called a manager in Credit
Suisse and basically asked how they could place money for a very
wealthy African client. What they were offered was a trust set up,
which basically means that the bank employees would act as nominees,
which would basically increase the level of secrecy. Even people inside
the bank would not be able to know who the real client is.
This is something that is very dangerous about Switzerland, and in
general the secrecy in the bank, is that the bank employee--there is a
who knows what and who can find out what? If you are a client that
needs protection--and, for example, in these days those would be any
ultra-wealthy Russian clients--basically the employees in the bank can
prevent other people to see disinformation even inside the bank. So
only, for example, top managers would be basically allowed to see it.
One really important element of what can be done in terms of
Switzerland is basically to, from the other side, enable protection of
bankers to basically conceal information and assisting clients in
preserving their money--dirty clients in preserving their money.
Mr. Massaro: Thank you so much. We have a Swiss senator who would
like to come on the--come on the speaker and say a few words. Francois,
could we arrange that? In the meantime, I am going to continue with the
questions here.
Someone comments that the two--that the 200 billion dollars is a
guess of the Swiss banking--somebody in the Swiss Banking Association.
What other concrete evidence do we have? Noting that, you know, this
stuff is really hard. I mean, the problem with anonymity in this is
that you--in many cases you do not know, but can anybody--can anybody
take that on?
Mr. Browder: I am just going to--I will just say that, based on
what Miranda has been saying, there is no way that any of us can know
that, because it is all a bank secret. So the only people that would be
able to quantify it are the bankers themselves.
Mr. Massaro: Or the banks.
Mr. Browder: The Swiss Banker Association have, I guess, made an
attempt to quantify it. I would actually believe that the number is far
larger than 200 billion dollars, but, you know, that seems like a good
number to start with.
Mr. Massaro: Yes, I saw--in that--in that article somebody put it
at 300 billion dollars. Sorry, Mark.
Mr. Pieth: Yes, I was just going to jump in. I think you are
probably right. It is going to be bigger. The difficulty is, you know,
if you are a--let us say, a mainstream banker. You are not a crook--
automatic crook. You are sanctions busting. That means from the moment
somebody's on the list and you know I am acting for that client,
sanctions busting is a crime that qualifies as a predicate offense to
money laundering. So you fall into the trap that you are actually not
only obliged to tell on your client--you know, the SARs, the suspicious
activity reports--but you are actually going to go to jail as a
criminal, possibly.
Now, Miranda has said boldly there are no presidents of Swiss banks
who have gone to jail. It is not quite true. We tend to put people to
jail who are not mainstream bankers. So foreign bankers in Switzerland,
there you face being closed down, jailed, whatever. I think the tricky
thing for the banks is they risk to having action against--for money
laundering against them. The lawyers are therefore really a problem
because they will not be found out. That is the--and Mr. Sommaruga, who
has asked to take the floor, he has actually been very instrumental for
that change of law which was aborted. Maybe it is useful to ask him to
say directly what his opinion is.
Mr. Massaro: Okay. Yes. Let us hear it from the horse's mouth. Mr.
Sommaruga, Carlo, you are on the panel. If you can unmute, please take
the floor.
Mr. Sommaruga: Yes. Do you read me?
Mr. Massaro: We do. Thank you for joining us.
Mr. Sommaruga: Thank you very much to let me sort of say some
words. First of all, I want to tell that I am a Geneva senator in Bern
in the parliament. It is many years that I am engaged, committed to the
question of laundering--money laundering, and those problematic of
other corruption. I am, I will say, one of the few parliamentarians
that is very committed in Switzerland about this question. This is
reason that we have no majority to make very important change of our
law that are problematic.
For the first time, I am pleased to inform you, that yesterday then
Foreign Policy Committee of the National Council has adopted a
modification of the law of the embargos that I proposed. It was to
introduce a Magnitsky amendment for personal sanction, and this is a
good news. It is a partial good news, because it must be then discussed
in the plenary session and then in the second chamber, the Senate,
where the majority are difficult. I think it is a good--a good step. We
go in the direction that our friend Bill Browder had said. He had made
some lobbying in Switzerland in this direction. I thank him for that.
Behind the critique that we have heard about, the persons like
Lauber or other person in Switzerland, I think there is some structural
problem. I think there is structural problem in the law. In our
parliament, there is not the consciousness to change this law. For
example, the funds of dictator are blocked immediately. You have a good
communication of the government said, Okay, we have blocked the money
of Gadhafi family, or of Tunisian dictator, of Egyptian dictators, and
so on. There is--these are blocked only when the dictator fall.
Then the problem is what happen with this money. It must be
necessary to have an international cooperation to have justice in the
land of origin and Switzerland. Many times after the fall of the
dictator the justice is in the and of deep State of the dictator. So it
is very difficult to bring the justice of this country to collaborate
with Switzerland to make these--to assure that these money can go back
to the people in the country of origin--Egypt and Tunisia. Or they
judge our goodwill, but they have not the competence to make this very
complicated law. So at the end we have the case where the money is not
confiscated completely, but it is given back to the family of the
dictator.
This is a big problem, and I think we must change the law, but
there is no majority to change that. We are making a very big
information about it, as I think that we had a very good--[inaudible]--
with the Abasha [ph] Fund, but it was a very single case, I would say
that we had, and very special, special case. Then maybe we must think
that we--there is--in the criminal law, there are difficulties to about
the corruption found from abroad. As far as the funds coming from
corruption abroad, for the Swiss justice system to confiscate them, it
must have an information of the existence of a crime or other wrong
comportment, other crime. It is --that is this crime at the origin of
the dark money.
This is quite difficult for Switzerland to get this information
with some justice that are not collaborated. I share that concern about
the--[inaudible]--of the former Attorney General Lauber, that he will
not maybe actively go in this case of corruption and outright
corruption. I believe that the new attorney general is motivated by a
strong will to fight this corruption. We have the limit of our law. I
think that that must be a reflection in Switzerland, and maybe a push
from outside, to make--to make another thing.
Last remark is that alternatively, the majority of the parliament,
like Mark Pieth said, refuse to extend the scope of the anti-money
laundering law to the activity of lawyer who create holdings company or
offshore companies as requested by the FATF. I think that here it
showed that the USA and the European Union must put pressure on this
issue. I say that--I say that as a lawyer and parliamentarian. I think
that it is not--it is not correct to see that the European lawyer are
not--must make transparency about the creation of this society to the
anti-laundering institution.
In Switzerland, they are not in this case. That must be a very
quick change, but it will not change if there is not pressure of
outside. It was so for the bank secret. We change when it was a big
pressure of outside. Every time to progress, it must be pressure from
outside. Thank you.
Mr. Massaro: Yes. Thank you very much. I want to keep moving along
on the Q&A here. Bill, let us come back to you with this question about
what are your early impressions about the willingness of the new
attorney general? You talked about this just for a few seconds in your
opening remarks. About his willingness and ability to crack down on
ill-gotten assets in Switzerland, and what is your view of SECO's--I
suppose that is the Swiss--if someone could, you know, pull that up for
us--efforts to cut through the network of shell companies and other
murky areas to find and freeze such assets?
Mr. Browder: A good question. So let us talk about the new attorney
general. There was a--so we had this old attorney general, this Michael
Lauber, who was clearly compromised. He was fired from his job. He held
on for dear life, but he was eventually fired. Then there was this
hiatus where it took, like, a year, a year and a half before
Switzerland found a new attorney general. A lot of the candidates that
had been proposed got rejected by the parliament for one reason or
another. Then this new individual came on, named Stefan Blattler.
Stefan, I believe, was the head of the police in one of the regions in
Switzerland. I was kind of hopeful, based on his credentials, that he
would be a crime-fighting new attorney general.
What have we seen in our own--from our own eyes is that after the
previous attorney general agreed to return the money to the criminals
in Russia, we filed an appeal with the--with the Swiss criminal court.
So the prosecutor can say, this is what we intend to do. We had a
position where we could appeal it. We appealed it. And what I have seen
so far is that the new prosecutor now has responsibility for the case.
If the new prosecutor wanted to go back and clean house--which is what
needs to be done in order to restore Switzerland's credibility, at
least in this area--then he should drop the request to return the money
to the Russian crooks. He should stop fighting with us.
We are now fighting with the attorney general of Switzerland, his
office, saying: Do not give the money back to the Russian crooks. He is
saying, we want to give the money back to the Russian crooks. In fact,
we want to kick you off the case so you cannot even file legal
complaints to stop us from doing this. I mean, it is remarkable. He has
not changed any of the actions, and then I read this--we were just
searching up before this session this thing from the 29 of April. So
this was just a week ago, and he is saying he has little desire to
reform the attorney general's office.
Moreover, two of the key deputies of Lauber, two individuals--one
of them is named Jacques Rayroud and the second is Ruedi Montanari--
are not going to be fired. They are not--so basically keep the old crew
in, everybody doing the same thing, let us not look at any of the past
cases. Let us just declare we are going to be really good in the
future. That is not how you cleanup a dirty situation, and so I would
say that the new attorney general can either prove himself to be a guy
cleaning up this mess--and there is a real mess there--or he can just
become part of the mess and own it. I really hope that he chooses to
clean up the mess, and not become part of the mess.
Could you just repeat the second question? Because there was some--
Mr. Massaro: It was--it was the second--
Mr. Pieth: Shall I pick the SECO up?
Mr. Massaro: I am sorry, Mark?
Mr. Pieth: Shall I pick the SECO up? Because--
Mr. Massaro: Yes. Yes. Yes, please. I just want to acknowledge that
we are joined by Mr. Steve Cohen--Representative Steve Cohen, our Co-
chairman. I wanted to give him the opportunity, just in case he wanted
to say anything, or gather his bearings? What do you think, Mr. Cohen?
Co-chair Cohen: I think I will gather my bearings.
Mr. Massaro: Okay.
Co-chair Cohen: I will count on you to tell me everything that our
wonderful panelists and our good friend Mr. Browder has said to you
that should be put into any type of official format--whether a bill, or
a letter, or whatever, and you are responsible totally. Bill, nice to
see you, and thank you. Thank you to all the other panelists. Now I
will regather.
Mr. Massaro: Yes, sir. Okay, excellent. We will make it happen.
Thank you, sir.
Mark, so that the SECO, the State Secretariat for Economic Affairs.
Mr. Pieth: Okay. I will say a few words about these guys. State
Secretary of Economy. It is a very small agency, dealing with --or,
within the State secretariat dealing with implementing the sanctions
regime. You know, it is something between two and 10 people. They were
overwhelmed and shocked by what happened. I mean, we all were shocked
by what really happened with this Russian invasion, but we--you know,
some of us saw it coming. So they could have prepared. They were not
having a lot of preparation because they were not responsible for
sanctions at the time of 2014, the Maidan revolution. There was--that
was a different outfit.
I know this because I had been on a team investigating the food
scandal in Iraq, together with Paul Volcker, and there we had to bring
all the evidence. Basically, SECO rubber stamped what we brought so
that it could be sent to the U.N. So I had my experience there with
them. Their major problem is, now that they have a sanctions list, they
do not know who the beneficial owners of companies, real eState, or
even accounts are in Switzerland. They are really very, very remote
from what is going on in this turmoil. So they are kind of--they are
the people who have to cooperate with the U.S. That is why I am saying
it might turn out that in the end the good will to cooperate might not
necessarily generate the effect that we are hoping for.
Mr. Massaro: Yes. That is right, and we have got--you know, we have
got a comment here, essentially saying there is no will on the part of
the Federal Government to lead the action against Russia and Russian
interests. I guess there was an interesting question earlier, and I
wonder any takes on this, about--you know, we have got this really
strong Western alliance now with the other democracies, G-7 plus
Australia. So it is really a democratic alliance, and the EU. The EU
can, obviously, exert quite a bit of influence on Switzerland, as
Switzerland is surrounded by EU, and I wonder, you know, will we--is
that an effective avenue? Will we see our allies and others exerting
similar pressures? I do not know if anyone feels they are qualified to
answer that.
Mr. Pieth: You know, the difficulty is Switzerland is not in a good
situation with the EU. They are--Switzerland is closer to Brexit than
to--or, to the U.K. situation, if you look at EU. In fact, it is
interesting, probably this brings us closer to the EU than we have ever
been. So it is not about fighting. The problem is, every EU country has
its own challenges. If you think of Germany, for instance, Germany has
finally joined the group of the good guys on arms, but Germany is one
of the biggest problem cases for energy, yes? It is paying for the war,
if you want. So in a way, the pressure that you can expect from Germany
on Switzerland is going to be minimal.
Having said that, there is one more thing I have to say. If Germany
decides not only to close the oil, but possibly the gas delivery--which
is a far way off--Switzerland will again come in because we are the
trading hub for oil and gas of the world. So here is the question to
Geneva: Are you ready to close Geneva?
Mr. Massaro: Mmm hmm. Great point. Thanks, Mark.
Senator Roger Wicker has his hand up. Senator Wicker, the floor is
yours.
Senator Wicker: Hey. Can you hear me?
Mr. Massaro: Sure can, sir.
Senator Wicker: Okay. Good. Well, listen, I have been watching, and
I do appreciate everyone participating. I wanted to ask Mr. Browder
about this idea of a mutual legal assistance treaty. Would you
elaborate on that, and explain to everyone listening exactly how that
would work, and what that would accomplish, in your opinion?
Mr. Browder: Senator Wicker, thank you, and thank you for your
leadership on all these issues, and on Magnitsky, and everything else
you have done to help victims all over the world. The mutual legal
assistance treaty--so most countries have mutual legal assistance
treaties with other countries, and those treaties basically allow--or,
sort of govern how you work together with those other countries in
terms of exchanging information, in terms of extradition, in terms of
cooperating. We currently treat--we put Switzerland in a category--so
and different countries have different --there are different categories
for different countries.
For example, the United States does not have a proper mutual legal
assistance treaty with Russia because we do not trust the Russian
authorities. Then the United States has a very robust mutual legal
assistance treaty with Canada, because we do trust the Canadian
authorities. we figure that they are running a sort of honest law
enforcement operation, are we are too, and we should treat each other
as if each country is doing what it can do and what it should be doing.
Switzerland falls into the category of Canada, being a country that we
have full reliance on their honesty and their goodness.
If they are not being fully honest or fully good, if they are
involved in effectively, you know, conspiracy with Russians--which is
what we found--and they are unable to prosecute those people involved
in those, then we should look line by line and say: What information
are we providing them? You know, maybe the Russians will be asking them
to provide information. Or, you know, how are these--you know, what
assumptions are we making to the Swiss--with the Swiss that need to be
looked at for a second time? Maybe we should put them into a different
category, where our trust is not universal. Our trust is conditional on
certain things.
I think just the action of putting into question the mutual legal
assistance treaty puts them on the--in the hot seat, which is they have
to then explain themselves. They cannot just sit there proudly
proclaiming themselves to be an honest country when they have not
behaved honestly in this case, and many other cases.
Senator Wicker: I see. Well, you know, I--it happens that I am
planning to be Switzerland on two occasions in the coming months. I
appreciate you bringing that aspect to my attention. Perhaps we can
enlarge on that when I am in Davos and then later in Geneva. Just to
say, before I yield back, I very much appreciate the Helsinki
Commission and our staff and our leadership, Representative Cohen and
Senator Cardin, for authorizing this hearing. I think it is most
important and timely. I am heartened to know that people around the
world are listening to this. So thank you very much, and best wishes to
you, and, Bill, congratulations on the success of your latest book.
Thank you, Paul.
Mr. Massaro: Thank you very much, sir. So, with that, we will
actually close the briefing. We have hit time, at 11 a.m. So thank you
very much, everyone, for being here. Thank you to our distinguished
panel. Look forward to following up with everyone to figure out what
sort of policy response we are going to take on this. See you around.
Thank you very much.
[Whereupon, at 11:02 a.m., the briefing ended.]
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