[Joint House and Senate Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
RUSSIA'S ALPINE ASSETS: MONEY LAUNDERING AND SANCTIONS EVASION IN
SWITZERLAND
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HEARING
BEFORE THE
COMMISSION ON SECURITY AND COOPERATION IN EUROPE
U.S. HELSINKI COMMISSION
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
JULY 18, 2023
__________
Printed for the use of the Commission on Security and Cooperation in
Europe
[CSCE118-5]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via www.csce.gov
_________
U.S. GOVERNMENT PUBLISHING OFFICE
52-924 WASHINGTON : 2023
COMMISSION ON SECURITY AND COOPERATION IN EUROPE
U.S. HELSINKI COMMISSION
U.S. HOUSE
U.S. SENATE
JOE WILSON, South Carolina Chairman BEN CARDIN, Maryland Co-Chairman
STEVE COHEN, Tennessee Ranking Member ROGER F. WICKER, Mississippi Ranking
ROBERT B. ADERHOLT, Alabama Member
EMANUEL CLEAVER II, Missouri RICHARD BLUMENTHAL, Connecticut
RUBEN GALLEGO, Arizona JOHN BOOZMAN, Arkansas
RICHARD HUDSON, North Carolina JEANNE SHAHEEN, New Hampshire
MIKE LAWLER, New York THOM TILLIS, North Carolina
GWEN MOORE, Wisconsin SHELDON WHITEHOUSE, Rhode Island
VICTORIA SPARTZ, Indiana
MARC VEASEY, Texas
EXECUTIVE BRANCH
Department of State - to be appointed
Department of Defense - to be appointed
Department of Commerce - to be appointed
C O N T E N T S
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Page
COMMISSIONERS
Hon. Ben Cardin, Co-Chairman, from Maryland...................... 1
Hon. Roger Wicker, Ranking Member, from Mississippi.............. 2
Hon. Joe Wilson, Chairman, U.S. House, from South Carolina....... 10
Hon. Victoria Spartz, U.S. House from Indiana.................... 15
WITNESSES
Bill Browder, Global Magnitsky Justice Campaign.................. 4
Drew Sullivan, Co-founder, Organized Crime and Corruption
Reporting Project [OCCRP]...................................... 6
Olena Tregub, Secretary General, Independent Defense Anti-
Corruption Committee [NAKO].................................... 8
RUSSIA'S ALPINE ASSETS: MONEY LAUNDERING AND SANCTIONS EVASION IN
SWITZERLAND
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COMMISSION ON SECURITY & COOPERATION IN
EUROPE,
U.S. HELSINKI COMMISSION,
HOUSE OF REPRESENTATIVES,
Wednesday, July 18, 2023.
The Hearing Was Held From 1:23 p.m. To 2:29 p.m., Room G50
Dirksen Senate Office Building, Washington, DC, Representative
Joe Wilson [R-SC], Chairman, Commission for Security and
Cooperation in Europe, presiding.
Committee Members Present: Representative Joe Wilson [R-
SC], Chairman; Senator Ben Cardin [D-MD], Co-Chairman; Senator
Roger F. Wicker [R-MS], Ranking Member; Representative Victoria
Spartz [R-IN].
Witnesses: Bill Browder, Global Magnitsky Justice Campaign;
Drew Sullivan, Co-founder, Organized Crime and Corruption
Reporting Project [OCCRP]; Olena Tregub, Secretary General,
Independent Defense Anti-Corruption Committee [NAKO].
OPENING STATEMENT OF HON. BEN CARDIN, CO-CHAIRMAN, U.S. SENATE,
FROM MARYLAND
Co-Chairman Cardin: Welcome our witnesses here. In
Congress, you got to be flexible. This hearing was originally
scheduled for 1pm. Chairman Wilson would be normally calling
this hearing to order, but there are a series of votes on the
House floor. We will start the hearing and we are going to go
as long as we can. I am not sure when the House members will be
returning. Senator Wicker and I are going by the Senate
schedule, which is different than the House schedule. We are
going to have conflicts throughout this period. This is our
return date in the Senate, and there are a lot of conflicts
that are taking place. I hope--just as your indulgence is we--
this is an extremely important hearing, and I am very pleased
that Chairman Wilson called this hearing on the money
laundering and sanctions evasion in Switzerland with Russia's
alpine assets.
Switzerland is a good friend of the United States.
Democratic State. We have strategic partnerships with
Switzerland on so many different issues. They have a dark
streak in enabling the laundering of blood assets. We saw that
during World War Two, when Switzerland was the preferred
location for gold taken by the Nazis from Jews. We saw that on
where the moneys were hidden with the apartheid leaders and
businesses from South Africa. We have seen it in regards to the
oligarchs in Russia. So we consistently see a pattern here in
which Switzerland's banking arrangements have facilitated the
corrupt practices of people that have robbed their country of
their wealth.
There has been a repeated effort to deal with the Russian
money that has adversely affected the sanctions. Part of our
strategy in winning the war for Ukraine is to isolate and put
sanctions on Russia. Those sanctions are only as effective as
we are able to make sure that they are enforced. We have seen
the Russian economy surviving better than we thought it would,
and part of that has been the laundering of dirty money in
Switzerland. That is an area of great concern to all of us. The
accountants, the lawyers, the banks, the auditors, the
investment advisors, the consultants, and others who accept
dirty money in exchange for laundering and influence services
are facilitating the perpetrators of gross human rights
violations and corruption.
It was not too many years ago that Senator Wicker and I
were joined by Senator McCain, with the help of one of our
witnesses, Bill Browder, and we established the Magnitsky
sanctions, then global Magnitsky sanctions. It has become the
standard among the Western world that individual sanctions are
critically important if we are going to be able to root out
human rights violators and corrupt leaders. We have been pretty
successful in the use of the Magnitsky sanctions. We are
pleased about that. We need to look at the facilitators, those
that are facilitating the corrupt leaders. That is one of the
areas which we need to expand and apply the Magnitsky
sanctions.
This hearing is first and foremost about our continued
effort in this Commission to do everything we can to assist
Ukraine in its defense against Russia's War of aggression. We
have held hearings in regards to war crimes. We have held
hearings in regards to how we can provide assistance. This
hearing is how we can make sure that the sanctions that are
imposed are not being evaded by a country like Switzerland,
through the use of their banking system. There is a secondary
purpose, and that is to raise the awareness of the need to
expand those that are sanctioned under our sanction laws to
include those that claim to have clean hands because they are
lawyers and accountants, et cetera. They are facilitators, and
they need to be held accountable.
With that, let me turn it over to my colleague and friend,
the ranking Republican on the Helsinki Commission, Senator
Wicker.
STATEMENT OF ROGER WICKER, RANKING MEMBER, U.S. SENATE, FROM
MISSISSIPPI
Senator Wicker: Thank you so much, Senator Cardin. Let me
just say that you have stated it very well. The title of this
hearing is indeed provocative, and deservedly so and intended
to be attention getting: ``Russia's Alpine Assets: Money
Laundering and Sanctions Evasion in Switzerland.'' My
distinguished friend from Maryland is exactly right,
Switzerland is a friend, and we share so many common values.
This is an issue worth exploring, and it is an issue worthy of
the title of this hearing.
Let me say this, it is one of the great honors of my career
to have been involved with Senator McCain and Senator Cardin as
one of the co-authors of the Magnitsky Act, and then to have
assisted further along with the Global Magnitsky Act. As my
friend Senator Cardin prepares in a year and a half to move
from the public sector into the private sector, there is no
question that his efforts to root out corruption, and
particularly on behalf of really threading the very difficult
needle of getting Magnitsky passed, it will go down as one of
his great legacies during his time of public service at the
State and Federal level. Let me just say to my friend how much
I appreciate that.
Briefly as we move to the witnesses let me just say, Russia
has made corruption an important part of its foreign policy.
Everyone really knows that. It is bought off former top
officials in Europe and contracted world-class law firms to do
its dirty work. The Kremlin even found ways to corrupt the
highest levels of Swiss law enforcement. The former Swiss
Federal prosecutor was forced to step down and a high-level
enforcement officer was convicted of bribery. These are facts.
I am concerned that Switzerland may soon return stolen
Russian money to those who took it. This would be wrong under
any circumstances, but it is especially disastrous to do so as
Russia wages a brutal and unprovoked war against its neighbor,
Ukraine. I look forward to learning today how we can do our
part to ensure that this stolen Russian money does not leave
Switzerland, and how we can guarantee that the investigation
into Russian money laundering in Switzerland comes to a
successful conclusion. I thank our witnesses for being here,
and I will yield back to the distinguished Senate Chairman of
Helsinki.
Co-Chairman Cardin: Thank you. Thank you very much, Senator
Wicker. Thank you for those personal comments. I appreciate
that.
We will now hear from our witnesses. Your full statements
will be made part of our record. We thank the three of you for
being with us. We will start with Bill Browder, who is the head
of the Magnitsky Global Justin Campaign. Mr. Browder was the
largest foreign investor in Russia until 2005, when he was
denied entry to the country and declared a threat to national
security for exposing corruption in Russia state-owned
companies. In 2008, Mr. Browder's lawyer, Sergei Magnitsky,
uncovered a massive fraud committed by Russian Government
officials that involved the theft of $230 million of State
taxes. Sergei Magnitsky testified against the State officials
involved in the fraud and was subsequently arrested, imprisoned
without trial, and systematically tortured. He spent a year in
prison under horrific detention conditions, was repeatedly
denied medical treatment, and died in prison on November 16,
2009, leaving behind a wife and two children.
We will then hear from Mr. Drew Sullivan, the co-founder
and publisher of the Organized Crime and Corruption Reporting
Project. Before that, in 2004, he founded and edited the Center
for Investigative Reporting, the leading investigative center
in Bosnia-Herzegovina. Now, last, we will hear from Olena
Tregub, secretary general, the Independent Defense Anti-
Corruption Committee. That committee is a joint initiative of
Transparency International Defense and Security and the
Ukrainian chapter of Transparency International.
We will start with Mr. Browder.
STATEMENT OF BILL BROWDER, HEAD OF GLOBAL MAGNITSKY JUSTICE
CAMPAIGN
Mr. Browder: Senator Cardin, Senator Wicker, it is a great
honor to sit before you. We have had a long history together,
starting in 2010 with the--following the death of Sergei
Magnitsky, which led to the two of you and Senator McCain and
Senator Lieberman passing, along with all of your colleagues,
the Magnitsky Act. Let me just second what Senator Wicker said,
which Senator Cardin--that is the Magnitsky Act is a piece of
great leadership and great heroism, and will certainly be--you
will be remembered for this work long into the--long after your
political career ends. There are many, many people--millions of
people around the world that are grateful for what you have
done.
As you know, Sergei Magnitsky, his murder was something
that changed my life completely. After he was killed, I gave up
my life as a businessman to focus all of my time, energy, and
resources going after the people who killed him, to make sure
they face justice. The Magnitsky Act was an important part of
that. The other important part of our campaign for justice was
to learn who got the $230 million that Sergei Magnitsky was
killed over. We began an investigation which started moments
after he was killed and goes on until today.
As we began this investigation, we started to get
information from whistleblowers, from journalists, from law
enforcement investigations. One of the places where we got
information was a person who told us that the husband of the
tax official who approved the $230 million tax refund received
roughly $10 million in his accounts at Credit Suisse in Zurich.
We turn that information over to the Swiss law enforcement
authorities. They froze that money; they opened a criminal
investigation.
They, subsequently, then froze roughly another $10 million
belonging to various people. One of them was a man named Dmitry
Klyuev, who was the head of the Klyuev organized crime group
that was--organized the whole tax refund, and a lot of the
other nastiness that Sergei Magnitsky was subjected to. Another
one was a man named Denis Katsyv, who was the owner of a
company called Prevezon, which has also been prosecuted here in
New York for--the company has been prosecuted for money
laundering connected to the Magnitsky case.
There was a 10-year investigation that was going on. At
some point at the beginning of the investigation, the Swiss put
their most senior Russian-speaking officer in charge of the
investigation. His name was Vinzenz Schnell. The moment this
Mr. Schnell began this investigation--or, joined the team, I
should say, the investigation ground to a halt. We were very,
very confused about why it was not moving forward. We kept on
writing applications and requests to the Swiss authorities to
have them try to do something, and nothing happened.
Then we discovered around 2018 why it had ground to a halt.
What we learned was that Mr. Schnell was apparently invited on
a number of all-expense-paid hunting trips in Russia, a bear
hunting trip to Kamchatka, boar hunting near Moscow. All the
trips were paid for by Russian oligarchs. It was discovered
that he did this. He was fired from his job in the Swiss
Federal Police. He was put on trial. He was found guilty.
During the trial and during the court hearings, it was--he
disclosed that the reason why they were entertaining him was
they wanted to get him to drop--the Swiss to drop the Magnitsky
investigation.
After he was fired, in spite of this information, that is
exactly what happened. The Swiss law enforcement authorities
dropped the Magnitsky investigation. They did not prosecute a
single person. They are now planning on giving back about 80
percent of the $20 million that was frozen. Now it is not just
giving money back to criminals which makes this so offensive.
Three of those four individuals who were--whose money has been
frozen are on the U.S. Magnitsky list. They were part of their
efforts to get justice for Sergei Magnitsky.
They are not just sanctioned by the United States. They are
sanctioned by Canada, by the U.K., by Australia. You have got a
situation where Switzerland is not only planning on returning
money to criminals, but they are returning money to people who
are sanctioned by the United States and our allies. It is not
only outrageous that they are doing that, but they are doing
that at a time of war, where Russia has launched this
unprovoked, aggressive invasion, murderous invasion of Ukraine.
We have applied to the Swiss prosecutor, to the new
prosecutor, to stop this miscarriage of justice. Their response
was to kick us off the case, to say that we were not the
victims. It was just the Russian Government that was the
victims. When we went to court to share all the information
about the corruption with the court, the court said: Well, we
cannot even consider it because the Swiss prosecutors said you
are not a victim, so you have no standing, and as a result, we
fully affirm the decision. Senator Wicker has been in touch
with the Swiss, and the Swiss say: We cannot get involved in
any judicial decisions.
In my opinion, what is happening in Switzerland, this is
just the tip of a much bigger iceberg. I think our other
witnesses will be talking about it in more general terms. The
Swiss Government wants to be seen to be doing something, but
when it comes to reality the Swiss Government do not want to do
anything because they have such--there is such a lot of money
to be made off of dirty Russian money in Switzerland. We are in
a situation which is perhaps not as brazen as it was when I
first came to you back in 2010, but it is still pretty brazen.
Where you have a country where the legal system does not work,
where criminal justice does not work.
The purpose of the Magnitsky Act when we first came up with
it was to deal with a system that did not work. We have that
going on right now. I say this with a heavy heart, but I say
this as something which I think is necessary because of the
stubbornness of the Swiss authorities, which is that when a
legal system does not work, we have to intervene ourselves.
There is very specific provisions in the Magnitsky Act which
say that if a person is involved in concealing the legal
liability for the detention, abuse, or death of Sergei
Magnitsky, including those who made false and misleading
accounts about the fraudulent tax scheme uncovered by Sergei
Magnitsky, they can be sanctioned under the Magnitsky Act.
So my request today is that we ask--that you, the Helsinki
Commission--asks the U.S. Secretary of State and the Secretary
of Treasury to sanction the individuals in the prosecutor's
office who have been involved in this conspiracy to give back
the money. Those names include the former Attorney General
Michael Lauber, the current Attorney General Stefan Blattler,
the Deputy Attorney General--the former Deputy Attorney General
Patrick Lamon, the current Deputy Attorney General Diane
Kohler, and Vinzenz Schnell, the famous bear hunter. Thank you
very much.
Co-Chairman Cardin: Thank you, Mr. Browder.
Mr. Sullivan.
STATEMENT OF DREW SULLIVAN, CO-FOUNDER, ORGANIZED CRIME AND
CORRUPTION REPORTING PROJECT [OCCRP]
Mr. Sullivan: Thank you, Senator Wicker and Senator Cardin
for the opportunity to be here today.
Co-Chairman Cardin: Turn your mic on.
Mr. Sullivan: The Organized Crime and Corruption Reporting
Project is a global nonprofit investigative journalism
organization on six continents and we publish over 140
investigative stories a year. From our earliest days, we
tracked organized crime, corrupt public officials, and what we
call the criminal services industry. That is the banks, law
firms, and registration agents that enabled organized crime to
globalize their operations. Swiss banks were always front and
center in many of the schemes we followed, even in the earliest
days. For stolen and illegal money, they are the gold standard
for offshore secrecy destinations.
Our investigation into what we call the Russian
laundromats, these were all-purpose financial fraud vehicles
used to launder more than $20 billion in Europe, found that
Swiss banks were regularly represented. That is why we think
the often-mentioned figure of $200 billion in Russian money in
Swiss banks is a gross underestimation. Swiss banks operate
worldwide and control trillions of dollars both inside and
outside of Switzerland in their wealth management systems and
in trusts. Many of these assets are fronted by offshore company
proxies, bearer shares, and other untraceable asset structures
around the world. We estimate that the total amount of Russian
money controlled by Swiss banks is more likely twice that size,
up to $400 billion.
Russian money is hugely important to Swiss banks. The
historic outflow of frozen assets--of stolen assets from Russia
and other Soviet republics, former Soviet republics, over the
past 30 years dramatically altered the banking landscape. At
one point, $160 billion per month was flowing out of Russia
alone. Banks fought each other for this money, and when they
got it they benefited with historic growth rates. The majority
of this profoundly undemocratic money was dirty, but
Switzerland had to bank the money or lose ground to Dubai,
London, and other banking centers. They leaned into banking
Russians hard.
Publicly, Swiss banking secrecy laws have allowed the
industry to perpetuate a myth that Swiss authorities were on
top of the issue, that they would cleaned up dirty money or
were in the process of doing so, that their due diligence
processes were robust. These lies would be repeated
vociferously by banks, regulators, and government officials
over the years. In 2021, OCCRP got a unique opportunity to look
for ourselves. With our partner, the German newspaper
Suddeutsche Zeitung, we received the first-ever significant
leak of Swiss banking account records. In this case, from the
banking giant Credit Suisse.
We scoured through the records of more than 18,000
accounts. What we found shocked even us, veterans of big
corruption issues around the world. We found that organized
crime figures and corrupt officials continued to maintain large
Swiss accounts, despite the fact that their crimes literally
showed up in the first result of a simple web search of their
names. Through these records, OCCRP traced the money from
dozens of historic corruption scandals, and clearly saw that
around the same time the money went missing it was deposited
into a Credit Suisse account. We found Russian oligarchs,
despotic leaders, war criminals, drug dealers, and others.
We also found 11 separate instances where a scandal led
Credit Suisse officials or Swiss regulators to publicly State
that they had initiated steps to fix the problems--new rules,
new reviews of accounts, new crackdowns. Despite these alleged
fixes and heartfelt pledges, the bank never fundamentally
changed its operations. It continued to strongly incentivize
the signing-up of criminals, often through subcontractors, and
continued to directly appeal to dirty money globally. We found
Swiss regulators to be no more honest. They seem to serve the
purpose of protecting the Swiss banking sector first and
foremost, and then providing an illusion of regulation. At one
point they even asked Credit Suisse how they should respond to
us. They tolerated banking secrecy laws and hampered
enforcement, and they turned serious criminal cases into minor
fines.
I have to admit that they did respond to our stories by
starting an investigation, but that investigation was into us.
They wanted to know who the leaker was and whether they could
prosecute them. There is no evidence that they ever looked at
the information that we uncovered. Meanwhile, reporters working
on the Swiss secrets project had to avoid Switzerland because
they could be arrested for violating Swiss banking laws. While
Switzerland portrays an image as itself as a clean, modern
country, as efficient and finely crafted as their luxury
watches, the best metaphor for Swiss banks I can come up with
is as junkies hooked on dirty money and living with a
government of enablers.
The addiction is driven by the importance of banking to the
country. It accounts for more than 10 percent of the country's
employment and tax revenues. Banks hold assets worth more than
450 percent of the annual gross domestic product. It is an
endless supply of cheap development funds and wealth creation.
This tolerance of money laundering has driven its cost to
historic lows. It used to cost 20 to 30 percent to launder
money. Now bank fees are actually higher than the fees for
money laundering. Built into the bank fees charges are the
costs to pay off their fines, penalties, and lawyers when they
do get caught laundering. Bank fees have essentially become the
profits of global money laundering.
When Russian banks--when Russian money started to get
problematic in 2014 with the seizure of Crimea, Swiss banks
helped paper over dirty money using proxies and offshore
companies. That continues today. Calls to Credit Suisse bankers
during the reporting of our story found they were quite helpful
in suggesting corporate structures that would protect the
identity of the ultimate beneficial owners. It is this system
that is still in place and is allowing Russia to easily bypass
sanctions. Nothing has really changed, except that Credit
Suisse was taken over by UBS after our story ended.
If Swiss banks cannot enforce sanctions that their
government has pledged to enforce, the EU and U.S. Government
should look at means of using their jurisdictional control over
U.S. and euro-denominated accounts to bring them in line. Swiss
banks could also be designated for heightened scrutiny and due
diligence checks when dealing with American banks. The banks
and regulators have openly lied for decades. Only severe
pressure will make them change their ways.
Co-Chairman Cardin: Thank you for your testimony, as
shocking as it is. Thank you very much for your testimony.
Ms. Tregub.
STATEMENT OF OLENA TREGUB, SECRETARY GENERAL, INDEPENDENT
DEFENSE ANTI-CORRUPTION COMMISSION
Ms. Tregub: Thank you, honorable Senator Cardin, Senator
Wicker, distinguished members of Helsinki Commission. It is an
honor for me to testify today in front of you. I represent the
Independent Defense Anti-Corruption Commission. It is a civil
society organization from Ukraine. Before the full-scale
invasion, we were engaged in defense reform in making Ukrainian
defense industry more transparent, more competitive, in
reforming defense procurement. After February 24, as many other
civil society groups, we started to look into some areas of
work which could help stop the war and save our country in the
area of our expertise.
That is how we started looking into sanctions and export
control regime to obstruct the flow of Western technology to
produce Russian weapons. This Western technology comes from
democratic Western countries, and Switzerland is one of such
countries. Switzerland has a longstanding tradition of
neutrality. Yet, when it comes to actual decisions, this
neutrality is rather questionable. Sometimes it is
hypocritical. As Mr. Sullivan already mentioned, their amount
of Russian assets in Switzerland may be over 400 billion
dollars. I want to emphasize that despite that, Switzerland
refused to be part of the European task force devoted to
searching hidden Russian assets.
Why do they do it? Is it because Russians and their money
are still hiding in Switzerland? We know stories even about
Alina Kabayeva in the media. Still, people, media, suspected,
but government seems to look away from this and does not want
to investigate. These Russian questions, of course, concern us
as Ukrainian citizens a lot because they help Russia to wage
the war. When we look particularly at weapons, it is very
similar paradox there. Even, I would say, sharper paradox.
Because you know that debate about the supply of weapons to any
country at war is off the table in Switzerland a long time
before the invasion of Ukraine. They are a neutral country.
They do not want to be part of any conflict in the world.
The nature of Russian invasion made many people question
their beliefs. According to recent polls, already 55 percent of
Swiss citizens support lifting the ban on exports of Swiss
weapons to Ukraine. Yet, this ban remains. At the same time,
our organization analyzed 22 pieces of Russian Military
equipment and weapons. It includes--and we found that
semiconductors and other critical components produced by
Switzerland, by Swiss companies, they make Switzerland No. 1
country in Europe in terms of number of those components. I am
talking about very serious, deadly weapons that help Russia to
wage this genocidal war and commit war crimes. This is those
weapons in which we found Swiss components.
This is Kalibr missile. This is battle helicopter Alligator
Ka-52. This is H-101 missile. This is drones Korsar, Orlan.
This is Iranian-made drones, Mohajer-6 and Shahed 136. Swiss
companies, such as STMicroelectronics, U-Blox, TE Connectivity,
TRACO Electronics, they produced microchips and other critical
components for these weapons. On paper, they terminated any
trade with Russia, because Switzerland introduced in March 22
those sanctions, like other European countries. Investigations
prove otherwise, because they are still able to trade these
components through third countries such as China, such as
Turkey.
We--for example, I give you one example to show how easy it
is and how transparent it is. Yet, Swiss Government is not
investigating it. For example, the Swiss company U-Blox, which
is based in Zurich, it is a world-renowned manufacturer of
microchips. They had around 10-14 shipments of different
equipment, including navigation model, to Chinese companies
that later sold those to Russian company, SMT iLogic. This
company is linked to special technological center which is an
official manufacturer of Orlan drones, in Russia.
They are--interesting part of the story that Switzerland
sanctioned SMT iLogic only in January 2023, almost 1 year after
the full-scale invasion began. Even more striking story is
another company which directly basically supplies Swiss
machinery to Russian war factories, which was sanctioned by
United States back in 2014, Galika AG. As of April 2023, they
are still not sanctioned by Switzerland and still operating,
according to investigations of Swiss journalists.
I want to emphasize this, that if Switzerland is so
principled about not being part of any armed conflict in the
world, why it is not enforcing measures to stop supply of its
critical components to Russian and Iranian weapons? This is the
question we are asking. We ask to you as Members of the
Congress, to make sure--is to make sure that the sanction
regime and global export control coalition, which was created
by the United States, will become a functioning mechanism,
because the challenge of stopping their critical technology is
not only Swiss challenge.
We know that majority of those components into--in these
weapons, they come from the United States. United States should
lead by example. United States should include Switzerland in
this multilateral effort. Swiss Government, they should change
their policies. They should provide very strict regulation to
their companies to basically make sure that there is no re-
export of military equipment to end users in Russia, because
feeding Russian war machine with its technology while denying
weapons to Ukraine does not look like neutrality to me. Thank
you for your attention. Glory to Ukraine. God bless America.
Co-Chairman Cardin: Well, let me thank all three of the
witnesses. This is just unacceptable. We cannot allow the
secrecy of Switzerland's banking laws to prevent the Western
global policies to isolate corrupt leaders. As has been pointed
out, we have certain tools here in the United States. We have
certain treaty responsibilities with other countries. We have
certain banking rules. We have to recognize that we are in a
fight right now to preserve democratic states, and Ukraine is
the front line. One of the best strategies we have is to
isolate Russia through effective sanctions. If we allow the
laundering of assets, then the sanctions are just not going to
be as effective as they need to be. For many reasons, this is
just not acceptable.
We have now been joined by our House colleagues. I am going
to turn the gavel over to Chairman Wilson. Once again, let me
thank all three of the witnesses for your testimony.
OPENING STATEMENT OF JOE WILSON, CHAIRMAN, U.S. HOUSE, FROM
SOUTH CAROLINA
Chairman Wilson: Thank you very much, Co-Chairman Senator
Ben Cardin. What a honor to be here with you. Something you are
going to see is how bipartisan this is, the concern that we
have of indeed a global conflict between dictatorships and
democracies. Republicans and Democrats are united as never
before on an issue. In fact, I am going to prove it right away
because I am going to recognize Senator Roger Wicker from the
great State of Mississippi as to--and I appreciate Senator
Cardin, again, for his leadership here. So--and then we will
proceed with further statements and questions.
Senator Wicker: Well, thank you. I do appreciate that.
Senator Cardin and I have made opening statements. I am happy
to hear from our House members. I can proceed to a question or
two from our witnesses.
In that case, Mr. Browder, your suggestion at the close of
your testimony is quite astounding. I am sure it sounds rather
foreboding to government officials in Switzerland, that you are
recommending that our government actually sanction specific
Swiss officials just as we sanctioned corrupt Russian
officials. So you realize that this is--would be a pivotal
moment in U.S. foreign policy. Would you like to talk about
that, and what you think the realistic chances are of
persuading our government to take this step?
Mr. Browder: Thank you, Senator Wicker. It is a suggestion
I do not make lightly. I have spent the last 13 years watching
the situation deteriorate in--I should say, this tip of the
iceberg, if you will, in Switzerland deteriorate. I was just
interviewed by several Swiss journalists. They have said to me
they do not really care what we are saying here in America
about this kind of abuse. They have their ways of doing things,
and who are we to criticize them? That was exactly the same
attitude that the Russians had when they killed and covered up
the murder of Sergei Magnitsky. It is a sort of defiance of the
law.
Is it realistic? I do not think any--when I, with you and
Senator Cardin and the others, started the Magnitsky Act
campaign, nobody thought it was realistic that we could ever
sanction Russian officials. Everybody said, that is impossible.
We could not do that. The argument always was, we are not
sanctioning Russia. I mean, now we are sanctioning Russia, but
back then the argument was we are going after the people who
were breaking the rules. If they break the rules and the legal
system does not allow any recourse, then that is what we are
going to do. We can still have diplomatic relations with
Russia, but we can sanction those individuals.
I am not suggesting that our governments break relations
with Switzerland. That would be crazy. What I am suggesting is
that there is clearly an abuse of law that is taking place
within the Swiss system that they do not have any kind of
recourse to fix it, that we have tried from the outside and
they have ignored us. This does get people's attention. That is
what--and so will our government do it? I do not know. That is
what we are here for, is--I am here for as a witness, and you
are here for as a person overseeing the work of the government,
is to try to get the right thing done.
Senator Wicker: It is actually the Russian people whose
money is being stolen by these corrupt leaders.
Mr Browder: Indeed. So, and our mutual friend Vladimir
Kara-Murza has been here many times as a Russian opposition
politician to say that the regular people of Russia and the
regular people of Switzerland, and the regular people of the
United States do not want leaders stealing and do not want
people promoting that. We are doing everybody a favor by
holding those who are responsible and those who enable those
responsible--holding their feet to the fire.
Senator Wicker: Have you--have you gained some allies
within the Swiss Government, or within the Swiss populace, for
your position in this regard? Are some Swiss people helping us
in this regard?
Mr. Browder: Well, one person who I was hoping would be
here today, but could not travel to Washington for personal
reasons, is the most senior specialist on corruption and money
laundering in Switzerland. He is a professor of criminology
from--a former professor from the Basel University. His name is
Mark Pieth. Mark is probably the leading voice in Switzerland.
He is hugely on our side in this endeavor. He wants Switzerland
to be an honest country. There are many people that he knows
who are supporting him and supporting me in this whole
endeavor.
It is quite interesting, one do not want to put too much
emphasis on social media because it can be manipulated, but
when I started to put out statements on social media about this
hearing, people were coming out of the woodwork, both
internationally and in Switzerland, saying--particularly the
Swiss--saying, we are ashamed of what our country is doing.
We-- you know, good on you, you know, trying to make something
happen here.
Senator Wicker: Mr. Sullivan, tell us, first of all, about
your organization. Then sort of give us a little more
information about the type of activities the government is
engaging in to investigate your organization, and what you are
doing to unearth and expose this corruption.
Mr. Sullivan: The Organized Crime and Corruption Reporting
Project is very quietly the--one of the largest investigative
reporting organizations on Earth. We have about 65
investigative editors working with some 600 journalists around
the world, doing large numbers--two to three investigative
projects a week.
Senator Wicker: Are you self-supporting, or do you have--
Mr. Sullivan: We are funded by governments, including the
U.S. Government. We are funded by large, institutional donors
and private individuals. Our mission is largely to create
investigative reporting around the world, to bring together
investigative reporters in countries, to collaborate across
borders looking at large, important stories that are out there,
including money laundering, drug trafficking, things of that
nature.
Senator Wicker: Tell us, if you will, about the extent to
which you are being investigated. Was it just a flash in the
pan, or does that continue?
Mr. Sullivan: It was pretty much a flash in the pan. We are
pretty good at protecting sources--[laughs]--so there was no
way they could ever get to that source. They did set up an
investigation and they did look into it. We were not privy to
what actually they looked at, but they failed.
Senator Wicker: Then, Ms. Tregub, tell us about your
organization. Also, are there other countries that
intentionally or inadvertently are manufacturing or
participating in the development of weaponry that winds up in
the hands of Russians?
Ms. Tregub: Certainly. Our organization, since we
specialize in defense industry, we were able, after the full-
scale invasion, began to study different weapons that were used
against Ukraine, and that were captured by Ukraine. We found--
we analyzed around 300 components coming from U.S., actually,
from 60 different companies from United States. This is
unfortunately the leading country out of Western countries
supplying their dual-use critical components.
When it comes to other countries, like I said, in Europe
Switzerland is No. 1. Then we have Germany, we have the
Netherlands, we have United Kingdom, Austria, France. These are
European countries. Also we found some Japanese equipment. What
is interesting--
Senator Wicker: It is not just the Swiss.
Ms. Tregub: It is not just the Swiss, but like I emphasized
the paradox here that Swiss are much more sensitive about not
participating in any armed conflict and being neutral. How come
they become number-one European country in critical components
in Russian weapons? This is the question here. Yes, it is a
global problem which should be tackled by those countries. We
will now investigate more weapons, because we want to see how
now maybe the number of these Western components is reducing,
because this information is now in the public. We published--
our organization published several reports. We talked to Wall
Street Journal and other big media.
After this, we were reached out by many governments, by
Japanese Government, by American Government. They were asking
us, what can be done? Can you give us more material? Swiss
Government never reached out to us, even though they are No. 1
country. We will continue this work. Definitely we think that,
like I mentioned, a lot of work still needs to be done by you
here in the United States.
Senator Wicker: Just one other thing, just so the thousands
and thousands of people listening right now understand who you
represent. You are a nongovernmental organization. Where do you
get your financing?
Ms. Tregub: Yes, that is right. We are a civil society
organization in Ukraine. We get our funding from different
Governments--European, British, Swedish, French, private
donations. Just like OCCRP was saying.
Senator Wicker: Thank you. I will yield back at this point,
Mr. Chairman.
Chairman Wilson: Thank you very much, Senator Wicker. We
appreciate so much your leadership.
Ladies and gentlemen and colleagues, I am Joe Wilson, a
Member of Congress from South Carolina. I am very grateful to
be serving as the new Chairman of the Helsinki Commission,
Organization of Security and Cooperation in Europe. I am really
grateful, sadly, that we were delayed by votes in the House. I
have been joined by Congresswoman Victoria Spartz of Indiana.
We are going to be here, and I am going to make an opening
statement and then refer to Congresswoman Spartz to ask, that
we follow the 5-minute rule, and we will stick to 5 minutes of
questions. Then I will ask 5 minutes of questions.
With my opening statement, this is a critical hearing on
money laundering and sanctions evasion in Switzerland. I
especially appreciate Switzerland in that the communities I
represent of central South Carolina were initially settled by
German-Swiss farmers in the early 1800's. We treasure our Swiss
heritage. Sadly, we see ourselves in an existential battle
between democracy with rule of law opposing dictatorships with
rule of gun. We did not choose this battle. Now that it is
here, democracy must prevail, and all democracies should be
working together.
War criminal Putin is not only attempting to wipe Ukraine
off the map, he is threatening all of Europe and all
democracies. He, in his own words, does not intend to stop at
Ukraine. Rather, he seeks to conquer Ukraine and use their
resources of Ukraine to take over Moldova and Georgia, and
invade Poland, Romania, and the Baltic states--where it has
been stated that Estonia, Latvia, and Lithuania are actually
revealed as provinces to be resurrected and in a new Soviet
Union.
The threat to Americans is real, as the Chinese Communist
Party is also waiting to invade Taiwan, and the regime in
Tehran is developing nuclear weapons to vaporize the people of
Israel as they chant ``Death to Israel. Death to America.'' The
resolve of the Ukrainians has deterred other adversaries from
engaging in mass murder and destabilization. Now we have to do
everything in our power to help the Ukrainians win. Ukrainian
victory is the most important goal in the world today, I
believe, to further deter dictators who hate Western democracy
and all it stands for. Territorial integrity must be achieved
for peace through strength in Ukraine.
This is why it is so important for democracies to work
together to prevent dictators from evading sanctions and
actively undermining Western civilization. We have a historic
cooperation among democracies. Europe has woken up and is now
taking Putin's murderous invasion seriously. The United States
and our European allies are closer than ever before. It is
inspiring to see the unity of the European Union, NATO, adding
Finland and Sweden, and the Organization of Security and
Cooperation in Europe, along with something also extraordinary,
and that is in the United States, a unity of Republicans and
Democrats to support the people of Ukraine.
Sadly, Switzerland remains a weak link in the chain.
Switzerland, as a fellow democracy a sister republic. The
United States should be very close with Switzerland. The
heritage of my home district is so clearly Swiss. Sadly,
Switzerland has yet to address its enabling of dictators by
remaining a money laundering and sanctions evasion hub.
Although it has adopted European Union sanctions, it remains
inundated with Russian oligarch money, and even now,
remarkably, incredibly, sadly, plans to return stolen Russian
money to those who stole it. It is Switzerland's own interest
to embrace its democratic heritage and values and join the
democratic world in resisting war criminal Putin and his thugs.
That is why we are holding the hearing today. I just want
to thank all three witnesses who have been here today. Mr.
Browder is a hero of mine, in that he was not deterred when
Sergei Magnitsky was murdered by a war criminal Putin. He led
the effort for sanctions against the war criminals in Moscow.
People said it could not be done, but we have the Magnitsky
Act. I appreciate too, your courage for Vladimir Kara-Murza.
This needs to be addressed, the total depravity of the regime
and Moscow.
Then, truly, Mr. Sullivan, what you are doing, a corruption
reporting project, has never been more important. It is to not
only report on corruption, but to deter it, and then to report
where corruption has been addressed, which I believe has
occurred in Ukraine where they are actively resisting
corruption. Then it is really inspiring to me, Ms. Secretary
General Tregub, the people of Ukraine have become an
inspiration to the world.
It is just so refreshing, as I mentioned, to see
Republicans and Democrats, to see the European Union come
together, and be so supportive. Almost $100 billion or more in
aid to the people of Ukraine. Additionally, NATO, adding Sweden
and Finland. Who would ever imagine in our lifetime that
something that significant could occur. It is due to the--
respecting the inspiration of the people of Ukraine, what has
been done. Over and over again, we need to be working together.
With this, we truly are fighting--it is an existential
fight, or disagreement--situation that is before us today, a
competition, conflict between democracy and dictators. We must
be on the side of democracy and rule of law to oppose dictators
rule of gun. I hope, gosh, of all countries, that Sweden [sic;
Switzerland] will reaffirm its democratic heritage and reject
dictator blood money.
With that, I refer to Congresswoman Victoria Spartz. She
has an extraordinary insight. She is the only Member of
Congress who is ever been born in the Soviet Union. Now, of
course, she claims proudly her heritage of Ukraine.
Victoria Spartz, all the way from Indiana.
STATEMENT OF VICTORIA SPARTZ, U.S. HOUSE, FROM INDIANA
Representative Spartz: Thank you, Mr. Chairman. I apologize
for my Yankee accent, but it is a pleasure to be here today. I
apologize. I will try to be brief. We actually do have a
Department of Justice oversight. I need to go. This is
important function Congress does. You know, I actually agree
with a lot of things that are brought up here because it does
not matter from which country you are from--are you from U.K.,
Switzerland, UAE, or Cyprus, or Russia? If you do something
wrong, you are doing something wrong. We have to really look
carefully, you know, what is happened in in some of this
country because if we do not have proper enforcement all of
these laws that we are passing are becoming useless. This is
very big problem in a lot of areas. You know, and it is not
like if you are born in some country or another somehow you are
made of special clay. [Laughs.] We have great people, good
people in each country. We have to deal with that.
My question is, if each of you maybe can mention briefly
what is the biggest loopholes that you see egregious violations
or schemes are using that? How to make sure if we address them
we do have a proper due process? It is important for us that we
establish, you know, and that is always a concern. How do we
make sure when we put some of these policies in place we also
have a proper due process? We do have the rule of law and we
need to make sure. If you can maybe, each presenter briefly,
you know, just share something with us, and some other
solutions.
Mr. Browder: Thank you, Congresswoman Spartz. I just want
to touch on some numbers for you. The Swiss Bankers Association
early in the conflict said that there was $200 billion of
Russian money in Switzerland. The two witnesses, Mr. Sullivan
and Ms. Tregub, have both--and they are experts, probably more,
and do not have a conflict of interest--and said the number
of--the amount of Russian money is probably much greater than
that. Ms. Tregub said 400 billion dollars. I think Mr. Sullivan
said orders of magnitude greater than that. So far, the Swiss
have only frozen $7.8 billion of Russian money.
What that tells you is that the system there in terms of--
in terms of going after the blood money that Putin has, that he
can use to spend on killing Ukrainians, is pretty much
unlimited in Switzerland. You know, we are spending lots of
money supporting Ukraine. At the same time, the Swiss are
allowing the Russians to have access to that money to kill
Ukrainians, and we should do something to shut that down. If
the Swiss are not willing to do it voluntarily, then we should
put pressure on them. They were not willing to give the Nazi
gold back to the Jewish people until Congress got involved.
Congress has power here, and the Swiss respect that. Sometimes
when people do not behave themselves, we need to give them an
incentive to behave themselves. That is why I think we are all
here. That is where you can play a role. Thank you.
Representative Spartz: Mr. Sullivan.
Mr. Sullivan: You know, the real problem is that the global
economy now is really extremely difficult to understand,
because companies are no longer companies. Bank accounts are no
longer bank accounts. They are controlled by offshore
companies. They are controlled by proxies. They are controlled
by things that you as regulators cannot oversee, because the
money goes--moves around the world. Law enforcement only works
in a nation-State. It does not go beyond the borders. Mutual
legal assistance treaties are ineffective often at tracking
these things down. Organized crime and criminals know that if
they move money, after 6 months there is no way anybody is
going to be able to trace that money.
What we have seen over the years is a different global
economy that is really built on offshores. That is enabling
Switzerland. Switzerland is a significant player in that
industry. Their bankers, their trusts, their wealth management
systems are all designed to basically hide not only Russian
assets but, you know, assets of African dictators, and even
Americans and other Europeans who want to hide from taxes.
Consequently, countries, I think, need to look at what they are
requiring when an offshore operates in their jurisdiction, when
a bank account is set up by somebody offshore, and to look at
who that ultimate beneficial owner is. To require this type of
information from foreign companies.
You know, if you look at both in New York, and in London,
and in Paris, you all find whole luxury buildings owned by BVI
companies, or offshores. This is all really a serious part of
the problem. Switzerland has been a major player because they
are such a credible banking system and their money is accepted
everywhere. Really, it is--there is rot at the very core of the
financial system, as long as offshores are allowed to really
operate in these countries.
Representative Spartz: My time has expired, but if you just
briefly can mention quickly, because I am out of time, and Mr.
Chairman, just a few seconds.
Ms. Tregub: Oh, sure. I will not repeat on money laundering
and banks. I just want to reiterate about the export controls,
which I think is important to help stop the war. The export
control measures should be expanded to target bigger number of
dual use goods, and the U.S. should be leading this process as
the leader of export control coalition. They should include
Switzerland into this coalition. Generally, there should be
some unified policies and procedures developed by the
coalition, and companies, and individuals, and intermediaries
who were involved in exporting those technology to Russia
should be hold accountable. Or, there should be mechanisms for
this.
Representative Spartz: Thank you. Thank you. I yield back.
Chairman Wilson: Thank you very much, Congresswoman
Victoria Spartz. Thank you for being a champion for your
birthplace, Ukraine. We really appreciate your service.
Mr. Browder, what can be done? This may be repetitious, but
what can be done to ensure that the stolen Russian money is not
returned to those who stole it?
Mr. Browder: Thank you, Chairman Wilson. I will repeat for
you what I--what I testified before, because I think it is so
important that you hear it firsthand. In the Magnitsky case,
$20 million was frozen in Switzerland by law enforcement based
on a criminal complaint that we filed where we identified the
money. The money belonged to the tax officials--the husband of
the tax official who approved the illegal tax refund that led
to the murder of Sergei Magnitsky. The money belonged to the
head of the Klyuev organized crime group that organized the
whole crime, and various others. The person investigating the
crime was corrupted. The person inside the Swiss police was
corrupted by the Russians. He was bribed with hunting trips all
over Russia. He was found to have been corrupted, he was fired,
he was prosecuted, he was found guilty.
The corruption by the Swiss courts--and the corruption was
due--or the corruption with was meant specifically to close
down the Magnitsky case. In spite of him being found out to be
corrupt and doing all this terrible stuff, the Swiss law
enforcement authorities are now stubbornly returning the money
to the criminals who are on the U.S. sanctions list, on the
Canadian on the U.K., and on the Australian sanctions list.
This is a slap in our face. It is intolerable. We have made
numerous representations to them, from Congress, from myself.
The one thing we can do, and this is my proposal to the
Helsinki Commission, and I say this with a heavy heart, is to
sanction the individuals in the Swiss prosecutor's office who
are involved in this corruption. The names of them are in the
written testimony that I have submitted. We should, I believe,
write a letter to the Secretary of State naming these
individuals and asking the Secretary of State to sanction them
under the Magnitsky Act.
Chairman Wilson: Thank you for that suggestion. That is
specific. I look forward to working with my colleagues to
accomplish just what you requested. Then, Secretary General
Tregub, how detrimental would it be to Putin's ability to wage
war if the loopholes surrounding weapons components were
closed? What can be done to save lives of young Russians being
sacrificed in and Ukraine and the people of Ukraine?
Ms. Tregub: Well, we definitely see that the Russian intent
is to continue the war as long as they can. Yet they have this
very, very highly technological weapons, very deadly weapons
that are used against us, against Ukraine, against our peaceful
civilians. Our organization published reports about how these
particular weapons, like Kalibr missile, like Shahad drones,
how they were used to destroy children summer camp, hospitals,
and so on. If Russia is not able easily to replenish these
weapons, then it will become much more difficult for them to
wage this war against Ukraine, and to keep erasing Ukraine from
the map.
This is why we focused on them. As of political decision of
Russia to wage this war, I do believe now that it used to be
Putin's war, and now it is more Russia's war, and they are
committed to this war. For me, it is surprising that more than
1 year, more than 500 days into full-scale invasion, they still
keep receiving critical technology, not from China. No. From
democratic countries, including Switzerland and U.S.
Chairman Wilson: Thank you for your efforts. I have
actually visited Bucha. I visited the gravesites of the
families that were just brutally murdered and then left to be
buried in shallow graves. This has just got to be addressed.
The people of Switzerland, of all people, it would be my
anticipation to be actively involved with democracy. Mr.
Sullivan, what has been effective in encouraging the Swiss to
comply with international law and norms?
Mr. Sullivan: I mean, nothing, is the quick answer.
[Laughs.] I mean, you know, there has been--we can get
information when law enforcement goes to Switzerland and
requests it. That is an inefficient system, unfortunately. The
Swiss will respond to law enforcement requests for information,
but they will not be proactive whatsoever. It really does take
pressure. You know, the United States has jurisdiction over
Swiss U.S.-denominated accounts in Swiss banks. They have a lot
of ability to put pressure on that. They have a lot of ability
to demand, you know, these kind of, you know, extra due
diligence when a Swiss bank is dealing with, for instance, an
American bank.
That is a way to basically put pressure on them. You know,
the whole international system really depends on banks
effectively working with banks. Anything you put in the way of
it will immediately put those banks at a significant
disadvantage. Consequently, any restrictions or regulations
would be absolutely terrible for Swiss banks.
Chairman Wilson: Again, as we are now concluding, I want to
thank the witnesses for being here. Each of you have been
really special to raise these issues. It is particularly--
again, it is so sad and heartbreaking to me, a country as great
as Switzerland, and when you mentioned about banks. The
integrity of the bank, that is the reason for their success.
Part of that should certainly be to uncover and stop corruption
around the world.
With that we are adjourned.
[Whereupon, at 2:29 p.m., the hearing ended.]
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