Swiss private banks are once again being pilloried internationally for their business with wealthy Russians. It's becoming increasingly dangerous for the industry.
Another data leak is causing embarrassment for Swiss banks. The «Tages-Anzeiger» (In German, paywall) cites data from the French-language Swiss television station «RTS» that a local asset manager and various well-known institutions are involved in money flows around Russia's Ponomarenko oligarch family and former Russian Minister for Information, Leonid Reiman.
Swiss Hub
Reiman is considered an intimate of Russian President Vladimir Putin, and allegedly enriched himself with Russian state assets in the 1990s, according to an internationally recognized court. While Alexander Ponomarenko isn't on Western sanctions lists, his companies are accused of supporting Russia's war against Ukraine.
The Tages-Anzeiger report mentions Bank Julius Baer, Lombard Odier, Pictet, and Reyl in connection with the data leak.
Payments are said to have run through various Ponomarenko family members and various countries. The German magazine «Spiegel» reports investments in Berlin's real estate market, and the Swiss offshore financial center was used as a hub for the transactions.
Leak from Zurich Asset Manager
The leaked data originated from independent Swiss asset manager Finaport and was posted on the darknet by hackers. Over 500,000 files dating from 2003 to early 2023, were analyzed by RTS, research collective Organized Crime and Corruption Reporting Project (OCCRP), France's «Le Monde,» Germany's «Spiegel» and broadcaster «ZDF,» Austria's «Der Standard» and Switzerland's TX Group.
Finaport told «Spiegel» that the data was an «arbitrary, not up-to-date and incomplete selection.»
Nevertheless, financial SMEs and the named Swiss banks are again being dragged into the spotlight in a business considered effectively dead since Russia's attack on Ukraine in February 2021. Russians are still permitted to bank in Switzerland with restrictions for non-sanctioned individuals with EU or Swiss passports.
Few Official Farewells
A few players have officially said goodbye since Russia's war of aggression, including Zurich-based Vontobel and independent asset manager Sound Capital, while Liechtenstein-based VP Bank is still in the process of winding down a portfolio of Russian assets. Zurich-based private bank Julius Baer, mentioned in the reports, said in July it ceased all business with Russian-based clients. But there could be loopholes.
The dilemma Swiss private bankers face is that banking services for non-sanctioned clients with a «Russia connection» are extremely lucrative, an industry insider told finews.com, precisely because they've become difficult and are rarely offered. Each bank is allowed to decide on its risk appetite and weigh the dangers to its reputation against short-term earnings boosts.
Industry Association Proposal
The Swiss Bankers Association (SBA), which plays an important role as an advisor to the banks on this issue prefers to see Switzerland take a tougher line on Russian money. Association head Roman Studer recently told the «NZZ» (paywall) that the SBA wouldn't oppose Switzerland joining the G-7 task force to implement sanctions against Russia.
«From the perspective of the Bankers Association, I see few reasons to oppose joining. In recent months, we have always expressed this view in direct talks with the parties involved,» Studer said.
FDP party leader Thierry Burkart agrees. He sees no reason why Switzerland shouldn't join, saying on SRF's «Tagesschau» last night «On the contrary, we would have the opportunity there to put forward our point of view and show that we are already very active in this matter.»
Under the US Microscope
The lobbyist's problem is the Federal Council continues to oppose accession, and it's not clear whether the industry will stand united behind such a decision. According to the association, Swiss banks consistently implement internationally coordinated sanctions.
As the Ponomarenko case shows, the reputational risks for the banking industry continue to increase if the line on Russian banking is unclear, not to mention tangible pressure from the US, where authorities are examining the implementation of sanctions at individual Swiss banks. Without an official exit from Russian banking, the industry remains highly vulnerable.
