Tuesday, July 23, 2024

Is Switzerland still a safe haven for dirty money and its owners?

In the wake of increasing international pressure on and attention drawn to Switzerland during the Russia-Ukraine war and specifically with regard to the country’s opaque regulatory structures facilitating the hiding of dirty money, the Swiss Federal Council initiated a consultation to strengthen the government’s anti-money laundering framework in late 2023. Aimed at creating, “an effective system for combatting financial crime … for the good reputation of an internationally important and safe financial centre”, Swiss decision makers have a lot of work ahead of them if they are to achieve their stated goals. Switzerland has been known as a destination for kleptocrats, war criminals and sanctions evaders for decades due to its business culture of banking and corporate secrecy, enabling individuals to set up business structures, make transactions and invest under complete anonymity. 

However, the fallout from Russia’s invasion of Ukraine—an unprecedented event in the post-1945 order of international relations—eventually caught up with Switzerland too, prompting its leaders to freeze senior Russian government officials’ assets and impose a package of sanctions on Moscow, toeing the line with sanctions imposed by the United States, the European Union, and Western allies. Despite the initial steps taken towards making information about real and beneficial owners of companies accessible to the public, in the name of transparency, vast illicit networks still operate out of Switzerland. 

Recently, a Dutch citizen working out of Geneva came under suspicion of trading and profiting from sanctioned Russian oil with the help of a UAE-based affiliate company. Niels Troost, the founder and beneficial owner of Swiss-based Paramount Energy & Commodities SA, was personally implicated, and eventually sanctioned, due to the trading activities of his Dubai-based subsidiary, Paramount Energy & Commodities DMCC. While Paramount DMCC is a nominally separate legal entity and technically not bound by the sanctions imposed in Europe (the United Arab Emirates is among the countries that opted for ‘strategic neutrality’ over Russia), an agreement employing a ‘nominee director’ in 2022 made the latter answer to the shareholders of Paramount SA, i.e. Troost. Indeed, and an in-depth Financial Times investigation showed both companies to essentially, be one and the same. 

Paramount SA’s oil trading history and Troost’s personal ties raise serious suspicions. While denying that the Switzerland-based company traded any Russian oil under sanctions since they were introduced, Paramount SA was among the biggest traders of ESPO in two consecutive months following the outbreak of the war in Ukraine. Moreover, this rise to prominence occurred directly after the G7-imposed oil price cap on Russian crude was put in place. It was then that, according to the Wall Street Journal, then small time oil traders, among which Troost, and his supplier of Russian oil, Michael Zeligman of Concept Oil, can be counted, stepped in with an eye towards reaping enormous profits. The Swiss investigative journalism platform, Public Eye, linked Troost and Paramount SA to Russian oligarch Gennady Timchenko, a close friend and business partner of President Vladimir Putin, and even noted him to be a clandestine funder of the notorious Wagner mercenary group. The fact that business at Paramount SA tanked directly after European nations sanctioned Timchenko raised further eyebrows. 

In addition to this, Troost has been working with associates whose names are well-known among Russian companies and individuals trying to shield their wealth. Both François Mauron, who also appears in Paramount DMCC’s corporate documents, and is sanctioned in the UK alongside Troost, and Swiss-American businessman Maurice Taylor, serving as the director, board member or legal representative of scores of trading companies linked to Russian oil, are believed to have assisted Troost and Paramount since 2022.  

As was noted, in February this year, the British government placed Troost on its sanctions list for enabling the “unfettered trade in Russian fuels outside the reach of UK and G7 sanctions”. Mauron has also been sanctioned by the UK, and has had his assets frozen, as a result of being “involved in obtaining a benefit from, or supporting, the Government of Russia”. In March, Troost hired the help of a renowned lobby firm in Washington DC to the tune of 100,000 USD a month to avoid suffering similar consequences in the US. 

Notwithstanding the Swiss federal government’s recent public declarations about increasing transparency with regard to illicit financial networks operating out of the country, many observers feel this is a dishonest endeavour, hoping to manoeuvre through the crisis in Ukraine, leaving the system in place essentially unchallenged. An Organized Crime and Corruption Reporting Project (OCCRP) from 2022 revealed that Credit Suisse held more than $8 billion of assets linked to dictators, human rights abusers, sanctioned parties, and political actors suspected of corruption, and routinely provided yacht loans to Russian oligarchs. 

A report published by the United Nations a few years ago also criticized Switzerland on the basis that the business interests of wealthy individuals influence domestic legal proceedings. The report alleged that the Swiss Office of the Attorney General dismissed or delayed cases former Algerian defence minister Khaled Nazzar and Syrian President Bashar al-Assad’s uncle Rifaat al-Assad despite their ongoing investigations for having committed war crimes. 

While Swiss authorities are, of course, not being suspected of actively assisting Russia and Moscow-linked businesspeople evade sanctions in today’s highly sensitive political environment, regulations in place in Switzerland certainly allow for individuals to bend the rules of international law and get away, more or less, scot-free. The case of Niels Troost and Paramount SA—should Switzerland reach a verdict in the matter too—must be used to roll out specific pieces of legislation targeting illicit financial flows. 


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