LONG ARM OF US SANCTION LAW TICKLES TWO SWISS LAWYERS

In a move making waves across Europe (and beyond), the United States recently placed sanctions on two Swiss lawyers accused of helping Russian clients secretly move large sums of money.

The sanctions make it clear that the U.S. intends to target not only the people directly benefiting from the funds but also the intermediaries—like lawyers—who help set up the systems that make it possible.

The lawyers allegedly helped Russian groups shift money into Switzerland by setting up companies to hide where the money came from.

The lawyers were:-

1. Andres Baumgartner and
2. Fabio Libero Delco,

This crackdown is part of the United States’ ongoing efforts to limit Russia’s influence following its invasion of Ukraine.

1. The U.S. government claims these lawyers used their expertise to create legal structures, known as shell companies, that make it hard to track the actual owners of the money.
2. These shell companies allow people to hide funds and assets from authorities, sometimes helping them bypass sanctions meant to keep Russia economically isolated.
3. By targeting these lawyers, the U.S. aims to prevent Russia from accessing international money despite strict sanctions.

The Role of Swiss Lawyers in Russian Money Transfers

1. The two lawyers operating in Switzerland and nearby Liechtenstein have been accused of being “important business and cash flow facilitators for Russia.”
2. The Office of Foreign Assets Control (OFAC), the U.S. body that enforces sanctions, claims Baumgartner and Delco played significant roles in helping Russian-linked clients manage their assets through secretive methods.
3. OFAC said this is the first time the U.S. has sanctioned Swiss lawyers over their ties with Russia.

Baumgartner and Delco reportedly used their positions to help Russian clients create shell companies in Switzerland.

1. These shell companies do not operate as real businesses; instead, they are empty “letterbox” firms that exist only on paper.
2. These firms are often registered to one address and have no employees or physical offices.
3. They allow money to move from one place to another with little oversight. Such setups aim to hide who owns the money, making it difficult for governments to trace the funds back to Russia.
4. While these shell companies are technically legal in many countries, the U.S. government says they are often used for illegal activities, including hiding “dirty” or “laundered” money.

Switzerland’s Banking Secrecy Under Pressure

1. Switzerland has a long history of banking secrecy, which allows clients to hide their financial information from others.
2. However, the country has made some changes after recent international pressure. Swiss banks no longer keep everything completely private, but loopholes remain, especially regarding shell companies and trusts.
3. Many Swiss laws still allow these structures to be created and maintained without revealing who owns them.

Switzerland’s Stand: Excluding Swiss Subsidiaries from Russian Sanctions

1. In response to the growing concern over hidden assets, Switzerland’s parliament is now debating a new law to increase transparency in company ownership. This proposed law would create a “beneficial ownership” registry, which would reveal the names of the real owners of companies, making it harder for people to hide behind shell companies.
2. The draft law would also require lawyers to report suspicious transactions or face legal consequences.
3. However, parts of the law have faced resistance, especially those requiring lawyers to exercise more caution.
4. Some Swiss lawmakers and lawyers feel this goes too far, arguing it could negatively impact legitimate business activities, like property or merger transactions.

U.S. Efforts to Curb Swiss Legal Loopholes

1. The U.S. has been pushing Switzerland to close what it sees as dangerous loopholes that allow wealthy Russians to escape sanctions by using Swiss legal structures. U.S. diplomats and Treasury Department members expressed their concerns in recent meetings with Swiss officials. They urged Switzerland to strengthen its anti-money-laundering rules, arguing that the Swiss legal system makes it too easy for Russian assets to be hidden.
2. The issue of shell companies is not limited to Russia. According to recent data from the Swiss watchdog group Public Eye, there are roughly 33,000 shell companies in Switzerland, with a high concentration in areas like Geneva, Ticino, and Zug. This number is significant, given that Geneva alone has one shell company for every 37 people. Critics argue that Switzerland’s system remains one of the world’s most favourable places for those looking to move or hide their money.
3. Additionally, U.S. authorities are not just focusing on lawyers. They have also targeted a Swiss company named ZG Optique SA, which develops specialised optical equipment. This company was sanctioned for working closely with Russian defence contractors, including Katod, which produces night-vision goggles. According to OFAC, ZG Optique has supplied precision instruments to Russian clients, even those tied to sanctioned companies associated with Russia’s military. By cutting off this connection, the U.S. aims to restrict access to advanced technology that Russia could use in military operations.
4. Switzerland’s Finance Ministry has yet to comment on these specific sanctions, stating that it supports the proposed changes to Swiss law to improve transparency in financial and legal services. Meanwhile, the law is expected to face more debate in the Swiss parliament as politicians decide how much they will alter Switzerland’s traditional stance on financial secrecy.
5. The U.S. sanctions have sparked discussions within Switzerland and beyond, shedding light on legal and financial advisors' role in moving money internationally, especially during political and economic conflict.

Source

• https://www.msn.com/en-us/money/companies/us-sanctions-2-swiss-lawyers-over-russian-money-transfers/ar-AA1tfpmI#:~:text=These%20lawyers%2C%20Andres%20Baumgartner%20and%20Fabio%20Libero%20Delco%2C,limit%20Russia%E2%80%99s%20influence%20following%20its%20invasion%20of%20Ukraine.
• https://www.swissinfo.ch/eng/foreign-affairs/us-treasury-sanctions-two-swiss-lawyers-for-aiding-russian-clients/87889584?utm_source=multiple&utm_medium=website&utm_campaign=news_en&utm_content=o&utm_term=wpblock_highlighted-compact-news-carousel
• https://www.swissinfo.ch/eng/foreign-affairs/us-treasury-sanctions-two-swiss-lawyers-for-aiding-russian-clients/87889584?utm_source=multiple&utm_medium=website&utm_campaign=news_en&utm_content=o&utm_term=wpblock_highlighted-compact-news-carousel