Banking secrecy remains a business model for Swiss banks

Swiss officials have discovered CHF9 billion ($10billion) in embezzled Venezuelan public funds spread across hundreds of bank accounts. One in eight Swiss banks is caught up in this latest scandal, which some experts say shows up the failure of the anti-money-laundering mechanism put in place by Switzerland.

This content was published on February 5, 2021 – 11:00

February 5, 2021 – 11:00

Katy Romy

Once a prosperous oil-producing country, Venezuela is now one of the poorest nations in Latin America: 96% of the population lives in poverty, according to the 2019-2020 National Survey of Living Conditions.

While ordinary people are suffering, Venezuela’s newly wealthy – known as the “bolibourgeoisie” – continue to live it up. Thanks to their close ties with the regime of former President Hugo Chávez, who died in 2013, they have lined their pockets with public funds, and many are now enjoying a gilded retirement abroad. To commit their misdeeds, they overwhelmingly made use of the Swiss financial marketplace.

One in eight Swiss banks implicated

Disclosed by the Tribune de GenèveExternal link in mid-January, investigations undertaken by the Zurich police reveal the scale of the plundering. Prosecutors have identified suspicious flows amounting to some CHF9 billion. According to the Tribune de Genève, the money is spread across hundreds of accounts opened in around 30 Swiss banks. One in eight Swiss banks is thus involved in the scandal.

These colossal sums – only a few hundred million francs of which have so far been blocked by the courts – enabled the holders to acquire extravagant collections of luxury watches, villas, yachts and racehorses.

Senior Venezuelan officials, including former finance minister Alejandro Andrade, were bribed directly via a Swiss account now under investigation. Andrade was sentenced to ten years’ in prison in the US, after confessing to receiving nearly $1 billion (CHF895 million) in kickbacks.

Venezuelan money – a high-risk affair

Despite its magnitude, this new case involving Swiss banks does not surprise economic crime specialists.

“It’s infuriating, but some Swiss banks continue to do as they please. Switzerland remains a money-laundering paradise,” laments Mark Pieth, criminal law professor and expert in international corruption.

The banks should have shown extra caution in dealing with Venezuela. “Some Swiss banks were implicated in past cases of misappropriation of Venezuelan public funds,” adds Pieth, who has also acted as an anti-corruption adviser for world football’s governing body FIFA.

Thus, millions stemming from the corruption scandal around the Venezuelan state-owned oil company (PDVSA) passed through the Swiss government. “Accepting money from a failed state like Venezuela is a professional folly. It is obvious that anyone who does so is colluding with a corrupt regime,” Pieth said.

Nonetheless, Swiss banks continue to take significant risks. This demonstrates the failure of banking supervision, according to Pieth. “The Swiss financial marketplace is one of the most powerful in the world, but our monitoring system is ineffective. Yet we should be capable of putting in place proper oversight.”

He says part of the problem lies with FINMA, the Swiss financial sector’s supervisory body. It can warn banks of the risks they are taking, but the decision to…