(Bloomberg) -- A pair of Swiss lawyers were hit by US sanctions for helping illegal money flow from Russia through shell companies, as it seeks to put pressure on intermediaries that offer legal cover for continued violations.
The lawyers, Andres Baumgartner and Fabio Libero Delco, were sanctioned on Wednesday by the Office of Foreign Assets Control who said the pair “are major handlers of Russian assets and are important business and cash flow facilitators for Russian in Switzerland and Liechtenstein.”
It’s the first time Swiss lawyers have been targeted by the US since Russia’s invasion of Ukraine. A receptionist at the law firm of Dietrich Baumgartner said they’d review the actual statement from OFAC before providing any comment.
The crackdown comes as Switzerland’s parliament debates a draft law that would force companies to declare their real ownership and require lawyers to flag suspect transactions - or face criminal prosecution.
With Switzerland’s traditional bank secrecy now notionally a thing of the past, progressive lawmakers are targeting norms that critics say still facilitate the flow of dirty money in and out of the country.
The bill proposing a beneficial-ownership registry will be debated in the parliament’s upper house in December. Its justice committee said on Wednesday that it supports the new law except for the due diligence obligations for lawyers.
Those were split from the original bill “for later consideration,” the committee said in a statement. Lawmakers also moved to exempt foundations and associations from the obligation to record themselves in the register.
Legal Loophole
The US has been pressuring Switzerland for months, with little success, to close a loophole that makes it straightforward for lawyers to set up shell companies that facilitate sanctions evasion.
Switzerland “can and must do more to ensure its legal framework is not used for illicit financial activity,” Scott Miller, US Ambassador to Switzerland, said in a statement.
“We continue to urge Switzerland to close the loopholes in its anti-money laundering legislation to ensure that lawyers serving as non-financial intermediaries are subject” to money-laundering rules, he added.
At last count, there were close to 33,000 shell companies based in Switzerland, one for every 37 citizens in Geneva alone. But conservative politicians and legal lobby groups say the bill is a blunt instrument that targets not just the fringe of shady lawyers but also the regular businesses of property and M&A law.
Earlier this month, a delegation of US State Department and Treasury officials flew to Switzerland to meet their Swiss counterparts to discuss progress in fighting money laundering and sanctions. The US delegation stressed “the importance of closing loopholes in what could be exploited by financial and legal intermediaries in support of illicit financial activity,” according to a statement from the US Embassy in Bern.
A spokesperson for the Swiss Finance Ministry declined to comment on individual cases of sanctioned persons, adding that it supports the original draft as it was submitted to parliament.
Optical Tech
OFAC on Wednesday also sanctioned a second company, ZG Optique SA, “for operating or having operated in the technology sector of the Russian Federation economy.”
The company based in French-speaking Switzerland, develops high precision instruments, has customers in Russia and has partnered with sanctioned affiliates of Rostec, according to US authorities.
ZG Optique has also exported technology to Katod, a sanctioned Russian manufacturer of night-vision goggles, OFAC said. A representative at ZG Optique’s headquarters declined to immediately comment.
--With assistance from Bastian Benrath-Wright.
(Updates with state of play on new draft law in fifth paragraph)
©2024 Bloomberg L.P.