Putin’s money trails in Switzerland
A spectacular money laundering trial is underway at the District Court in Zurich. The case deals with money that a childhood friend of Putin transferred through accounts at Gazprombank in Zurich. The Public Prosecutor’s Office makes no secret of its suspicions as to who the money really belongs to.
Currently, a judge at the Zurich District Court is dealing with accounts and money flows that reaches into the innermost parts of the Russian power circle, possibly all the way to Russian President Vladimir Putin.
The “Gazprombank trial” is the first criminal case worldwide to deal with dubious money transactions of a figure in Putin’s closest circle: Sergei Roldugin, a cellist and director of a music school, but also Putin’s childhood friend and godfather of his eldest daughter.
According to media reports, which have become known as Panama Papers investigations, Roldugin helped launder at least two billion US dollars through various offshore companies and banks. One of these banks is Zurich-based Gazprombank Switzerland, a subsidiary of Russia’s state-controlled Gazprombank.
Judge Sebastian Aeppli, who already presided over the trial of ex-Raiffeisen boss Pierin Vincenz, will announce the verdict in the “Gazprombank trial” on 30th March. Whatever the outcome, it will make headlines worldwide. Not only because the money trails that reach all the way to Putin, but Switzerland is also under scrutiny of its handling of dubious offshore funds.
The court hearing took place on 8th March at the Zurich District Court. Specifically, the prosecution accused four Gazprombank employees of looking the other way when Roldugin acted as a frontman for various financial transactions through the Zurich branch from 2014 to 2016. For this “lack of due diligence in financial transactions”, the prosecution is demanding a conditional prison sentence of seven months for the defendants.
“30 million francs went through the accounts of a cellist,” said prosecutor Jan Hoffmann, during the plea in court. In addition, obscure loans worth millions were granted without collateral and without interest through the accounts of Roldugin and his partners, he continued. Furthermore, Roldugin, a musician, should be co-owner of one of the largest media companies in Russia. “If no further clarifications are necessary in this constellation — then when?”
The formal accusation makes it clear to whom the prosecution really attributes Roldugin’s financial transactions: “It is notorious that Russian President Putin officially has an income of only about CHF100,000 and is not wealthy, but in fact has enormous assets which are managed by persons close to him.”
To the disappointment of the press, the four defendants did not provide any insight into the financial flows of Putin’s confidants during the questioning by Judge Aeppli. All four, including the bank’s CEO, remained silent, apart from asserting their innocence.
The lawyers of the defendants decisively countered the accusations of the prosecution. Contrary to Jan Hoffmann’s arguments that Roldugin’s closeness to Putin speaks against the accused, his closeness to Putin exonerates them, they said. A musician could also have a large fortune at his disposal, precisely because he was a friend of Putin and, therefore, enjoyed economic privileges. This is called “favouritism”, said one of the defence lawyers. It is morally reprehensible, but common in many countries.
The defence also stressed that Aeppli had to consider that more is known about Roldugin today than during the time of his business relationship with Gazprombank Switzerland.
In fact, the Panama Papers revelations, which accuse Roldugin of massive money laundering, were only made public in April 2016. However, Roldugin’s accounts that the prosecutors are focusing on were opened already in 2014.
Chronologically, looking at the case:
2014: War, sanctions and account opening
In March 2014, alarm bells were ringing at banks. The compliance departments, which are responsible for adherence to laws and guidelines at banks, combed through the files of their Russian clients. The reason was, that from mid-March 2014 onwards, mainly Russians and Russian companies ended up on sanctions lists of the USA, the EU, Switzerland and other states every few weeks. No reputable bank wanted to risk violating any sanctions. Russian clients suddenly became a potential burden.
Russian soldiers without identification insignia called “little green men”, had occupied the Crimean Peninsula belonging to Ukraine at the end of February 2014. At the same time, Russian intelligence services along with military forces began to foment protests and organise an armed conflict in eastern Ukraine. In response, the US and the EU enacted a far-reaching first set of sanctions against Russia in mid-March 2014.
On 20th March, the US Treasury Department imposed massive sanctions on Bank Rossiya. It was the bank used by high government officials and was controlled by the closest circle of Putin favourites, the US Treasury wrote. VISA and Mastercard immediately suspended their services, assets of the bank in the US were frozen, US companies were no longer allowed to do business with the bank, and any deals with the goal of evading sanctions were also prohibited. The latter made it virtually impossible for banks outside the US to do business with Bank Rossiya, otherwise they risked being sanctioned themselves. In fact, no one outside Russia wanted to have anything to do with Bank Rossiya anymore.
Only a few weeks later, Gazprombank in Zurich opens two corporate accounts facilitated by Bank Rossiya. Roldugin is listed as the beneficial owner of the two accounts but the contact details for the accounts are email addresses linked to Bank Rossiya. One of Roldugin’s companies, which has just opened an account, owns 20% of Video International. The company is one of the largest media advertising companies in Eastern Europe and is controlled by Bank Rossiya. All this is described in the formal accusation of the prosecution and is not disputed in court by the defence.
Then, at the end of September 2014, an article appears in the New York Times quoting Roldugin as saying that he is certainly not a businessman and not a millionaire. Nevertheless, over the next two years about 30 million Swiss francs are flowing through Roldugin’s two accounts — until the Panama Papers put an end to all that.
2016–2018: Panama Papers, FINMA investigation and account closure
In April 2016, a network of media published the Panama Papers reports. Fears were rife in Switzerland that the local financial sector could once again be caught up in a maelstrom of negative headlines. The Panama Papers revealed thousands of offshore constructions, many of which had a connection to Switzerland. This time, however, it was not the banks that came under pressure. Rather, Swiss law firms that had set up large numbers of offshore companies for their clients were scrutinised.
The Panama Papers are a huge amount of leaked confidential documents from the former fourth largest administrator of offshore companies in the world, Mossack Fonseca from Panama. An anonymous whistle-blower handed over the documents spanning from 1977 to 2015 to the Sueddeutsche Zeitung. After several months of research, an investigative network of over 100 media outlets published their reports. They revealed numerous cases of tax evasion money laundering and corruption.
A money laundering network with Roldugin and Bank Rossiya as central actors was one of the most significant revelations of the Panama Papers. Roldugin and his entourage were responsible for “laundering” at least two billion US dollars, wrote The International Consortium of Investigative Journalists. And according to research by the Tages-Anzeiger, Gazprombank Switzerland and particularly the Zurich law firm Dietrich, Baumgartner & Partner were involved in the money laundering transactions.
Putin’s name, however, did not appear in the Panama Papers. For Russia experts like Karen Dawisha, former professor at the Havighurst Centre for Russian and Post-Soviet Studies at the Miami University, however, it was clear that such money laundering networks could not have existed without Putin’s knowledge. “When you are the president of Russia, you don’t need written contracts. You are the law,” she wrote of Putin.
Just two days after the publication of the first Panama Papers reports, the Swiss Financial Market Supervisory Authority Finma informs Gazprombank Switzerland that it has opened a preliminary investigation into Sergey Roldugins transactions at the bank.
Five months later, in September 2016, the business relationship between Gazprombank in Zurich and Roldugin is dissolved.
In February 2018, almost two years after the Panama Papers reports appeared, Finma publishes a devastating report on Gazprombank. It states “that Gazprombank Switzerland had seriously violated the due diligence requirements of the Anti-Money Laundering Act in the period from 2006 to 2016.”
As a consequence, FINMA is prohibiting the bank from expanding its business activities with private clients until further notice. And the misconduct is apparently so serious that Finma passes the dossier on to the Public Prosecutor’s Office in Zurich.
2019–2022: Troika Laundromat — the proceedings are ongoing
In March 2019, another money laundering network was uncovered: the “Troika Laundromat”. Again, it involved billions of dollars from Russia that were shifted back and forth via shell companies between 2006 and 2013 to conceal the origin of the funds. Sometimes unsuspecting straw men were used for the transactions. The press photo of a poor Armenian construction worker who lived in an unheated flat and, according to documents, had transferred 40 million US dollars to offshore companies, became a symbol of the “Troika Laundromat”. Tax advisor Sergei Magnizky who uncovered a large-scale theft operation in 2008 that also used the “Troika” money laundering network, also became well-known. For exposing the theft, he was imprisoned in Moscow, where he died after severe maltreatment in November 2009.
Roldugin’s accounts at Gazprombank Switzerland are also exposed by the “Troika-Laundromat” reports. 69 million US dollars flew into the accounts of Gazprombank Switzerland via the money laundering network in the period from 2006 to 2012, 37 million of which landed in Roldugin’s accounts. The indictment of the Public Prosecutor’s Office in Zurich in the “Gazprombank trial” also states that Roldugin held accounts at Gazprombank Switzerland already between 2006 and 2012.
In February 2022, the Zurich Public Prosecutor’s Office confirms to the magazine Bilanz that proceedings were underway against the CEO and other employees of Gazprombank Switzerland.
Three weeks later, Russia attacks Ukraine on a large scale.
2022: War escalates in Ukraine, Gazprombank gives up
On 24th February 2022, Russia invaded Ukraine. Hundreds of thousands have already been killed or injured in this war, and over thirteen million Ukrainians have been displaced. In response, Western countries punished Russia with an unprecedented wave of sanctions. Many countries have frozen the currency reserves of the Russian Central Bank and restricted imports of Russian raw materials. And with the exception of Gazprombank, major Russian banks have been completely excluded from international payment systems. The Swiss Federal Council quickly decided to adopt the EU sanctions against Russia.
Gazprombank is the only major Russian bank to have been exempted from tough sanctions because the EU needs a bank to process payments for ongoing gas imports from Russia.
Nevertheless, it is becoming increasingly difficult for Gazprombank to do business. Many Western companies are ending their cooperation with Russian firms regardless of sanctions. And because no auditor agrees to carry out the statutory audit for Gazprombank Switzerland, the bank announces in October 2022 that it will withdraw from Switzerland.
Gazprombank Switzerland is currently being “wound up” and will quietly disappear at some point. On Thursday, however, the bank will once again be in the centre of attention when Judge Sebastian Aeppli announces his verdict in the “Gazprombank trial”. Putin’s money trails in Switzerland, and Switzerland’s handling of them, will once again make headlines around the world.