Swiss banks will tighten control over the accounts of Russians

Swiss banks have begun to warn Russian clients about closing their accounts if they pay taxes to the Russian budget. Switzerland faces US pressureand G7 countries due to the small amount of frozen Russian assets

Swiss banks began to monitor the transfers of their clients from RUSSIA, and if they pay taxes to the Russian budget, a number of banks announced the closure of their accounts. This was told to RBC by two lawyers from Switzerland working with Russian clients, as well as a source in the banking sector of this country.

What's happened

The situation began about a month ago with clients of UBS and Credit Suisse, Roman Kudinov, managing partner of the Swiss law office LEOLEX, told RBC: companies in Russia and paying taxes, the bank will have to close their account, but no official action has yet been taken after that. The actions of banks are still selective, not massive.” According to him, banks explain this decision by the fact that such clients pay taxes to the state, which destabilizes the situation in Ukraine.

According to the lawyer of the Swiss bureau "Emery & Partners" Violette Emery Borzho, several indicators can lead to blocking the accounts of Russians: paying taxes in Russia, doing business in Russia, dual Swiss-Russian citizenship and being on the international sanctions list. “Existing bank accounts are not blocked automatically, but on a case-by-case basis,” she explained. We are talking about banking clients from Russia who have a residence permit in Switzerland. For Russian citizens living in Switzerland without a residence permit, existing accounts are blocked automatically, and in both cases it is impossible to open a new deposit, Borzho said.

Another Swiss lawyer told RBC that his clients have already faced blocking of accounts due to the payment of taxes to the Russian budget. Letters with such a warning to some of its customers could have been sent by UBS, a source in the Swiss banking sector told RBC. The fact that local banks began to close the accounts of those clients who pay taxes in Russia was previously reported by the Merciless PR TELEGRAM channel.

Kudinov believes that banks are more likely to be forced to resort to such steps due to pressure on them from the Swiss authorities, parliamentary parties and the Swiss State Secretariat for Economics (SECO), which again began to talk about tightening control over the implementation of sanctions against Russia. “All Swiss banks are required to strictly comply with these sanctions , otherwise the Swiss government will initiate legal proceedings. Some banks are adding even more careful internal rules to not have anything to do with Russia,” confirms Borjo.

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“Our bureau regards these actions as illegal and plans to appeal them as soon as our clients receive official written notifications,” Kudinov emphasized. Borjo notes that in some cases the blocking cannot be challenged, but there are intermediate cases where one can try to find a solution through negotiations with the bank.

RBC sent a request to Swiss banks. Credit Suisse declined to comment, other financial institutions did not respond to RBC's request.

What restrictions did Switzerland impose on Russians?

After the start of a special military operation in Ukraine, Switzerland banned local banks from accepting deposits from Russian individuals and legal entities, as well as Russian banks, if the deposit exceeds ₣100 thousand. At the same time, the measure does not apply to people with dual citizenship, one of which is in Switzerland or one of the countries of the European Economic Area, as well as for Russian citizens who have a residence permit or citizenship of Great Britain, Andorra or Monaco.

In December 2022, SECO reported that ₣7.5 billion worth of Russian assets were blocked in Switzerland (about $7.95 billion at the time). In February 2023, it became known that Credit Suisse had frozen Russian assets totaling ₣17.6 billion (about $19 billion), the Sonntags Zeitung newspaper reported, citing a credit institution. At the same time, only ₣4 billion (about $4.3 billion) of the frozen amount falls on people who fell under sanctions. The remaining ₣13.6 billion ($14.7 billion) is either related to those against whom restrictive measures have been introduced by third countries, or are the funds of the Russian Central Bank.

Why Switzerland is tightening the requirements

In March 2023, US Ambassador to Switzerland Scott Miller called for an additional ₣50-100 billion of Russian assets to be frozen. But SECO HEAD Helen Budliger-Artieda, in turn, believes that this could violate property rights. Also, the G7 countries in early April asked Switzerland to more actively freeze the assets of Russian oligarchs.

According to George Voloshin, an expert on sanctions of the Association of Certified Money Laundering Specialists, external pressure is primarily due to the fact that to date, Switzerland has frozen quite a few assets of Russian origin compared to their total volume in the financial system of the Confederation. Switzerland continues to face pressure from Western states, in particular from the G7 countries, which is associated with the desire of Western jurisdictions to confiscate assets frozen in the country, adds Anton Imennov, Senior Partner at Pen & Paper.

In total, from ₣150 billion to ₣200 billion of Russian assets can be located in Switzerland, Voloshin cites data from the local banking association: “Obviously, not all of these assets are subject to freezing, for this their owners or persons controlling them must be under Swiss sanctions, but for outside the country, they believe that so far little has been frozen.”

The consequence of such pressure may be an additional freeze of assets that are directly or indirectly owned or controlled by sanctioned persons, Voloshin argues. Imennov believes that the practice of applying existing sectoral restrictions and banking legislation may become tougher. “Thus, the Swiss bank UBS since March of this year began to ask Russians who have open accounts and deposits in the bank, information about their citizenship or residence permit in Switzerland. Otherwise, the bank threatens to block. Although there is no formal ban on opening accounts under EU and Swiss law,” he said. The lawyer added that mass blocking of accounts of Russians already took place in France in April 2022 and in Georgia at the end of last year, when the country's largest bank, Bank of Georgia, closed part of the accounts of Russian individuals,

As for taxes, from a legal point of view, Swiss banks should not worry that their clients - individuals or corporations - pay taxes in Russia if they have a business there, Voloshin continues: “Most likely, we are talking about potential reputational costs. On the other hand, this is quite a radical step.” According to Imennov, these decisions can be explained by the reluctance of banks to allow in their activities a violation or circumvention of Western sanctions against Russia in connection with the application of liability measures in the form of a fine or the imposition of blocking sanctions against the banks themselves. “Nevertheless, taking into account the existing sanctions regulation, these measures indicate overcompliance on the part of financial institutions,” he concluded.