- Money laundering of Venezuelan billions at around 30 Swiss banks
- Questionable funds from Venezuela flowed into several hundred accounts
Christian Brönnimann, Sylvain Besson/SonntagsZeitung
Petroleumworld 01 19 2021
Venezuela is falling. According to a September report by the UN Human Rights Council, nine out of 10 residents live in poverty after years of crisis and mismanagement. One of the central reasons for the misery is rampant corruption. Under socialist presidents Hugo Chavez (until 2013) and Nicolas Maduro, a small elite shamelessly helped itself to the country's oil wealth. They brought tens of billions abroad. They used the state money to treat themselves to a life of excessive luxury, while the rest of the population became impoverished.
Now it is becoming increasingly clear to what massive extent the Swiss financial center is affected by this scandal. Research shows: Zurich law enforcement officials have been investigating since the fall of 2019, and in just one year, a team of Zurich canton police and prosecutors identified money flows of about 9 billion Swiss francs from Venezuela to Switzerland, suspected to be the result of crimes.
According to a police spokesman, the money ended up in several hundred accounts at about 30 Swiss banks. This means that we are not talking about a few black sheep in the financial center. At least one in eight Swiss banks has accepted questionable funds from Venezuela.
A secret bank statement reveals: Corrupt officials
were bribed directly with money from Swiss accounts.
However, of the 9 billion under investigation, investigators were only able to intercept a few hundred million. They are currently blocked in Swiss accounts. The large remainder has already disappeared. The money was transferred to foreign banks - or squandered on villas, luxury cars and watches, yachts and private jets. A secret bank statement reveals: Corrupt officials were bribed directly with money from a Swiss account.
Zurich opened five money laundering cases
Even if the billions are already gone: If it is confirmed that Swiss banks accepted funds from a crime and could have prevented it, or if Swiss actors helped launder dirty money, they will be liable to prosecution.
Duties of the banks
Swiss banks must look closely at suspicious transactions to mitigate the risk of money laundering. The Money Laundering Act requires banks to clarify, among other things, "the economic background and purpose of a transaction" if the transaction "appears unusual" or is "fraught with increased risk." Examples are set out at the ordinance level that indicate increased risks, such as when a transaction involves shell companies, particularly from abroad, or when transactions are conspicuous by their size.
In the case of transactions with increased risks, a bank must make "additional clarifications with reasonable effort." This includes, among other things, checking "the plausibility of larger incoming payments."
If the banks suspect that money could have been laundered with a transfer, they are obliged to report this to the Money Laundering Reporting Office Switzerland (MROS).
The public prosecutor's office of the canton of Zurich has opened at least five proceedings for money laundering. It has seized account documents from several banks. But to convict someone of money laundering, investigators must first prove that the assets actually came from a crime. This is the most difficult part in any money laundering investigation. That's because the original crime usually happened far away. The Zurich investigators are therefore also cooperating with foreign law enforcement agencies. First and foremost, the U.S. is pushing various cases against the corrupt Venezuelan elite.
So how did the Venezuelan elite manage to extract billions from the state treasury? According to research, Zurich investigators are focusing on several schemes. The two largest account for the lion's share of the 9 billion.
Dollars for the black market
In both cases, the peculiarities of the Venezuelan foreign exchange market play a role. This is because it is highly regulated. The state sets official exchange rates. But very few people have access to this official currency exchange. That is why there is also a huge black market. And because the Venezuelans want to get rid of their own currency, the bolivar, as quickly as possible due to massive inflation, this market is also actively used. But on the black market, foreign currencies cost many times more than the official rate. This opens the door to shadow business.
For those who have privileged access to the preferential government rate, exchanging currency can multiply their money in no time at all. For example, in 2014 the U.S. dollar cost ten times more on the black market than it did on the official exchange. So if you first bought U.S. dollars from the state at knockdown prices and then sold them on the black market, you could multiply your money tenfold in just two transactions.
The consequences of Hugo Chavez's rule are visible everywhere: poverty has grown in Venezuela since
the state elite enriched itself on the oil billions.
The Venezuelan state has many dollars from the sale of oil. But instead of using it to increase the well-being of all according to socialist ideals, the country under Hugo Chavez opened the dollar floodgates only for a few select minions. They shared their astronomical profits with corrupt officials.
And Swiss banks and bankers also earned handsomely.
In 2018, the U.S. asked Switzerland for legal assistance in one of the two major schemes. The request was available to this newspaper. According to it, around 4.5 billion US dollars flowed into Swiss bank accounts in this scheme, first and foremost at the Geneva-based CBH and the Zurich-based bank EFG. The Venezuelans' confidant at CBH is said to have received around $22 million in commissions for his services, according to the request.
In the request for judicial assistance, the Americans name other Swiss banks to which funds from Venezuela have flowed. Namely, Julius Baer, Bank Leu, which has since been taken over by Credit Suisse, Société Générale, Bank Frey, Credinvest, Gazprombank Switzerland and JL Securities. The Zurich criminal proceedings are not currently directed against banks. The presumption of innocence applies.
2.9 billion in 12 months - in a single account
The mastermind of the second major scheme is Venezuelan TV mogul Raul Gorrin. He has close ties to Venezuela's highest power elite around Hugo Chavez and Nicolas Maduro. The Americans put Gorrin on notice for arrest as "most wanted" in early 2020. Gorrin bribed, among others, the former Venezuelan treasurer Alejandro Andrade. The latter has confessed to accepting values of around one billion dollars. The U.S. sentenced him to ten years in prison in 2018.
Alejandro Andrade (56) has a long history with Venezuela's former president Hugo Chavez. According to the story, Chavez unintentionally knocked out young Andrade's eye during a baseball game. Andrade then entered Chavez's inner circle of power as his bodyguard. Finally, from 2007 to 2010, he was treasurer of the socialist state.
In 2012, shortly before Chavez's death, Andrade moved with his family to Miami to enjoy the wealth he had accumulated to the fullest. But the U.S. justice system got wise to him. In 2018, Andrade confessed to accepting $1 billion in bribes. His possessions included several luxury properties in the U.S., private jet and yacht, Swiss bank accounts, race horses and an exclusive watch collection. Andrade was sentenced to 10 years in prison in the U.S. in 2018.
A central account that Raul Gorrin could dispose of was again at CBH in Geneva. This newspaper has account statements from it. They show the extent to which the Geneva bank served as a transit point. In the 12 months from April 2012 to March 2013, the account received about 2.9 billion U.S. dollars, divided into about 20 tranches between 45 million and 500 million. After large incoming payments, the large amount of money was then moved around in smaller portions within days, often in round sums to countless shell companies somewhere in the world. For example, a bank statement for June 7, 2012 alone shows exactly 77 such transit transactions.
Only a privileged few benefit from the dollar revenues of state oil company PDVSA.
The corrupt ex-treasurer Andrade has signed a guilty plea in the USA. It mentions several transfers in favor of Andrade, which can now be attributed to the Geneva CBH account thanks to the available bank statement. Among them are four transfers of around 34 million dollars for the purchase of a private jet. Several transfers also went to a dealer of luxury Swiss watches in Venezuela and Miami. Andrade owned an absurdly expensive watch collection with at least 35 fine pieces, all Swiss-made (get a glimpse of the watch collection and take the test of how well you know it).
According to investigations by the US judiciary, Gorrin did not only bribe Alejandro Andrade with money from the Geneva CBH account. His successor Claudia Diaz also took advantage. A statement of claim filed by the U.S. against Gorrin describes, among other things, a transfer of $4.35 million. This sum went from Geneva to a company in Miami on November 13, 2012. Purpose, according to the U.S. investigation: Purchase of a yacht for Claudia Diaz.
CBH writes on request that neither the bank nor its organs have ever been prosecuted for money laundering. This is not surprising, it says, as CBH systematically applies high standards in due diligence. The bank has always complied with applicable law and cooperates fully with the authorities when requested to do so.
Also a client of Julius Baer
The wanted TV mogul Gorrin not only had the best relations with CBH, but also with Bank Julius Baer. Namely, he was a client of Baer banker Matthias Krull. The latter was sentenced in 2018 in the US to ten years in prison for money laundering.
In Switzerland, on the other hand, the whole Venezuela swamp - as far as is known - has so far had no criminal consequences for bankers. But that could still change. In addition to the money laundering proceedings already opened, the public prosecutor's office in the canton of Zurich is also conducting preliminary investigations against former Julius Baer CEO Boris Collardi.
When the Venezuela scandal slowly surfaced three years ago, Collardi surprisingly left Julius Baer. Today, Collardi is a partner at one of Switzerland's classiest private banks, Bank Pictet. He declined to comment for this article.