The online magazine of the Swiss Bankers Association
April 16, 2014


Dictators assets: what lessons have been learned from the Arab Spring?

Dictators assets: what lessons have been learned from the Arab Spring?

At the beginning of the year, Ukrainian President Viktor Yanukovich was removed from his role as head of state. As during the Arab Spring, for Switzerland the question of how to deal with the assets of an ousted head of state and his entourage has once again arisen.

At the end of February, the Swiss Federal Council issued a decree to freeze the assets of Viktor Yanukovich and his entourage. As was the case during the Arab Spring, the basis for adopting this measure lies in the competency granted to the Federal Council to create emergency legislation as provided for in the Swiss Constitution.

In this instance, however, and in contrast to the Arab Spring, the assets were frozen in coordination with other financial centres and the EU.

Crimea crisis: Switzerland under international pressure

In mid-March, the majority of the population residing on the Ukrainian Crimean peninsula voted in favour of annexation by the Russian Federation. The ensuing treaty of accession signed with Russia resulted in acute protests. In response, the EU and the US have introduced financial sanctions against Russia.

Because financial sanctions are often a concerted action within the international community, it would be problematic for the Swiss financial centre to just stay on the side lines. At the same time, with the issuing of sanctions by the EU and the US, the pressure for Switzerland to do the same has increased.

No adoption of the international sanctions against Russia

On the grounds of neutrality, the Federal Council has, however, decided not to introduce its own sanctions against Russia. For example, accounts potentially belonging to persons that have been sanctioned by the EU and the US have not been frozen. But the Federal Council must nonetheless prevent such persons from being able to divert assets to the Swiss financial centre.

It is prohibited to admit new business relationships with people that have been sanctioned by the EU and the US. Existing business relationships have to be reported.

In typical Swiss manner, the Federal Council has found a middle way for this conundrum: at the beginning of April, it issued measures that prohibit the admission of new business relationships with these individuals. Further to this, it has introduced an obligation to report any such existing business relationships.

The banks followed the events in Crimea very closely and introduced the internal measures necessary to avoid violation of the international sanctions. Notwithstanding this, the banks welcome the measures introduced by the Federal Council, as it has in so doing, created the legal basis upon which the banks can act.

A clear legal foundation is necessary in order to ensure legal certainty for banks and their clients.

Outlook for the new legislation

A clear legal foundation is nevertheless necessary in order to ensure legal certainty for banks and their clients.A new law which regulates the freezing and repatriation of dictators’ assets was submitted for consultation last year. It defines the criteria for the freezing of accounts and the handling of frozen assets. The corresponding dispatch is to be published in early summer.