Switzerland’s PDVSA rinsing problem
08 Sep 2020

Swiss banks first surfaced as handlers of illicit Venezuelan oil money in 2016, when U.S. Attorney Preet Bharara sought records from more than 18 of them on of bribery at PDVSA, a state-owned oil and natural gas company. Precisely two weeks later, Switzerland’s financial regulator built its annual meeting around a frank warning to banks on money laundering.

The new cases emerging four years ago, Finma said at the time, indicate corruption and rinsing of several billion in funds. At the time, Malaysian 1MDB as well as FIFA, soccer’s global governing body, were attention-grabbing cases – but few people were as familiar with PDVSA.

Hugely Wealthy Bolichicos

That changed two years later when one of Julius Baer’s former private bankers, Matthias Krull, was arrested in Miami. But numerous banks other than the Zurich-based wealth manager were also involved in rinsing Venezuelan PDVSA money offshore.

They had catered to so-called bolichicos, a crop of well-connected, younger businessmen who had grown rich under the regime of Hugo Chavez. Unimaginably wealthy: investigative website Infodio, which is devoted to PDVSA corruption, calculates that $1.5 billion disappeared from the company’s coffers between 2002 and 2014.

Billions of PDVSA Funds

The plunder is set against hyperinflation, shortages of food and medicine, and unemployment created by the government of Nicolas Maduro, the current president. PDVSA billions flowed through Swiss bank accounts in the U.S. and in Spain, to be invested in real estate and companies, for example.

The U.S. is conducting several probes into corruption at PDVSA. In Switzerland, banks in 2015 lodging alerts with MROS – the Bern-based office that is banks’ first port of call when they suspect money laundering, the Swiss prosecutor said. The alerts were regarding a significant number of banking relationships, the prosecutor told finews.com.

Swiss Mothball Probe

The matter was escalated to the Swiss attorney general two years later, but an investigation was mothballed in April, the prosecutor said. Bern couldn’t obtain unbiased legal aid from Venezuela, where Maduro is holding on despite opposition leader Juan Guaido, who was recognized as an interim president, last year by dozens of countries including – crucially – the U.S.

Swiss justice officials have addressed countless requests for legal aid from other countries – including the U.S. Until now, no bank has been accused of laundering Venezuelan graft money. The Swiss as well as Liechtenstein ties to PDVSA are well-known: besides Credit Suisse and its former subsidiary Clariden Leu, UBS, Julius Baer, EFG International, as well as Compagnie Bancaire Helvetique, or CBH, and Lugano’s Banca Zarattini, roughly one dozen more banks are likely involved.

Bank of Choice: CBH

The bank which pops up most frequently in U.S. justice documents is CBH: the Genevan wealth manager is suspected of laundering $4.5 billion in just two years until 2014 for Luis and Ignacio Oberto, Venezuelan brothers.

The guiding spirit appears to have been Charles Henry De Beaumont, a private banker who set up sham entities for the two to receive PDVSA money. From there, the money flowed via Bank Espirito Santo, PDVSA’s house bank, to CBH in Geneva.

When the Portuguese bank collapsed in 2014, CBH took over the Swiss arm, Banque Privée Espirito Santo. CBH also wanted to buy a Miami subsidiary, Brickell Bank, but the deal fizzled – likely under the pressure of the U.S. investigation. Brickell eventually went to Banesco USA, an American bank focused on South Florida and Puerto Rico.

By Peter Hody and Katharina Bart, finews.com, 7 September 2020

Read more at finews.com

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet