Test of Swiss anticorruption drive

Tarnished by repeated disclosures that dictators and crime kingpins were storing ill-gotten gains in its banks, Switzerland has been working to restore its reputation.

For more than a decade, this Alpine banking redoubt has taken steps - including establishing a federal office to track money-laundering and setting aside some of its famously strict bank-secrecy rules - to convince the world that it will no longer turn a blind eye to questionable activities. Those found with vast, suspect accounts include the late Nigerian dictator Sani Abacha and Peru's disgraced former intelligence chief, Vladimiro Montesinos.

Former Swiss attorney general Carla del Ponte, now UN chief war crimes prosecutor, won renown investigating alleged corruption. In recent years, a tough chief prosecutor in Geneva, Bernard Bertossa, has taken up the often bumpy crusade. The effort received a boost last week, when a former top Kremlin official was arrested in New York by federal agents acting on an international warrant issued here.

Pavel Borodin's detention set off an international diplomatic scuffle. Moscow has called on the US to free Mr. Borodin - who had come to attend President George W. Bush's inauguration.

Borodin, a one-time aide to former President Boris Yeltsin and benefactor to current President Vladimir Putin, denies any wrongdoing. Swiss officials say he has promised to return to Geneva to answer investigators' questions if the warrant is withdrawn. He is being held without bail pending a hearing set for Jan. 25.

The Swiss are watching carefully, to see how other nations support their efforts in the case. "This is a test of how serious the world is in tracking down corruption," says Carlo Lombardini, a Geneva lawyer who specializes in money-laundering cases. "The Swiss are serious; let's see if the Americans are serious. If Borodin is not extradited, it means that no one really cares about what happens here."

The Swiss have reason to be skeptical. As part of their effort, they have blocked more than $1 billion in suspect funds in recent years. Since most of the accounts involve foreigners, the Swiss - not infrequently - are forced to unfreeze them for lack of evidence from other nations that the money is the product of illegal activity.

The resignation last year of the entire federal money-laundering office - complaining about overwork and underpay - was a further blow to Switzerland's efforts. But the Swiss say they will press ahead because - economically and politically - Switzerland cannot afford to be seen as a haven for dirty money.

"Over the last 10 years, Switzerland has recast its anti-money-laundering laws by strengthening the penal code, self-regulation, and stepping up international cooperation. We recognize that no financial center can, in the long run, live off dubious monies," says James Nason, spokesman for the Swiss Bankers Association in Basel.

After a two-year investigation into alleged money-laundering and bribes involving renovations of Kremlin buildings, Swiss authorities were flummoxed last month when Russian officials announced they were dropping the inquiry because of insufficient evidence against Borodin. Swiss investigators had provided a dossier suggesting that as much as $65 million in kickbacks was shared in the scheme. Their probe centered on two Swiss-based companies, Mabetex and Mercata, which investigators allege paid enormous bribes to key officials, including Borodin, Mr. Yeltsin, and members of his family.

Borodin, accused by prosecutors of taking some $25 million for himself and his family, left his powerful post as manager of Kremlin properties when Mr. Putin became president last year. But Putin - who first came to Moscow as Borodin's deputy - appointed his benefactor executive secretary of the still evolving Russia-Belarus union.

In unusually frank comments, Swiss prosecutor Mr. Bertossa told a Russian newspaper that Moscow's dropping the inquiry showed "a double standard of jurisprudence ... one for friends and one for opponents."

Some Moscow lawmakers, who said the arrest strained US-Russian relations, still agreed Borodin should be held accountable. Oleg Naumov, a member of the foreign affairs committee in Russia's Duma, or lower house of parliament, says: "The right thing is to prove in the Swiss court that Borodin is not guilty, and, first of all, it is he who should be interested in such a scenario."

Since Switzerland does not have an extradition treaty with Russia, its case turns on the United States sending Borodin here. If that does not happen, the sometimes wobbly efforts to stamp out money laundering will be seriously undercut.

Already, Geneva was dealt a setback when it failed to convict suspected mafia boss Sergei Mikhailov in 1998 on organized-crime charges. Prosecutors claimed Moscow authorities failed to cooperate. Embarrassingly, a Swiss court last year ordered the city to pay Mr. Mikhailov an unprecedented $450,000 in damages.

Despite tightened reporting requirements in 1998 for accounts held by politicians, some $650 million linked to Nigeria's Mr. Abacha turned up in Swiss banks, as well as millions said to belong to high-ranking Yugoslav leaders. And Swiss officials helping Peru investigate clandestine arms deals uncovered $75 million in Swiss accounts linked to Mr. Montesinos.

The Abacha sums are even larger than that stashed by former Philippine strongman Ferdinand Marcos, the discovery of which prompted Switzerland's cleanup drive.

For their part, some Swiss bankers complain the government has gone overboard, undercutting their competitive position by setting rules stricter than those of other world financial centers. For example, they say that Britain requires a higher level of evidence to reveal suspect sums. Neighboring Austria only banned anonymous accounts last year.

Switzerland, meanwhile, last year outlawed bribery of foreign officials and ended tax deductions for corporate "commissions."

(c) Copyright 2001. The Christian Science Publishing Society