Since the beginning of the war in Ukraine, the pressure on Russian owned assets all over Europe has ramped up dramatically. Adding up to an estimated 5% of the total wealth deposited in Swiss banks, some $150bn of Russian money is thought to be held in Switzerland. Of the 200 individuals associated with Vladimir Putin who were sanctioned by Washington in 2018, 30 have substantial assets in Switzerland.
In terms of oligarch-owned works of art, nobody knows exactly what is inside the famous Geneva Freeport, the secretive customs complex memorably described as Ali Baba’s cave. The value of the goods in its warehouses—almost 70% of which are works of art and antiquities—is estimated to be around $100bn.
On 4 March 2022, the Swiss government sanctioned several Russian individuals. Among them are tycoons like Alisher Usmanov, Alexey Mordashov and Gennadi Timchenko and his wife, both of whom are very active in the world of Swiss philanthropy. A week later, following the lead of the European Union, the Swiss government added a further 200 people to its sanctions list.
The office in charge of Swiss sanctions, the State Secretariat of Economic Affairs (SECO), refused to confirm to The Art Newspaper the amount of money seized as a result, saying “the figures are constantly changing” because its “analysts are in the process of compiling the data”. Asked whether any works of art or other goods had been seized from Swiss freeports, SECO declined to answer.
Still, the political pressure is such that Swiss bank Credit Suisse has instructed hedge funds and investors to destroy all documentation relating to the luxury goods of their Russian oligarch clients, as recently revealed by the Financial Times. Fearing their assets may be seized, such ultra-rich investors are looking for a way out. While some are opting for gold bars and other forms of less traceable wealth, many wealthy Russians appear to be turning to fine art.
One gallery owner who participated in the Art Genève art fair in early March noticed that “a lot of guided tours were conducted in Russian this year”, an observation echoed by another source from the Geneva art scene. Asked if there had been any increase in Russian interest, the Art Genève organisers disputed the claim, arguing that the total amount of sales had not increased significantly over previous years although they had no specific knowledge of sales by each gallery.
A rush by wealthy Russians to invest in art was confirmed to us by an industry insider, who stated: “All of my meetings with Russian investors were cancelled last week following the start of the war. But I spoke to three different gallery owners, and they all confirmed that three weeks prior to the Ukrainian invasion there had been a huge surge in sales to Russian buyers. My guess is that they were told about the war beforehand.”
Unlike the European Union, which now bans payment in cash for any amount in excess of €1,000, Switzerland still accepts cash payments of up to SFr100,000 (£80,000). There is a duty for sellers to do background checks and report any suspicious client or company to the police, but several insiders said that very few do so.
Outside the Geneva art fair, all eyes are on the Geneva Freeport, a large warehouse facility. The freeport is a special economic zone that treats goods as not having been imported into the Swiss customs territory; until 2007, these goods were not considered as even being in Switzerland.
Laissez faire: Luxembourg Freeport owner Yves Bouvier says that Swiss freeports do not seek to establish who is the ultimate owner of goods deposited Photo: Ore Huiying/Bloomberg via Getty Images
Majority-owned by the Geneva canton, and described as “a black box” by members of the European Parliament’s special committee on financial crimes and tax evasion, the storage complex had a complete makeover after the Panama Papers revelations that a Modigliani painting had been stored in the freeport for almost 20 years. And in the complex dispute between the Russian oligarch Dmitry Rybolovlev and Swiss art dealer Yves Bouvier over the commission made by Bouvier on the sale of 38 paintings, it was revealed how a number of masterpieces had been secretly moved through the freeport.
Ultimate beneficiaries unknown
Bouvier, a minority owner of Geneva Freeport, says that, contrary to Luxembourg Freeport, where he is the majority owner, freeports in Switzerland do not ask for the identity of the ultimate beneficiary. “The only thing they want is for the person in charge of the paperwork for the goods deposited in the freeport to be based in Switzerland. It is often a lawyer or a fiduciary.”
Another major issue, he adds, are the very few customs controls relating to the freeport’s bonded warehouse, which theoretically holds the less luxury items, and falls within the Swiss customs territory. Bouvier also remembers receiving “very few notifications from customs about individuals subject to sanctions”.
But according to the specialist art lawyer Anne-Laure Bandle, much has improved since 2015. “The freeports are subject to Swiss law. A warehouse has a legal duty to maintain an inventory of all sensitive goods deposited, which expressly includes works of art, collectibles and antiquities. The inventory must contain the name and address of the objects’ owners. While revealing the name of the art object’s beneficial owner is not required by law, the freeports systematically ask for this information for its tenants and sub-tenants.”
The Geneva Freeport © MHM55
However, while a prosecutor can block the movement of goods in Swiss freeports with relative ease, they have no way of knowing what it is they are looking for. The Swiss politician David Hiler, who was put in charge of cleaning up the country’s freeports, told Le Temps in November 2015: “We would like to introduce a due-diligence process where every sub-customer from the freight company leasing the space would be registered in an anonymised file. But as long as the law doesn’t change, we won’t be able to force them to do it.”
In a 2017 presentation, Hiler showed that 65% of the freeport’s storage area, 35,000 sq. m—nearly half the gallery space of the British Museum—was used to store art and antiquities.
The former mayor of Geneva, the left-wing politician Rémy Pagani, is not convinced that these loopholes will be closed. He says: “In Geneva, we have no visibility on the transactions that take place there. I was never able to get in when I was mayor. It’s [only] the Swiss government that can monitor everything that is being negotiated, but they don’t. If there is a transaction and a Russian sells a painting, the painting stays there, and nothing happens. The cash from the sale is sent directly to [the seller] in complete discretion.”
Monika Roth, a university teacher and Swiss lawyer, isn’t convinced either. She points to the case brought against the Russian oligarchs Boris and Arkady Rotenberg by the US Senate: “In that case, we saw how a German freeport was used to evade sanctions. The [brothers] had an intermediary who acted as their representative in the transactions. Because his name was not on any sanction list, nobody saw anything wrong.”
She also recalls how, in the Rotenberg case, an ultimate beneficiary was provided but never found despite considerable efforts made by the US Senate. “As long as Swiss customs isn’t able to really verify who the beneficial owner is, any laws can be really easily overturned.”
Asked repeatedly to comment on this particular aspect of freeport practice by The Art Newspaper, the Geneva Freeport administration chose not to respond. But in an Arte documentary broadcast last November, Anne-Claire Bisch, the freeport’s director, did address the possibility of a buyer successfully concealing their identity.
She said: “A client who wants to set up a complex financial scheme, whether it is offshore or in Switzerland … [she pauses]. You know, creativity doesn’t only apply to the art world… It applies to every field that exists, legal or financial. But we have no interest in being a creative actor in an illegal field.”