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OSCE Ministers Urge Concerted Action to Combat Sexual Exploitation of Children
Wednesday, December 13, 2006

By Ron McNamara, International Policy Director

Foreign Ministers from the 56-nation Organization for Security and Cooperation in Europe approved a major initiative on combating a wide range of sexually exploitative crimes against children, including prostitution, child pornography, trafficking in children for sexual exploitation, sex tourism and forced marriages of children. A collaborative effort spearheaded by the United States, Belgium and France, the decision was unanimously agreed in recognition “that sexual exploitation of children constitutes a grave and heinous crime, in many cases involving organized crime that must be prevented, investigated, prosecuted and penalized with all available means.” The decision, taken during the annual Ministerial Council meeting, held in Brussels, provides political impetus to enhance cooperation among law enforcement agencies throughout the OSCE region.

The statement issued by the Council condemns the sexual exploitation of children in all its forms, urging the participating States to conform their legislation on this subject to their relevant international commitments and obligations. Progress in strengthening the legal framework to combat these forms of abuse and close existing gaps is viewed by experts as essential to effective action by law enforcement, especially as these crimes often involve entities in numerous countries. The need for greater uniformity in relevant laws was made clear in a comprehensive report, Child Pornography: Model Legislation & Global Review, issued in 2006 by the International Centre for Missing & Exploited Children in cooperation with Interpol. Surveying laws in 184 Interpol member countries, the report found that more than half of these countries (95) had no laws addressing child pornography and, in many other countries, the existing laws were inadequate.

Among OSCE countries, the report found that six countries lacked any laws criminalizing any aspect of child pornography, with 32 countries lacking any legal definition of child pornography. Sixteen OSCE countries have failed to make the possession of child pornography a crime and 20 lack laws criminalizing the distribution of child pornography via computer and the Internet. Fifty OSCE countries do not require Internet Service Providers (ISPs) to report suspected child pornography to law enforcement. To date, Belgium, France and the United States are the only OSCE countries to have enacted comprehensive laws addressing all five areas analyzed in the report. The Ministers drew particular attention to the role played by new technologies, including the Internet, in facilitating the sexual exploitation of children, in an industry with revenues in the billions of dollars each year.

States were urged to take a holistic approach toward the problem of sexual exploitation of children, addressing root and contributing factors, including the demand that fosters all forms of sexual exploitation of children, and to develop comprehensive and proactive strategies and measures aimed at preventing and combating the sexual exploitation of children. OSCE countries were encouraged to develop compatible and exchangeable data registration systems specific to the sexual exploitation of children as well as create telephone or Internet hotlines as a resource for victims and their families. They were likewise urged to work with ISPs, credit card companies, banks and other corporations as well as relevant NGOs, to ensure information related to the sexual exploitation of children is tracked and reported.

In addition, the Ministerial decision included a series of specific recommendations for further action by the participating States, many aimed at strengthening the tools available to law enforcement, including adoption of legal measures that would allow them to prosecute their citizens for serious sexual crimes against children, even if these crimes are committed in another country. OSCE States were urged to aggressively prosecute the sexual exploitation of children and impose tough penalties on offenders perpetrating such crimes.

The Council recommended the establishment of training programs concerning sexual exploitation of children for personnel, including those working in the areas of justice, policing, tourism, transport, social work, health care, civil society, religious organizations, and education. Similarly, Ministers called for countries to facilitate legal protection, assistance, appropriate medical care, and rehabilitation and reintegration programs for child victims of sexual exploitation as well as efforts for the safe return of trafficked children.

The OSCE, as an organization, was encouraged to pay increased attention to these issues, including the links to trafficking in persons, and to cooperate with other international organizations, NGOs and civil society in combating the sexual exploitation of children.

The Brussels Ministerial decision on sexual exploitation of children originated, in large part, from a resolution sponsored by Commission Co-Chairman Rep. Christopher H. Smith and managed by Commissioner Rep. Joseph R. Pitts during the Annual Session of the OSCE Parliamentary Assembly convened in the Belgian capital in July 2006. That proposal, “Combating Trafficking and the Exploitation of Children in Pornography,” was overwhelmingly approved by parliamentarians from the participating States.

A Helsinki Commission hearing, “Protecting Children: The Battle Against Child Pornography and Other Forms Of Sexual Exploitation” was held on September 27, 2006, to assess the magnitude of abuse against children. In opening remarks, Co-Chairman Smith explained, “The anti-trafficking efforts have convinced me that combating sexual exploitation of children in all of its forms requires even more comprehensive laws, as well as effective partnerships between local, state, and federal law enforcement, and the nongovernmental communities at all levels, and that includes international.” Smith noted strong indicators that those captivated by pornography are more likely to become predators and purveyors themselves, further feeding the cycle. As with other addictive behaviors, these individuals are often driven into more extreme acts of preying on younger victims or employing violence. He observed that organized crime, including gangs, also appears to be venturing further into the lucrative trade in children. As a result, global criminal networks are springing up, further complicating efforts to prosecute those responsible for these horrendous crimes against children.

James E. Finch, assistant director of the Cyber Division of the FBI discussed the Bureau’s efforts to combat the sexual exploitation of children through the use of the Internet and promote closer cooperation with foreign law enforcement agencies. James Plitt, the unit chief of the Cyber Crimes Center of the Immigration and Customs Enforcement stressed “that the issue of child exploitation is enormous and multidimensional. Furthermore, any potential solution to this issue must be multidimensional….collectively, we need to understand the challenge we face, and we need to understand the trends, techniques and vulnerabilities of those engaged in international criminal business enterprises,” he concluded. On the question of limited resources, Plitt noted, “If we had triple the investigative resources, we would still have investigative leads untouched.” Finch underscored the challenges faced by law enforcement given the relative ease and limited expense involved in setting up exploitative web sites. Commissioner Mike McIntyre urged greater partnership between law enforcement and the public to identify perpetrators of these crimes as well as aggressive investigation and prosecution of them.

Linda Smith, founder of Shared Hope International and a former Member of Congress, presented the findings of the U.S. Mid-term Review on the Commercial Sexual Exploitation of Children in America, identifying five key issues which stand out as the most immediate and urgent needs to protect America's children: confront the demand side of exploitation; aggressively pursue those responsible for the online trafficking in children; ensure sufficient services for victims, especially shelter; expand cooperation between law enforcement agencies at all levels; and further strengthen Federal law. She made an impassioned call to decriminalize the prostituted minor, “What we've found was that these kids, when identified, are called prostitutes, and they're quickly moved into detention when they're found, treated like a criminal, and then, when released, put in a foster care system where they bleed out. We do not have child prostitutes. We have prostituted children.” With respect to pornography, she decried the marketing to recruit boys as clients as well as the explosion of pornographic images of children creating demand for direct sexual violation of children.

Carol Smolenski, executive director of ECPAT-USA discussed multilateral efforts to more effectively combat the sexual exploitation of children. She cited demand and prevention as major of common concern as well as the need to keep pace with rapidly changing technologies. Commissioner Pitts voiced particular concern that law enforcement have the tools necessary to adapt to technological challenges. Turning to the role of organized crime and gangs in exploitation, Smolenski observed, “you'd be hard-pressed to talk to a service provider who has not found gang involvement with child prostitution these days…yes, gangs are definitely a part of it and a growing part of it.”

Dr. Mohamed Mattar, executive director of the Protection Project at Johns Hopkins School of Advanced International Studies, touched on several positive developments in the fight against the sexual exploitation of children: expansion of criminal liability; extension of territorial jurisdiction; and enhancement of child protection, including the abolition of a statute of limitations. He welcomed Senate ratification of the Council of Europe Convention on Cybercrime of 2001. Mattar made a series of recommendations to enhance implementation of relevant U.S. law. He urged funding to back up U.S. efforts to prevent sex tourism, while citing laws in Sweden, Switzerland, and The Netherlands as particularly problematic. Dr. Mattar called for funding to support research on victims of child exploitation; establishing programs to expand state law enforcement officials' capabilities in prosecuting demand and providing services for victims; shifting the focus of the United States toward penalizing the purchaser of sexual services; and mobilizing countries to enact Internet laws that protect children from commercial sexual exploitation.

Ernie Allen, chairman and chief executive officer of the National Center for Missing and Exploited Children and the International Center for Missing and Exploited Children, focused largely on commercial child pornography, a multibillion-dollar industry, stressing that children are plentiful and easily accessed; child pornography is easy and inexpensive to produce; there is a huge consumer market for it, making it enormously profitable; and, finally, historically there's been virtually no risk, far less risk than trading in drugs or guns.

Allen presented his candid conclusion, “Most people don't understand what this problem really is; there's a real misconception. But what we are finding and what law enforcement is finding is that the victims are getting younger and the content, the images, are becoming more graphic and more violent. From the data on the hundreds of offenders who have been identified to date, we can report to you that 39 percent of those offenders had images of children between the ages of 3 and 5. And, 19 percent had images of children younger than 3 years old. This is not what America thinks it is.”

Few of the world's nearly 200 countries, he pointed out, have any kind of meaningful system or capacity to adequately and effectively combat the sexual exploitation of children, especially through child pornography. Allen discussed his organizations work in training law enforcement officials around the world in the investigation of computer-facilitated crimes against children as well as initiatives to enlist the support of ISPs and leaders in the technology and banking industries in dismantling networks responsible for exploitation of children. He echoed calls for additional resources to aid law enforcement, including in the field of forensics.

In response to a suggestion from Co-Chairman Smith that the United States push for an international form of Megan's Law aimed at sex offenders, Allen replied, “I agree 100 percent. I think it's absolutely appropriate. It's a prime opportunity for American leadership and the leadership of other countries on this issue. It's unbelievably important. These offenders are mobile…offenders from other countries come here, where we have no knowledge about their history or prior record.”

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Kremlin Narrative against NATO Over the years, Moscow has repeatedly resisted NATO enlargement – especially for countries it claims within its sphere of influence. Putin asserts that during a 1990 summit between President George H. W. Bush and President Gorbachev, the United States promised no further expansion of NATO; civil servants present at that meeting have refuted this claim, as has Mr. Gorbachev himself. In his conversation with Bush, Gorbachev repeatedly affirmed that nations have the right to make their own alliances. Though internal U.S. analyses of the 1990s suggested that expansion eastward may not be politically expedient, such positions never became official policy. The United States has remained resolute in its recognition of sovereign choice, and expansion has been driven by requests from former Soviet and Warsaw Pact states wary of Russian revanchism. The Kremlin has deployed an opposing narrative to justify Russian military engagements in Georgia in the early 2000s, and more recently in Ukraine. Putin sees the inclusion of either nation in NATO, and the political and economic liberalization that go with it, as threats to his regime’s stability. NATO membership would limit Russian interference in the internal affairs of either state. Additionally, if Russia’s neighbors and fellow post-Soviet states can become true democracies, provide higher quality of living, and ensure the rule of law, then why can’t Putin’s Russia? Any argument that NATO expansion threatens Russia misrepresents the organization, which is a diverse coalition dedicated to mutual defense and development. Moreover, such an assertion overlooks the efforts NATO has made to include and collaborate with Russia in the pursuit of cooperative security. NATO Back to its Roots By illegally and brutally invading Ukraine in February 2022 – a dramatic escalation of the grinding conflict started in 2014 – Putin has galvanized European and Western unity. Hearkening to its origins and returning attention to Eastern Europe, NATO is recommitting itself to “counter Russia’s attempts to destroy the foundations of international security and stability.” The international community is largely on board. In its collective attention beyond security, NATO – alongside other organizations – highlights not only the potential for, but the responsibility of the international community to condemn human rights violations, uphold the rule of law, and pursue economic health, all efforts that further challenge the Kremlin’s narrative that it can lead (or that there even needs to exist) an opposing bloc. Alarmed by Moscow’s renewed expansionism, Sweden and Finland have abandoned decades of neutrality in favor of NATO membership. They are on track towards the fastest accession process in history, and anticipate a smooth integration. Both already engage in the wider European community through membership in such organizations as the European Union and the Organization for Security and Cooperation in Europe. Their force structures are robust, and well-versed in NATO procedures following decades of partnership; their accession will secure northeast Europe, expand NATO’s border with Russia, and reinforce NATO presence in the Arctic and Baltic Sea. Although the Kremlin initially vowed “military and political repercussions” were Finland and Sweden to join NATO, such threats have dulled to warnings about the installation of NATO military infrastructure nearer Russia’s borders; as Finland and Sweden’s NATO membership neared finalization, Putin even expressed “no problem” with these states joining the Alliance. It remains to be seen how this change will play out. After decades of orientation towards international stabilization, humanitarian, and counterinsurgency mission sets, NATO has been refocused on European deterrence and defense following the Kremlin’s violent assault on Ukraine. In addition to condemning Russia’s invasion and supporting Ukraine via such measures as the Comprehensive Assistance Package, NATO plays a critical role in championing European collective defense and discouraging any expansion of conflict.    

  • Helsinki Commission Digital Digest July 2022

  • Co-Chairman Cohen Condemns Execution of Democracy Activists in Myanmar

    WASHINGTON—Following the execution of four democracy activists by Myanmar’s military junta, Helsinki Commission Co-Chairman and OSCE Parliamentary Assembly Special Representative on Political Prisoners Rep. Steve Cohen (TN-09) issued the following statement: “I strongly condemn the execution of these courageous activists by Myanmar’s unelected and illegitimate regime. These men—Kyaw Min Yu, Phyo Zeya Thaw, Hla Myo Aung, and Aung Thura Zaw—were political prisoners who were deprived of their right to due process and a chance to defend themselves. The junta sentenced them to death in secret trials, once again demonstrating the complete lack of respect for human life and common decency as well as a total disregard for rules-based order by which countries should abide. “The regime has jailed thousands, including the Nobel Peace laureate and State Counsellor Aung San Suu Kyi, after seizing power in a coup in February 2021. Following a series of closed-door hearings and a string of trumped-up charges and convictions each carrying additional sentencing, she was sentenced to a total of 11 years in prison as of April 2022.  In an obvious attempt to ensure she is jailed for life, she still faces added bogus charges that could see her imprisoned for more than 190 years by some reports. This is appalling and concerning as the recent executions confirm that the junta will not hesitate to murder political prisoners to further strengthen their rule of terror. “The world should unite to pressure Myanmar to release all political prisoners. At least 117 activists have been sentenced to death since the coup. We must do everything in our power to ensure that they do not face the grim fate of their four compatriots.”

  • Co-Chairman Cohen Deplores Arrest of Ilya Yashin in Russia

    WASHINGTON—In response to the arrest of Ilya Yashin, a Russian politician critical of Russia’s war in Ukraine, the Helsinki Commission Co-Chairman and OSCE PA Special Representative on Political Prisoners Rep. Steve Cohen (TN-09) issued the following statement: “Putin’s government has been engaged in a systematic assault on Russian citizens who dare speak the truth about Russia’s atrocities in Ukraine. Ilya Yashin, a Russian patriot and a fierce critic of the war in Ukraine, is one of the victims of this regime. “Ilya spoke out against the war despite the cynical law Russia has adopted that punishes people speaking the truth on this conflict with up to 15 years in prison. He was arrested on trumped-up charges and is facing a lengthy jail term for no crime other than publicly speaking out against Russia’s war in Ukraine. Ilya is a political prisoner and should be given all protections afforded by this status. The Russian government has a complete disregard for international law and customs but if they have an ounce of respect for their own laws, they will immediately release Ilya and other political prisoners.” Ilya Yashin, a co-founder of the Solidarity movement, is a member of a Moscow city district council. Throughout his career, he advocated for fair elections, rule of law, and democracy in Russia. Prior to his arrest, Mr. Yashin was one of the few Russian opposition activists who had not been killed, forced to flee, or imprisoned.

  • Helsinki Commission Urges Administration to Work to Free Vladimir Kara-Murza

    WASHINGTON—Helsinki Commission Chairman Sen. Ben Cardin (MD), Co-Chairman Rep. Steve Cohen (TN-09), Ranking Member Sen. Roger Wicker (MS), and Ranking Member Rep. Joe Wilson (SC-02) today released a letter urging the Biden Administration to “use every instrument in our toolbox” to free Russian political prisoner Vladimir Kara-Murza. The letter read in part: “The United States has a proud history of standing up for political prisoners and working relentlessly to help them return to freedom. We stared down the Soviet Union, Communist China, military regimes in Latin America and South-East Asia, and succeeded in helping secure the release of those who deserved freedom the most – innocent and peaceful activists and freedom fighters representing a vision for better governments in those countries. Mr. Kara-Murza represents a hope for a democratic Russia at peace with its neighbors and own citizens, and now is someone who the U.S. should advocate for his release… “The Helsinki Commission continues to raise the issue of political prisoners in Russia, Belarus, and other countries across the OSCE region, and specifically Vladimir Kara-Murza’s case…Now, we call on your Administration to use every instrument in our toolbox to secure the release of Mr. Kara-Murza. This is in the interest of our national security, his well-being, and importantly, the well-being of his incredibly brave children and spouse. Mrs. Kara-Murza and their three children reside in the U.S and despite the distance, the Kremlin has been poisoning – literally and figuratively – their lives for decades now. We should do everything in our power to help free Vladimir Kara-Murza and reunite him with his family.” On April 12, Vladimir Kara-Murza was arrested in Russia on charges of disobeying police orders when he allegedly “changed the trajectory of his movement” upon seeing Russian police officers at his home. This carried a 15-day sentence in jail. With five days remaining in his sentence, new charges were levied against him for spreading “deliberately false information” about Russia’s war on Ukraine.  He now faces up to 15 years in prison. On March 29, he testified at a Helsinki Commission hearing examining Russian dictator Vladimir Putin’s war on truth, where witnesses discussed the Kremlin’s use of propaganda and censorship. “Those who speak out against this war are now liable for criminal prosecution,” he said. The Helsinki Commission has a long tradition of advocating on behalf of political prisoners worldwide. Earlier this month, Co-Chairman Cohen was appointed the first-ever OSCE Parliamentary Assembly Special Representative on Political Prisoners.

  • CO-CHAIRMAN COHEN APPOINTED AS OSCE PARLIAMENTARY ASSEMBLY SPECIAL REPRESENTATIVE ON POLITICAL PRISONERS

    WASHINGTON—Margareta Cederfelt, President of the OSCE Parliamentary Assembly (PA), has appointed Helsinki Commission Co-Chairman Rep. Steve Cohen (TN-09) as the first-ever OSCE PA Special Representative on Political Prisoners. “I welcome the chance to serve as the voice of political prisoners across the OSCE region,” said Co-Chairman Cohen. “Every day, we witness more political arrests of opposition politicians, journalists, activists and civilians in Russia, Belarus, and other participating States that are cracking down on free speech, freedom of the press, and free thought. Through this position, I am committed to working tirelessly to elevate the issue of political imprisonment as the egregious violation of human rights that it is.” In his new role, Co-Chairman Cohen will collect and share intelligence on political prisoners throughout the OSCE region; raise awareness of participating States with high rates of political prisoners; advocate for the release of political prisoners; and promote dialogue at the OSCE PA and OSCE executive structures about political imprisonment.  Commission Chairman Senator Ben Cardin and Congressman Chris Smith were reappointed as Special Representative on Anti-Semitism, Racism and Intolerance, and Special Representative on Human Trafficking Issues, respectively.

  • Helsinki Commission Delegation Convenes Historic Black Sea Security Summit, Demonstrates Bipartisan Support for European Security

    WASHINGTON—From June 29 – July 9, Helsinki Commission Ranking Member Sen. Roger Wicker (MS) led a bipartisan, bicameral congressional delegation to Romania, the United Kingdom, Finland, and Sweden to consult with senior officials across Europe about Russia’s war on Ukraine, security in the Black Sea region, and Finland and Sweden’s plans to join NATO. On the shores of the Black Sea in Constanta, Romania, Sen. Wicker and Romanian Foreign Minister Bogdan Aurescu co-chaired the first-ever congressionally-organized Black Sea Security Summit to underscore the critical importance of the Black Sea region to European peace and security, and to establish a sustainable, collective approach to ending Russian aggression and enhancing mutual cooperation. “Given Russia’s monstrous war on Ukraine and its wider aggression in the region, it is not an exaggeration to say that the Black Sea is currently the epicenter of Euro-Atlantic security and global peace,” said Sen. Wicker. “Ukraine must be successful in this war…Vladimir Putin’s unprovoked aggression against a neighbor cannot stand.” “Over the last 25 years, a key objective of our bilateral strategic partnership has been to act as partners in enhancing our joint security and promoting the democratic and economic development of the Black Sea region.  The continuation of common decisive action in this regard at the bilateral and multilateral level is more relevant than ever,” said Minister Aurescu. “All along the Black Sea coast lies the first line of defense for the Euro-Atlantic community and the first line of support for our partners in Ukraine, the Republic of Moldova, and Georgia.” Prior to the summit, members of the Congressional delegation visited Romania’s Mihail Kogălniceanu Air Base, where they received briefings from U.S., Romanian, and other NATO personnel and met with American troops. Delegation members then traveled to Birmingham, UK, for the Annual Session of the OSCE Parliamentary Assembly (PA). Co-Chairman Rep. Steve Cohen (TN-09) was Head of the U.S. Delegation to the PA and spearheaded U.S. efforts to forge a strong, unified response from international legislators to Russia’s ongoing war of aggression against Ukraine and its people. “All OSCE parliamentarians must stand in solidarity with our Ukrainian colleagues as they battle the Kremlin’s vicious, intolerable war on Ukraine,” said Co-Chairman Cohen. “We must do all in our power—through this forum and all others—to ensure that Ukraine is victorious against Russian aggression.” During the Annual Session, parliamentarians overwhelmingly approved a resolution introduced jointly by Sen. Wicker and the heads of the Ukrainian and Lithuanian delegations, responding to Russia’s war on the Ukrainian people and the greater Russian threat to European security. The document “condemns resolutely and unequivocally the ongoing, intensified, clear, gross and still uncorrected violations of Helsinki Principles as well as of fundamental principles of international law by the Government of the Russian Federation in its war of aggression against Ukraine, as well as the complicity of Belarus in this war of aggression, and calls on the governments of OSCE participating States to do the same.” Several members of the U.S. Delegation successfully introduced more than two dozen amendments, designed to keep the focus on Russia’s current aggression, to an array of other resolutions. In Birmingham, the delegation also co-hosted an event highlighting the growing problem of political repression in Russia and Belarus, especially in the context of protesting the war on Ukraine; met with Mikhail Khodorkovsky to discuss his organization’s work to support political prisoners and democracy in Russia; and held bilateral meetings with the UK’s parliamentary leadership, OSCE officials, parliamentarians from other OSCE countries. Helsinki Commissioner Rep. Richard Hudson (NC-08) was re-elected to his post as chair of the OSCE PA’s Committee on Political Affairs and Security. Following the Annual Session, the congressional delegation stopped in Finland and Sweden to welcome the historic decision of both countries to join the NATO Alliance. In Finland, members met with President Sauli Niinistö, and Finnish parliamentarians including First Deputy Speaker Antti Rinne and OSCE PA Vice President Pia Kauma. In Sweden, they met with Foreign Minister Ann Linde, Deputy Defense Minister Jan Olof-Lin, and a group of members of the Swedish parliament, led by Speaker Andreas Norlén and OSCE PA President Margareta Cederfelt. In addition to Co-Chairman Cohen, Sen. Wicker, and Rep. Hudson, the Congressional delegation included Helsinki Commission Ranking Member Rep. Joe Wilson (SC-02), Commissioners Rep. Robert Aderholt (AL-04), Rep. Ruben Gallego (AZ-07), and Rep. Marc Veasey (TX-33), as well as Sen. John Cornyn (TX), Rep. Lloyd Doggett (TX-35), Rep. John Garamendi (CA-03), Rep. Sheila Jackson Lee (TX-18), Rep. August Pfluger (TX-11) and Rep. Chris Smith (NJ-04).

  • The Helsinki Process: An Overview

    In August 1975, the heads of state or government of 35 countries – the Soviet Union and all of Europe except Albania, plus the United States and Canada – held a historic summit in Helsinki, Finland, where they signed the Final Act of the Conference on Security and Cooperation in Europe. This document is known as the Helsinki Final Act or the Helsinki Accords. The Conference, known as the CSCE, continued with follow-up meetings and is today institutionalized as the Organization for Security and Cooperation in Europe, or OSCE, based in Vienna, Austria. Learn more about the signature of the Helsinki Final Act; the role that the Conference on Security and Cooperation in Europe played during the Cold War; how the Helsinki Process successfully adapted to the post-Cold War environment of the 1990s; and how today's OSCE can and does contribute to regional security, now and in the future.

  • Long Shadow of Russian Money Raises Tricky Questions for Swiss Bankers

    January used to be a big month for Swiss bankers and their Russian clients. Many of the Moscow elite had made a tradition of coming to the Alps for the orthodox new year, skiing with their families, then catching up with their financial consiglieri. In St Moritz, one banker recalls how he would book blocks of rooms for his clients. He would entertain them with snow polo, rolling out the charm as they clinked champagne glasses and watched horses charge across a frozen lake. This year he couldn’t tempt a single one. For the best part of a decade, Russian money has coursed through the Swiss banking world. But, as Russia’s relationship with the west has soured in recent years, what was once a source of bumper new profits for Switzerland’s banks has become a financial and reputational risk. In the run-up to Russia’s invasion of Ukraine in February, many wealthy Russians were moving to better safeguard their money from political interference, putting assets in the names of relatives or shifting them to less closely scrutinised jurisdictions, such as Dubai. In its wake, a vast sanitisation operation is under way at Swiss banks, to try and wind down relationships with sanctioned individuals. Neutral Switzerland has matched all of the EU’s punitive financial measures against Russia. More than 1,100 of the Russian elite — including figures such as coal and fertiliser billionaire Andrey Melnichenko and banker Petr Aven, both regular visitors to Switzerland — have become financial personae non gratae in a country many had assumed would keep their fortunes safe. The biggest banks, such as the publicly listed trio of UBS, Credit Suisse and Julius Baer, have declared they will cease all new business in Russia. For critics, though these are weasel words. It is their existing Russian clients that are the problem. No one is expecting many new fortunes to be minted in Russia any time soon. “Switzerland has a terrible history when it comes to Russian dirty money,” says Bill Browder, a longstanding Kremlin critic and a former Russian investor. He is sceptical of how much commitment there is among Swiss bankers to enforcing sanctions. “The Swiss want to be seen as doing something, but they don’t actually want to do anything,” he says. The US Helsinki Commission, an independent US government agency that observes human rights and the rule of law in Europe, agrees. In a report issued in May, it labelled the alpine state and its banks “a leading enabler of Vladimir Putin and his cronies”. The Swiss government responded by calling US secretary of state Antony Blinken in protest. A spokesperson for the Swiss government said president Ignazio Cassis “rejected the [report] in the strongest possible terms”. Like their counterpart in St Moritz, Swiss bankers the FT interviewed for this story all declined to be identified. Many more refused to speak at all. Switzerland’s banking secrecy laws are draconian — talking about clients can earn a lengthy jail term — and talking about Russian clients is even more taboo. “When we were onboarding a lot of these clients [in the 2000s], the entire approach was just very different. And you can’t really say that publicly now,” says one former banker who handled eastern European and Russian clients until retiring two years ago. “These [Russians] were people who had earned so much money, so quickly, that they didn’t know what to do with it. They were basically ideal clients. As long as you had no questions about where that money had come from . . . and, basically, we didn’t.” Quite how much Russian money there is in Switzerland is open to question. In March, the industry body representing Switzerland’s banks, the Swiss Bankers Association (SBA), caused a stir when it released details of a study estimating there was SFr150bn-SFr200bn ($154bn-$205bn) held in accounts for Russian citizens. At the end of last year, the total cash held on behalf of customers by Switzerland’s banks was SFr7,879bn, more half of which was wealth from abroad, according to the SBA. The disclosure prompted hand-wringing in the Swiss media. Commentators, even at conservative outlets such as the newspaper Neue Zürcher Zeitung, asked whether Switzerland should do business with autocratic regimes anywhere in the world any more. But others in the country have defended its economic relationships with Russia. The outspoken finance director of the canton of Zug, an important low-tax centre, said in March it was not his job to “act like a detective” and make judgments on Russian assets. In April, he announced that Zug, home to 37,000 companies, had no sanctioned assets to report back to Bern. Nevertheless, by April, the State Secretariat for Economic Affairs (SECO) announced that it had frozen SFr9.7bn of Russian assets. Authorities have insisted that the amount is proportionate to the scale of asset freezes in other leading financial centres. But Bern has been forced to row back in some cases, and in May it announced it was unfreezing SFr3.4bn of funds. Switzerland cannot freeze funds “without sufficient grounds”, says Erwin Bollinger, a SECO official, who adds that the government has received data on sanctioned accounts at more than 70 of the country’s banks. Direct disclosure by the banks has been patchy. Credit Suisse chief executive Thomas Gottstein told a conference in March that about 4 per cent of assets in his bank’s core wealth management business were Russian — a proportion that would equate to roughly SFr33bn. Meanwhile, UBS, the world’s largest private wealth manager, has disclosed it has $22bn of assets of “Russian persons not entitled to residency in the European Economic Area or Switzerland”, leaving open the question of how much it holds overall. Some 16,500 Russians are permanently resident in Switzerland, and more Russians are accepted for Swiss citizenship than any other nationality, according to the State Secretariat for Migration. Julius Baer has made no direct disclosure of the size or wealth of its Russian client base, though it has said, somewhat elliptically, that the value of assets held by its Moscow-based subsidiary is some SFr400mn. Information from the dozens of other smaller Swiss private banks is even scantier. Even leading industry figures wonder what is being left unsaid. One executive, who for the past two decades has been a senior figure in the private banking world in Switzerland, says he has almost no doubt that the significance of many banks’ close working relationships with sanctioned individuals is being underplayed. “You don’t have dozens and dozens of people employed on your Russia desks if you are not making money in Russia,” he says. Moreover, he adds, many Russian clients have done their business through Swiss banks’ subsidiaries abroad, such as those in Monaco, London or Asia. It is not clear to him whether all these assets have been caught by the Swiss rules. Swiss banks have a legal obligation to record the ultimate beneficial owners of all assets they handle worldwide, but doing so accurately can be tricky in jurisdictions where it is easy for third parties to mask who the owners are. Switzerland’s banks have moved dramatically from the freewheeling approach of previous years, when there was “a run on Russia”, says Thomas Borer, a former leading Swiss diplomat turned consultant, who has worked with prominent Russian clients. He now supports Switzerland’s sanctions policy. “Being militarily neutral does not mean being economically indifferent,” he says. But he argues that Swiss banking culture is still very different from elsewhere in the west. Even the biggest banks, he says, were clinging to relationships with Russian clients as the Ukraine crisis unfolded. The Financial Times revealed that, as late as March, Credit Suisse was asking investors to destroy documents that might expose Russian oligarchs it had done business with to legal risks. One senior relationship manager at a Zurich-based bank agrees. Even as sanctions came in, he says, the dominant approach was to ask, “how can we make this work for the client?” rather than “how do we do this for the government?”. But he defends the approach, saying: “Doing everything you can for your client is a Swiss commitment to excellence. If I was a watchmaker I would want to make the best watches with many complications. And if I was a policeman, then maybe I would want to be the best at catching Russian criminals. But I’m a banker.” There is still legal ambiguity in Switzerland over whether sanctions apply to family members and friends of listed individuals. This has provided a loophole bankers have helped at-risk clients to actively exploit in recent years. Swiss banks have seen “billions” of assets transferred to the names of spouses and children of Russian clients, in a trend that accelerated in the run-up to the war, says one banker. One bank chief executive admitted recently to the FT that there were many “grey areas” in applying sanctions. Part of the problem, he said, was that bank legal departments were struggling to obtain clarity from Bern on which asset transfers were deemed to be evading sanctions and which were not. Many who have been in the industry for a long time decry the new rules they must follow around taking new clients and being certain of the source of their wealth. “Know your customer used to mean just that: do you know the person? Now it is supposed to mean: do you know every little thing about their financial and private life?” says one Geneva-based banker. Many Russians themselves knew the banks were no longer safe havens, particularly since 2018 when Swiss banks began making significant concessions to information sharing on client accounts with other governments. Swiss residency did not protect billionaire Viktor Vekselberg in 2018, for example, when he was targeted by US sanctions; both Credit Suisse and UBS moved to terminate loans with him. The SBA says its members adhere to the highest international standards. Chief executive Jörg Gasser, argues Swiss banks have “no interest in funds of dubious origin” and have rigorous procedures in place to rapidly screen for sanctioned assets. “Swiss banks have been — and still are — very careful and diligent when it comes to accepting client funds,” he says, adding it is important to recognise the huge amount of legitimate business done with Russian entrepreneurs who are not subject to sanctions. For Mark Pieth, emeritus professor of criminal law at the University of Basel and a specialist in white-collar crime, the real story of the past decade is how Switzerland’s lawyers, rather than its bankers, have become the facilitators of hidden foreign money. “Swiss bankers were extremely cosy with Russians in the past,” he says. “Alongside London, this country was the porch for Russians into the west . . . but now I wouldn’t say the problem is so much with the banks — it is all the other intermediaries.” Swiss law gives remarkable sweep to attorney-client privilege, says Pieth, meaning lawyers can refuse to disclose almost anything to the authorities about their clients. The Swiss Bar Association strongly rejects this. “Professional secrecy does not protect against criminal acts,” it says. “Lawyers know the law and know what to do.” One senior industry figure defends the banks’ position unapologetically. He says everybody now wants to know the origins of their luxury jackets. But 10 years ago nobody was asking where they were made, by whom and with what materials. In banking, as in fashion, things have changed, he says, but nobody is haranguing the fashion world in the same way they are criticising banks. Fashion companies, though, have moved with the times and opened up, whereas Switzerland’s banks, for all their insistence on change and compliance, still want to maintain as much of the secrecy surrounding their clients as possible — even at a time of international crisis.  

  • Why I’m Sad to Be on Russia’s All-Purpose Payback List

    Reading Russia’s latest sanctions list, permanently banning travel to the country by 963 people, saddened me — and not just because my name is on it. It’s a catalogue of hurt from a nation that seems ready to blame everybody but its leaders for its current troubles. The list is very long indeed, running to nearly 100 pages in my printout. Reading so many names, you sense that Russia is deliberately burning nearly all its bridges to the United States. Russia’s ruling elite feels abused by American politicians, business leaders, journalists, judges, think tanks — nearly everyone, it seems. Donald Trump can still visit Moscow, but scores of Republican members of Congress can’t. The list of excluded GOP senators ranges from moderates such as Roy Blunt of Missouri and Mitt Romney of Utah to hard-right stalwarts Ron Johnson of Wisconsin and Tom Cotton of Arkansas. The GOP doesn’t fare much better in the House. Moderates Liz Cheney of Wyoming and Mike Gallagher of Wisconsin can’t tour the Kremlin anymore, but neither can Jim Jordan of Ohio or Marjorie Taylor Greene of Georgia. As for Democrats, forget about it. The sanctions list includes the Democratic House leadership, including Speaker Nancy Pelosi of California, Majority Leader Steny H. Hoyer of Maryland and Democratic Whip James E. Clyburn of South Carolina. The Congressional Progressive Caucus can save its rubles, too. The members of “the Squad” are all banned. So are Pramila Jayapal of Washington state and Ro Khanna of California. It’s the same on the Senate side. Majority Leader Charles E. Schumer of New York and Whip Richard J. Durbin of Illinois: Nyet, nyet.

  • Helsinki Commission on Sanctions Extended by Russia on Commissioners and Staff

    WASHINGTON—After Saturday’s announcement by the Russian foreign ministry that the latest list of Americans permanently banned from traveling to Russia includes all members of Helsinki Commission leadership, the overwhelming majority of commissioners, and nearly 20 current and former commission staff members, Helsinki Commission Chairman Sen. Ben Cardin (MD), Co-Chairman Rep. Steve Cohen (TN-09), and Ranking Members Sen. Roger Wicker (MS) and Rep. Joe Wilson (SC-02) issued the following joint statement: “The Helsinki Commission and our professional staff have worked consistently throughout our history to ensure that all OSCE participating States—including Russia—live up to their commitments to human rights and the rule of law. Clearly our work has made a significant impression on Russian dictator Vladimir Putin and his cronies, if even staff who left the commission years ago are being sanctioned by the regime. With these actions to bar travel to Russia by experts on the country, Putin continues his campaign to isolate Russians from the international community. “We will continue to hold Russia to account for its clear, gross, and uncorrected violations of the Helsinki Final Act, including the war crimes committed during its invasion of Ukraine, its suffocation of free media and civil society domestically, and its egregious attempts to undermine democracy across the OSCE region.”   While this latest list is one of the largest issued by Russia, Chairman Cardin and many other members of the Helsinki Commission had previously been barred from traveling to Russia.

  • Swiss Release Some Frozen Russian Assets

    The Swiss government on Thursday reported 6.3 billion Swiss francs ($6.33 billion) worth of Russian assets frozen under sanctions to punish Moscow's invasion of Ukraine, a drop from early April as around 3.4 billion francs in provisionally blocked assets were released. The figure marked a decrease from roughly 7.5 billion Swiss francs in funds the government reported frozen on April 7. Government official Erwin Bollinger pointed to fewer funds -- 2.2 billion francs -- newly frozen than those that had been released. read more "We can't freeze funds if we do not have sufficient grounds," Bollinger, a senior official at the State Secretariat for Economic Affairs (SECO) agency overseeing sanctions, told journalists. Pressure has increased on Switzerland -- a popular destination for Moscow's elite and a holding place for Russian wealth -- to more quickly identify and freeze assets of hundreds of sanctioned Russians. read more The U.S. Helsinki Commission, a government-funded independent commission which looks at security, cooperation and human rights issues in Europe, in early May called Switzerland "a leading enabler of Russian dictator Vladimir Putin and his cronies", who the commission said used "Swiss secrecy laws to hide and protect the proceeds of their crimes". The Swiss government rejected the accusations "in the strongest possible terms", while Swiss President Ignazio Cassis had requested the U.S. government "correct this misleading impression immediately" during a telephone call with U.S. Secretary of State Antony Blinken. Swiss banks hold up to $213 billion of Russian wealth, Switzerland's bank lobby estimates, with its two largest lenders UBS (UBSG.S) and Credit Suisse (CSGN.S) each holding tens of billions of francs for wealthy Russian clients. read more Credit Suisse alone froze some 10.4 billion Swiss francs of that money through March under sanctions imposed in connection with the invasion. read more Credit Suisse's reporting did not make clear how much of that money was frozen in Switzerland. While banks and asset managers can provisionally freeze funds, SECO officials on Thursday said funds needed to be released if they could not establish the assets were directly owned or controlled by a sanctioned individual. "The amount of assets frozen is not a measure of how effectively sanctions are being implemented," Bollinger said, adding asset freezes were "by far" not the most important measure in a wide-ranging packet of sanctions. ($1 = 0.9948 Swiss francs)

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