Chinese Secret Accounts in Swiss Banks face sanction prospects

Switzerland’s response to Russia’s invasion of Ukraine has made headlines as the country imposed sanctions on wealthy Russians close to Putin. The Swiss government’s latest move is to keep a close eye on Chinese wealth in Swiss banks after receiving intelligence that Beijing may be considering supplying Russia with lethal weapons, such as drones and munitions.

As reported by the Financial Times, Switzerland’s tough stance on sanctions has raised questions among wealthy Chinese about the safety of their money in Switzerland. Recent developments, including the spy balloon incident and the possibility of China supplying lethal weapons to Moscow, have brought the possibility of sanctions against China closer.

In fact, US Secretary of State Anthony Blinken has publicly warned Beijing against escalating the conflict in Ukraine and confirmed that the US has intelligence suggesting that China may supply Russia with lethal weapons. The United States is also planning to share this intelligence with its allies.

While the Swiss government does not disclose the extent of Chinese assets in the country, a release of documents to the International Consortium of Investigative Journalists in 2014 revealed that Swiss banks had set up accounts for many Chinese political elites and their offspring. Among the declassified documents were details that exposed the offshore holdings of at least 20,000 wealthy individuals from mainland China and Hong Kong, including high-level Chinese “red second-generation” families.

Shockingly, the documents also revealed that at least five family members of the Politburo Standing Committee members owned offshore companies in offshore financial centers like the British Virgin Islands and Cook Islands. Despite this, the Chinese government blocked the news from being released, and foreign-language websites were even blocked in China.

According to a recent study by Credit Suisse, the number of wealthy Chinese individuals with bank accounts in Switzerland has surpassed that of other wealthy countries including US.

The mounting tension between China and the West has left Swiss banks playing a “war game” on how to navigate the potential fallout should Beijing’s international relations take a hit. According to a report, all Swiss wealth managers are weighing the impact of sanctions imposed by Swiss authorities, which is a top priority on the board and executive’s agenda. For centuries, Switzerland has been a top destination for the world’s wealthiest people, with a reputation for strict bank secrecy and political neutrality. Tens of thousands of individuals have flocked to the country to open secret accounts, transferring vast sums of wealth and funds.

While this system has allowed for tax avoidance, it has also enabled criminal activities such as money laundering and providing a safe-haven for terrorists and illegal funds of dictatorships. This has placed Switzerland under pressure from various countries, including Europe and the United States.

In response to Russia’s invasion of Ukraine, the Swiss government has taken a firm stance, aligning itself with the European Union to impose sanctions on Russia and wealthy Russians. The State Secretariat for Economic Affairs reports that around 7.5 billion Swiss francs ($8 billion) in Russian funds are currently frozen under Swiss sanctions. Additionally, data shows that over 7,500 Russian billionaires have deposited a staggering CHF 46.1 billion in assets in Switzerland. Now Chinese wealthy elites are anxious of similar action on their accounts by the Swiss banks.