Swiss Banks Land in Middle of Money-Laundering Probe

BY: Greg Farrell @gregfarrel , Hugo Miller @hugodmiller  , Tiffany Kary @TiffanyKary

From: Bloomberg 

Preet Bharara

U.S. said to seek banking records in widening Venezuela probe

Swiss agree to turn over PDVSA-linked records for 18 banks

Swiss banks have a new money-laundering worry: Venezuela.

At the request of U.S. authorities, Switzerland has agreed to turn over records from at least 18 banks involving Venezuela’s state oil company, Petroleos de Venezuela SA, which is the subject of a widening corruption investigation by the U.S. Department of Justice, according to Swiss regulators.

Among the banks are UBS AG, EFG Bank AG and CBH Compagnie Bancaire Helvetique SA, said a person briefed on the matter. Spokespeople for the banks declined to comment. None of the 18, whose names haven’t been disclosed, has been accused of wrongdoing.

The development is the latest twist in a wide-ranging investigation that U.S. authorities say has revealed evidence of bribery at PDVSA, the linchpin of Venezuela’s oil industry, as well as at BANDES, the nation’s economic development bank.

The Swiss bank records are being sought by U.S. Attorney Preet Bharara in connection with his office’s investigation into representatives of Derwick Associates, a Venezuelan energy company that has done business with PDVSA, the Federal Office of Justice (FOJ) in Bern said. Bharara’s request means that records of any wire transactions between the 18 banks and individuals or companies suspected of bribery or other criminal conduct in Venezuela will be given to federal prosecutors in New York.

Potential Misconduct

The Venezuelan investigation could potentially expose some of the banks to harsh treatment from the Justice Department if any wrongdoing is found. Several Swiss banks, including UBS and EFG, have entered into agreements with U.S. authorities in recent years that require them to notify law enforcement about any potential misconduct. Last year the Japan unit of USB pleaded guilty to wire fraud in the Libor probe, while EFG joined the Justice Department’s Swiss bank program, part of which requires it to cooperate in treaty requests for information.

Justice Department spokesman Peter Carr declined to comment.

The U.S. investigations into bribery at PDVSA come as the Venezuelan government is struggling to avoid a default on its foreign debt amid low oil prices, the worst recession in a decade and political turmoil as President Nicolas Maduro battles with a newly installed opposition congress.

Illicit Funds

Opposition leaders pledged to probe allegations of government corruption after they took control of congress in elections late last year. Angel Alvarado, a deputy affiliated with the Primero Justicia opposition party, said in December that his faction had teams in place in Andorra, Switzerland, the U.S. and China tracking down illicit funds. 

The U.S. investigation has already led to criminal charges, including guilty pleas from three former PDVSA officials that were unsealed in Houston on Tuesday, according to court documents. The three -- Jose Luis Ramos Castillo, 38; Christian Javier Maldonado Barillas, 39, and Alfonzo Eliezer Gravina Munoz, 39 -- admitted to accepting bribes and helping two businessmen win lucrative contracts from the state-owned company. The three pleaded guilty to conspiracy to commit money laundering.

And in 2013, Maria de los Angeles Gonzales, a former official at the country’s economic development bank, Banco Desarrollo Economico y Social de Venezuela, pleaded guilty in New York to accepting bribes from representatives of Direct Access Partners, a broker-dealer with offices in Florida.

Derwick Probe

The Swiss authorities’ statement is the first official confirmation of the existence of a U.S. investigation into Derwick Associates. The company has denied allegations lodged in civil suits that it bribed officials from PDVSA in order to obtain lucrative contracts. No criminal charges have been filed against Derwick.

Joseph DeMaria, a lawyer for a Barbados affiliate of Derwick, and its two co-founders, said he wasn’t aware of the investigation, but said that any probe by U.S. authorities is part of a “continuous witch hunt” against his clients.

The agreement to turn over bank records shows how Swiss regulators are now cooperating with U.S. authorities after years of balking at requests for information about how their banks helped American citizens avoid paying taxes. The U.S. cracked down on tax evasion starting in 2009 after UBS, Switzerland’s biggest bank, paid $780 million to avoid prosecution.

Financial Regulator

The request to Switzerland came in two batches. The Department of Justice’s Fraud section filed a Mutual Legal Assistance Treaty request, or MLAT, for records from 8 banks related to the Houston case, according to Swiss officials. Bharara’s office sought records from 18 banks. Some banks were on both lists.

Finma, Switzerland’s financial regulator, “is aware of the case and is in touch with several banks” to gauge their level of involvement, a spokesman for the Bern-based agency said. He declined to confirm the names of any banks.

It’s unclear how quickly the Swiss banks will turn their client data over, said Ursula Cassani, a professor of law and money-laundering specialist at the University of Geneva. “It’s not unusual” for a process like this to take a year or more, she said.