Treasury Moves To Cut Off Swiss Bank for Aiding America’s Adversaries

An opaque Swiss bank may soon lose its access to the U.S. dollar — and the story of how it got there runs through Venezuela, Russia, and Iran. 

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking on February 26 to designate MBaer Merchant Bank AG as a financial institution of primary money laundering concern. According to Treasury, MBaer provides “financial support to illicit actors linked to Russian and Iran,” and is believed to have facilitated at least $100 million in illicit transactions since 2019. If finalized, the rule would prohibit U.S. financial institutions from opening or maintaining correspondent accounts for MBaer.

The action is part of a broader campaign against networks sustaining America’s adversaries — a campaign that included, most recently, a February 25 sanctions package targeting Iran’s shadow fleet and illicit weapons procurement. 

A Bank Built on Dirty Money

MBaer’s founding in 2018 came as the United States increasingly focused on the Venezuelan regime’s corruption, money laundering, and mismanagement through state-owned oil major PdVSA. The bank’s then vice chairperson reportedly facilitated payments on behalf of her husband, who was himself sanctioned by the Treasury Department’s Office of Foreign Assets Control (OFAC) in 2021 for his role as a key facilitator of a PdVSA sanctions evasion scheme. According to FinCEN, MBaer also maintained accounts for a key financial facilitator connected to a multi-billion-dollar PdVSA-linked cryptocurrency scheme, as well as for shell companies linked to Venezuelan public corruption.

The bank also allegedly services sanctioned Russian oligarchs, with FinCEN noting that, “MBaer reportedly relies on wealthy Russians, some of whom are subject to sanctions, as a central customer group.” FinCEN found that MBaer employees likely managed trust and front companies for the U.S.-sanctioned, pro-Russian Ukrainian oligarch Sergey Kurchenko, maintained accounts controlled by pro-Kremlin politician Viktor Medvedchuk — who was sanctioned by the United States, European Union, and Switzerland — and facilitated payments for companies implicated in the theft of Ukrainian grain and procuring equipment for Russia’s military. Beyond Russia, MBaer appears to have processed more than $37 million tied to an oil smuggling and money laundering scheme benefiting Iran’s Islamic Revolutionary Guard Corps. It also appears to have handled payments for a company whose assets included an Iranian shadow fleet tanker.

Congress Should Ensure Treasury Has The Information Needed To Enforce Sanctions

MBaer’s corruption-linked dealings in Venezuela may have begun as early as 2020, according to media reports. Six years later, the bank now aids Russia and Iran in evading western sanctions. In that time, the United States has brought charges against numerous individuals tied to PdVSA corruption, at least some of which appear to have involved or benefited MBaer. Congress should consider requiring mandatory referrals to FinCEN when foreign financial institutions are implicated in federal money laundering and corruption trials. This could help bring banks like MBaer onto Treasury’s radar earlier. 

FinCEN’s proposed action against MBaer also exposed a gap that Congress should close. As a federal agency, FinCEN must assess the compliance burden of any proposed action on affected parties. In this case, FinCEN was forced to reverse-engineer the universe of potentially affected U.S. financial institutions from quarterly financial reports, suspicious activity reports, and Federal Reserve master account records, as no authoritative registry of which foreign financial institutions hold U.S. correspondent accounts currently exists.

U.S. financial institutions are already required to collect beneficial ownership information on any foreign banks that they provide correspondent accounts for. Congress should consider extending this requirement to all foreign financial institutions — including broker dealers, mutual funds, and other non-bank financial institutions — with U.S. correspondent account access. This information should then be transmitted to FinCEN every six months, giving FinCEN a clear picture of not only which foreign financial institutions access the U.S. financial system, but also who owns them. It would also give Treasury a stronger foundation for identifying the next MBaer before it spends years serving America’s adversaries.

Max Meizlish is a research fellow for the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). For more analysis from Max and CEFP, please subscribe HERE. Follow Max on X @maxmeizlish. Follow FDD on X @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.