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Latest retreat by Swiss prosecutors in high profile money laundering case raises key administration of justice questions: are they up to the job?

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Swiss legal authorities have been forced into a climbdown over one of the country’s highest-profile money laundering cases, an investigation focused on the alleged theft of $176 million from Russia’s Otkritie bank, writes James Wilson.

It has been reported that the three defendants have been offered four and five month suspended sentences by prosecutors and a SFr3000 fine, in “ordinances” seen by the Financial Times. The newspaper also reported that this proposed settlement has been rejected by lawyers representing the individuals accused. The Financial Times noted that this is a significant reversal of approach by Swiss legal authorities, who had earlier sought prison sentences of up to five years in this nine-year investigation. According to Sam Jones of the Financial Times, the potential collapse “marks the latest blow to the reputation of Switzerland’s rule of law in complex financial cases”.

Otkritie's London lawyer, Neil Dooley of Steptoe and Johnson, said the Swiss prosecutor's offer was “astounding” and added: “Does the Swiss Ministry of Justice really want to send a signal to fraudsters and money launderers that they should bring their business to Switzerland, where they risk little more than a slap on the wrist and don’t have to disgorge stolen funds?”

A UK high court ruled in 2014 that the alleged theft of $173m from Otkritie was a “cunning and well-orchestrated fraud” driven by “blatant dishonesty . . . and simple greed”. A British criminal case followed and led to the group's ringleader, Georgy Urumov, a British resident, being sentenced to 12 years in prison. Sergey Kondratyuk, one of the five, pled guilty in 2013 and was sentenced to three years in prison. The four remaining — Ruslan Pinaev, his wife Marija Kovarska, Yevgeny Jemai and his mother Olessia Jemai — contested the Swiss case against them, however.

Swiss prosecutors are allowed to propose their own unilateral judgments on cases through ordinances if the sanction they attach is minor enough. Defendants then have ten days to accept or reject the ordinance. If rejected, the prosecutor must decide whether to undertake the lengthy process of pursuing the case further in court or drop the charges entirely. The Financial Times article also noted that in investigating the Otkritie fraud, Swiss authorities also declined early on to take any action against Swiss institutions embroiled in the case, such as the Swiss private bank Bordier & Cie. Bordier & Cie had facilitated a number of transactions before finally raising concerns with authorities only after Pinaev tried to close his account with the firm.

The ruling in the British fraud case’s 2014 high court judgment asserted that the bank initially took delivery of $120m allegedly connected to the London fraud from a Latvian bank, via a Panamanian shell company, without probing the superficial origin story given for the money. Bordier & Cie also later agreed at short notice to the withdrawal of $109m in cash by Urumov, Pinaev and Kondratyuk. The cash was immediately redeposited, via Bordier, in three separate entities . Bordier & Cie said the bank does not comment on proceedings in which it is not an involved party. “Bordier & Cie scrupulously respects all legal and regulatory obligations applicable to it”. Lawyers for Messrs Pinaev and Jemai and Ms Jemai said their clients have rejected the conclusions of the ordinances, and therefore remain innocent of any wrongdoing. They said they were ready to fight the case further in court should the prosecutor decide to proceed further.

The Financial Times reported Mr Pinaev's lawyer, Alexis Meleshko, as saying the case against his client was based on a simplified and one-sided reading of an “extremely complex” financial process that Swiss prosecutors had repeatedly failed to grasp. Mr Meleshko said he had never known a case to drag on for so long: “It is a ridiculous proceeding,” he said. Miguel Oural, Mr Jemai's lawyer, and Jean-Marc Carnicé, Ms Jemai's lawyer, said their clients had rejected the prosecutor’s ordinances.

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“The Swiss justice system is in a bit of a crisis at the moment,” said Mark Pieth, professor of criminal law at the University of Basel, as quoted in the Financial Times. “It’s not the law itself. It’s the institutions — the prosecutors, the courts . . . are they up to their task?”

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