(Bloomberg) -- Two former Societe Generale SA bankers are challenging Swiss fines issued for failing to report suspicious deposits worth more than $700 million made by a one-time ally of Russian President Vladimir Putin.
The former head of SocGen’s Swiss private bank and the ex-head of compliance, who can only be named as L. and K. under Swiss reporting restrictions, are appealing fines totaling 90,000 swiss francs ($96,000) at a trial starting Wednesday in Bellinzona.
Sergei Pugachyov, a former Russian senator, was once a close confidant of Putin and amassed a fortune of more than $1 billion in the 2000s. Russian prosecutors, however, claim his fortune is based on theft and have been seeking his extradition from France, so he can face charges that he embezzled at least $1.5 billion from his Moscow-based International Industrial Bank before it collapsed.
Between 2007 and 2010, SocGen opened 30 accounts in the name of 22 companies on behalf of Pugachyov and his family, according to Swiss prosecutors. In the first few months of 2009, $713 million was deposited by Pugachyov’s companies, ostensibly intended for Russian construction projects, according to the indictment.
Lawyers for the pair declined to comment ahead of the hearing. A spokesman for SocGen declined to comment.
Over the course of 2009 it became clear that those construction projects weren’t going forward, the prosecutors said. During 2010, SocGen’s Swiss executives learned more about the ties between Pugachyov’s companies and troubled Mejprombank, as International Industrial Bank is known in Russia, which eventually filed for bankruptcy in late 2010. Then in January 2011, Pugachyov lost his Russian senate seat and was stripped of his parliamentary immunity as a criminal investigation was opened against him over his role in the collapse of Mejprombank, according to prosecutors.
K., who was fined 60,000 francs, “had received by Jan. 28, 2011, all the information he needed to conclude that a well-founded suspicion of criminal origin of the funds weighed on the business relations linked to Pugachyov,” Swiss prosecutors wrote in the indictment.
Pugachyov has previously said he’s being targeted as part of a political campaign by Putin. Voicemail messages for him weren’t returned.
As for L., who was then the unit’s CEO and was fined 30,000 francs, the prosecutors said that it’s simply “not credible” that he failed to spot how insufficient the explanations given in late 2010 were for $271 million worth of incoming funds.
Read more: Russia Asks France to Extradite Former Putin Ally on Theft Claim
By 2016, Swiss banking regulator Finma had begun to investigate Pugachyov’s SocGen deposits. They transferred the case in 2019 to the Swiss Finance Department, which in June found the two men guilty of failing to meet their money-laundering reporting obligations. Within weeks they gave notice they would challenge the verdicts in federal court. The appeal is scheduled over two days.
©2021 Bloomberg L.P.