US Treasury moves to ban Swiss Bank MBaer from financial system over Russia, Iran ties

Washington: The U.S. Treasury Department moved Thursday to effectively banish a Zurich-based merchant bank from the American financial system, alleging the institution laundered more than $100 million for entities linked to Russian corruption and Iranian state-sponsored groups.

In a notice of proposed rulemaking, the Financial Crimes Enforcement Network (FinCEN) labelled MBaer Merchant Bank AG a "primary money laundering concern" under Section 311 of the USA PATRIOT Act. The designation, if finalised, would bar U.S. financial institutions from maintaining correspondent accounts for the Swiss firm, stripping it of its ability to clear transactions in U.S. dollars.

Allegations of Illicit Activity

Treasury Secretary Scott Bessent asserted that the bank and its staff have facilitated high-level corruption and the financing of terrorism since the firm's founding in 2018.

• Russian Connection: Federal officials alleged the bank served as a conduit for money laundering schemes tied to Russian interests.
• Iranian Ties: The Treasury accused the bank of processing financial flows for the Islamic Revolutionary Guard Corps (IRGC) and its elite Quds Force, both of which are currently designated under U.S. sanctions.
• Scale of Operations: "MBaer has funnelled over a hundred million dollars through the U.S. financial system on behalf of illicit actors tied to Iran and Russia," Bessent said in a statement.

The "Section 311" Sanction

The proposed measure will be one of the most aggressive manoeuvres in the Treasury's regulatory toolkit. By targeting the correspondent banking system, the network through which foreign banks process dollar-denominated trades, the U.S. can effectively isolate an international institution from global commerce.

Swiss Oversight and Bank Heritage

The Swiss Financial Market Supervisory Authority (FINMA) confirmed Thursday it is coordinating with U.S. officials. The regulator disclosed that it initiated its own enforcement proceedings against MBaer three weeks ago over deficiencies in anti-money laundering controls and sanctions risk management, a move the bank is reportedly contesting.

MBaer was established by Michael Baer, the great-grandson of the founder of the renowned private bank Julius Baer. U.S. authorities emphasised that MBaer is an independent, small-scale entity with no legal or corporate ties to the larger Julius Baer Group.

The action coincides with a delicate diplomatic environment, as the U.S. remains involved in complex negotiations with Iran and ongoing discussions regarding the conflict in Ukraine.