Swiss Freeze Russian Accounts

Swiss banks have frozen $16.8 million in Russian accounts suspected to be linked to the Bank of New York money-laundering case, officials said Tuesday.

Folco Galli, spokesman for the Federal Office for Police Affairs, said the banks had reported the action as required under a new Swiss law.

Under the 1998 law, banks are required to freeze accounts and report their action to the Swiss government when they have well-founded suspicion of money-laundering.

Galli said that Â"a number of such reportsÂ" had been received in the Bank of New York case.

American investigators reportedly believe that up to $10 billion was illegally channeled by the Russian mob through the Bank of New York, possibly including loans from the International Monetary Fund.

No one has been charged, but the case has been described as potentially one of the biggest money-laundering affairs ever uncovered in the United States.

The Clinton administration told Congress Tuesday that the United States must continue to support Russia or risk being branded as Â"scapegoatsÂ" for Russia's failure. But Treasury Secretary Lawrence Summers said the administration will move to strengthen laws and make it tougher for foreigners to clean ill-gotten gains through American banks.

Summers was the leadoff witness as Congress opened the first of a series of inquiries into the Bank of New York scandal.

The administration backs continued support for Russia in spite of these allegations because Â"to quarantine, contain or write off Russia as too corrupt would ill serve our national interest,Â" Summers told the committee.

Â"Acting on that view would limit our ability to support Russian economic and financial stability; it would inhibit our ability to promote democratization and it would raise the risk that the United States and the West would be labeled as scapegoats for Russia's failure to address its problems,Â" Summers said.

Swiss authorities have expressed eagerness to help the United States in its Bank of New York case as soon as U.S. authorities send a request for judicial assistance, but Galli said so far no such request had been received. Under international treaties the Swiss must receive such a request before they can start investigating.

Galli said federal authorities had referred Â"about a dozenÂ" reports of bank accounts to cantonal (state) authorities in Geneva, who are conducting the main Swiss investigation into money-laundering and corruption from Russia.

He stressed that the federal office only acted as a relay point and that so far the banks had only operated on a basis of suspicion.

Daniel Devaud, the investigating judge looking into allegations of money-laundering in connection with Russian corruption, said Tuesday that he had found no direct link between the Bank of New York case and a Swiss construction company that had carried out work for the Kremlin.

However, he sai names of companies which were linked to the Bank of New York case had also appeared during the investigation of that affair.

Last January, Swiss authorities raided the Mabetex construction company in Lugano in connection with suspicions that several high-ranking Russian officials received Â"a great deal of moneyÂ" for helping the firm get large contracts for renovating the Kremlin.

A top Kremlin official immediately denied the allegations. Behgjet Pacolli, president of Mabetex, also has denied any wrongdoing.

Suspended Russian prosecutor Yuri Skuratov said earlier this month that he had received documents from the Swiss suggesting that President Boris Yeltsin and his two daughters received kickbacks from Mabetex.

Last July, Devaud sent out an order to Swiss banks that they report any accounts they were holding for 24 Russian individuals, including Kremlin property manager Pavel Borodin or his wife.

Devaud also froze a number of bank accounts in connection with the order, but he declined to say how many accounts or how much money was involved.

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