The dramatic freezing of Ferdinand Marcos’s assets in Switzerland

The wealth of Ferdinand Marcos and his wife Imelda was legendary. Here they are in a photograph taken in Manila in 1972, with their children Ferdinand Jr, Imee and Irene. Keystone / AP

Forty years ago Switzerland froze the assets of toppled Philippine president Ferdinand Marcos under dramatic circumstances. This move marked a turning point in how Switzerland deals with assets belonging to politically exposed people.

March 24, 1986, started as a quiet day in Bern. It was a Monday, and the Swiss parliament’s spring session had just wrapped up. The only flurry of activity came from the Federal Palace and Bern’s townhall, where preparations were underway for the official reception and state banquet for Finnish president Mauno Koivisto. 

In strict confidence and with great urgency, the chief legal adviser of the Schweizerische Kreditanstalt (SKA) – the major bank later known as Credit Suisse, which has since collapsed – phoned the Federal Banking Commission (FBC), the supervisory authority overseeing Swiss banks.

The banker alerted the Banking Commission that Marcos, who had fled to the United States, had attempted to withdraw a large sum from the SKA through a trusted intermediary. He warned that if the authorities did not intervene, the money would be transferred to Marcos’s frontman the following day.

Switzerland under fire for harbouring Marcos’s wealth

The alarm was raised three days after the Banking Commission issued a statement warning that receiving and withdrawing assets belonging to the Marcos family would be subject to heightened scrutiny. Earlier, US mediaExternal link – citing seized documents – reported that Marcos, who had fled to Hawaii, had funnelled billions abroad during his 20-year rule, much of it, they said, to Swiss banks.

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With this move, the Banking Commission intended to prevent such transactions from being carried out by frontmen under the cover of banking secrecy. Lawyers were often involved using their professional confidentiality to conceal the identities of the true beneficiaries of the funds – a loophole Swiss authorities didn’t close until 1991.

The banks’ due diligence obligations in handling assets of politically exposed people were gradually tightened as part of anti-money laundering regulations.

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By the afternoon of March 24, 1986, chaos had erupted in the Federal Palace. The Banking Commission’s vice president, concerned about Switzerland’s reputation, had alerted the foreign ministry, which was already up to its neck preparing for the Finnish state visit. Edouard Brunner and Cornelio Sommaruga, the two top officials in the foreign and economic ministries, now put their heads together to decide on the next steps.

They agreed that the withdrawal of Marcos’s assets had to be blocked and concluded that it was time for the government to act. They argued that it should do so by using its emergency powers under the Swiss Constitution to safeguard the country’s foreign policy interests. A regular meeting of the government was out of the question, given the Finnish president’s state visit.

This is where Brunner’s talent for improvisation came into play. With the help of Brunner’s wife, Sommaruga drew out the welcoming ceremony before the state banquet, which gave Brunner time to gather the seven government ministers and convince them of the necessity to block Marcos’s assets. Just five minutes later, the decision was made on the spot via a presidential decree, which prompted Economics Minister Kurt Furgler to remark to the two state secretaries: “You caught us off guard.”

Imelda Marcos’s shoe collection became synonymous with greed and is said to have been the largest in the world – comprising thousands of pairs. Keystone / AP

It was Furgler who in 1979, when he was still justice minister, had justified the government’s unanimous decision to reject the call to freeze the Shah’s assetsExternal link and tell Iran to follow proper legal channels. All the more surprising was the government’s sudden reversal in the Marcos case. The Neue Zürcher Zeitung (NZZ) described the freezing of Marcos’s funds as an emergency brake and a coup de main, arguing that the government’s rush showed clear signs of disproportionality and threatened legal certainty in Switzerland’s financial sector.

Swiss banks were up in arms. In a letter to the government, Bank Leu called the decision “hard to understand” accusing the authorities of turning a legal issue into a political act that “could undermine confidence in the reliability of our country’s legal system”. The Swiss Bankers Association reinforced its opposition to the authorities’ handling of the Marcos case with a formal legal report.

Central bank left in the dark

The emergency freeze on Marcos’s funds raised more than a few eyebrows at the Swiss National Bank (SNB). Unlike the decision on the Shah’s assets, the federal authorities had not consulted the SNB beforehand. SNB Vice President Markus Lusser slammed the move as poorly prepared, warning that Swiss banks were being made the scapegoat for US policies towards Marcos. This was a clear nod to the documents leaked in the US that revealed information on Marcos’s Swiss accounts.

Repaying the Philippines

The freeze of Ferdinand Marcos’s assets was followed by a year-long legal battle whereby the Philippines claimed the former dictator’s fortune. The Marcos family, the Schweizerische Kreditanstalt (SKA) and the Swiss Bankers Association, which held most of the funds, flooded the case with appeals.

In 1991 the Philippines received the first bank documents. Then, in August 1995, the investigative judge leading the legal procedures unexpectedly ordered the transfer of the frozen funds to a blocked account at a Philippine bank. In a landmark rulingExternal link at the end of 1997, Switzerland’s Federal Court approved the early release of the funds to the Philippines. Among other things, the Philippines pledged to keep Switzerland informed about compensation for victims of human rights abuses. In June 1998, $683 million (roughly CHF990 million at the time) was transferred to Manila, and a final tranche of around $10 million (roughly CHF10.8 million at the time) was paid out by Switzerland in early 2009.

During the meeting of the SNB’s three-member board on April 3, 1986, Lusser also made a surprising proposal. He suggested examining whether the SNB, together with the Banking Commission, could advise banks to refuse funds from dictators who were still in office.

Later, the government tried to downplay the paradigm shift in handling dictators’ funds. In September 1986, responding to a parliamentary question from the right-wing Swiss People’s Party,External link it insisted that no fundamental change in practice had occurred. It argued that “extraordinary circumstances” had dictated the handling of the Marcos assets, and banking secrecy had not been affected in any way.

Despite these reassurances, the Marcos precedent went on to have a long-lasting impact. Swiss authorities later framed the reversal – and Switzerland’s pioneering role in returning dictators’ assets – as a conscious decisionExternal link. Yet in 2016 diplomat Pascale Baeriswyl admitted that Switzerland had stumbled into the turning point and turned necessity into a virtue.

New law does not meet expectations

Since the reversal of the Marcos case, Switzerland has tried hard to shed its reputation as “haven for dictators’ assets”. The results have been mixed, even though more than $2 billion (CHF1.58 billion) has been returnedExternal link. Yet a 2021 report by the Swiss Federal Audit Office criticised Switzerland for often promising too much, too soon. Several cases highlighted that returning the funds was particularly tricky when the money is meant to benefit the affected population.

For example, in the case of Haiti’s ousted dictator Jean-Claude Duvalier in 1986, no use has yet been found for the $10 million in seized funds.

After a series of emergency freezes during the Arab Spring, the government and parliament created a formal legal framework for blocking and returning rulers’ assets. The new law came into forceExternal link in 2016 but has so far had little impact.

One case remains pendingExternal link over CHF130 million (roughly $145 million at the time) that were frozen after the Ukrainian President Viktor Yanukovych was ousted in 2014.

Edited by Benjamin von Wyl. Adapted from German by Billi Bierling/ts