It was a tiny Swiss bank, headquartered in an open-plan office close to Lake Zurich and little known abroad. But MBaer Merchant Bank AG would sometimes charge clients 10 times the normal rate to process payments—the result of an extra fee charged to handle transactions other financial institutions deemed too risky to touch, according to new reporting by Bloomberg. 

The private bank collapsed last month after the U.S. Treasury Department accused it of handling suspicious payments tied to Venezuela, Iran, and Russia and threatened to invoke a “special measure” under the Patriot Act that would effectively bar MBaer from the American financial system. Finma, the Swiss supervisory body overseeing MBaer, announced that the liquidation of the bank had begun a day after the Treasury announcement.

U.S. officials who spoke with Bloomberg said that MBaer had attracted scrutiny around 2020 over possible money-laundering activity connected to Venezuela. The department’s Financial Crimes Enforcement Network (FinCEN) later alleged the bank enabled financing for Russia’s war effort and helped channel Iranian oil proceeds back to Tehran, including to the Iranian Revolutionary Guard Corps.

In a document published March 2, FinCEN said MBaer had provided access to the U.S. financial system for parties supporting Iran-related money laundering and terrorist financing. U.S. officials also accused the bank of facilitating payments tied to an international oil smuggling and laundering scheme run by the Quds Force, which Washington designates as a foreign terrorist organization, Bloomberg said. 

MBaer allegedly tried to stay below the radar by routing high-risk transactions in Swiss francs or euros rather than dollars, reducing scrutiny that typically comes with U.S. currency payments. People familiar with the matter told the news agency that some staff raised concerns about operational weaknesses, but encountered resistance or were pushed out, fostering a culture of fear inside the bank.

The bank’s illicit business helped drive a rapid expansion.  By the end of 2025, it held about 4.9 billion Swiss francs in client assets, served roughly 700 clients, and employed around 60 people, according to Bloomberg. Its relatively small size initially placed it in Finma’s lowest supervisory category for market participants deemed low risk.

But concerns intensified. In 2024, a review commissioned by then-board member Bignia Vieli found widespread systemic risks and suggested the bank should self-report to Finma, Bloomberg said. Despite that, people familiar with the matter said no major corrective action followed and management still received full bonuses.

Finma formally opened enforcement proceedings in 2024 and later said 98 percent of the bank’s recent client assets came from high-risk sources. The regulator found MBaer had systematically failed to investigate the background of client relationships and had actively helped clients circumvent asset freezes, according to the report.

Even so, Switzerland’s legal process allowed MBaer to continue operating while challenging the regulator’s actions in court. By early 2026, Finma’s shutdown order remained tied up in litigation until the U.S. Treasury intervened.

Basel-based lawyer Mark Pieth told Bloomberg the episode underscored the weakness of Swiss enforcement against financial crime.

“The Americans had to come in again and put a gun to their chest,” Pieth told the news outlet. “In terms of its legal system, Switzerland still is an offshore center, where cases drag on for years under the pretext of due process.”

Read more at Bloomberg