The 1980s: drug money, the Lebanon Connection and the Kopp affair

A new kind of dirty money

The Chiasso affair concerned flight capital, meaning money that was legally earned but illegally exported from Italy and hidden from the Italian tax authorities. In the 1980s the focus shifted to money earned through crime itself. The international trade in heroin and cocaine generated cash on a scale that no earlier criminal market had produced, and the traffickers needed banks to convert that cash into assets they could use. The United States, which bore the brunt of the drug epidemic, began to press financial centres to cooperate. Switzerland, with its large private banking sector and its tradition of discretion, was an obvious target of that pressure.

Ticino once again played a central role. Between 1978 and 1989 the cantonal public prosecutor was Dick Marty, who later became a member of the Council of States and of the Parliamentary Assembly of the Council of Europe. As prosecutor he coordinated what was then the largest seizure of heroin and morphine base in Swiss history, around 100 kilograms intercepted on a lorry in Bellinzona. In 1987 he and the police commissioner Fausto Cattaneo received an award from the United States Department of Justice and an international association of narcotics officers for their work against drug trafficking.¹ The drug cases showed investigators how the proceeds were moved. Couriers brought cash across the border, money changers and small trading companies converted it into gold or foreign currency, and accounts at established banks gave the funds a respectable appearance.

The legal problem was that none of these steps was clearly punishable in Switzerland. The Swiss Criminal Code of 1937 punished the receiving of stolen goods, but it contained no offence of laundering the proceeds of crime. A banker who accepted cash from a drug trafficker committed no crime unless he could be shown to have participated in the trafficking itself. In the summer of 1986 the Federal Council therefore asked the Lugano lawyer Paolo Bernasconi to draft proposals for a money laundering offence. Bernasconi delivered his report with three proposals on 15 September 1986.² The Federal Council consulted on his draft, but the legislative process moved slowly until a scandal made it urgent.

The Lebanon Connection

In July 1988 Dick Marty had the brothers Jean and Barkev Magharian arrested on suspicion of laundering drug money.³ The investigation revealed a network that the press soon called the “Lebanon Connection”. The German newspaper taz, reporting in 1990, described it as a network of money changers, couriers and financial institutions that had laundered drug dollars in the billions through Swiss big banks.⁴ Part of the money had been moved through Shakarchi Trading AG, a Zurich company active in foreign exchange and precious metals. The Magharian investigation revealed that Shakarchi Trading was involved in the network, and on the company's board sat the Zurich lawyer Hans W. Kopp, husband of the Federal Councillor in charge of the Federal Department of Justice and Police.⁵

The Lebanon Connection had a direct legislative consequence even before it became a political affair. After the disclosure of the scandal in November 1988, the Federal Office of Justice drafted a bill on money laundering on 28 November 1988, with the participation of outside experts.⁶ The draft built on Bernasconi's proposals but was now driven by a sense of urgency that the earlier consultation had lacked.

A telephone call from Bern

Elisabeth Kopp had been elected to the Federal Council in 1984 as its first woman member. She came from the canton of Zurich and represented the Free Democratic Party. On 27 October 1988 she telephoned her husband and told him that suspicions of money laundering existed against Shakarchi Trading AG. Hans W. Kopp resigned from the company's board the same day.⁷ When the call became known, the Federal Councillor at first denied any breach of official secrecy. On 7 December 1988 the Federal Assembly still elected her vice-president of the Federal Council for 1989.⁸

The affair then moved quickly. On 9 December 1988 Kopp admitted to her colleagues that she had warned her husband. On 12 December she announced her resignation with effect from the end of February 1989. A special prosecutor examined the matter and on 11 January 1989 concluded that there was a suspicion of breach of official secrecy. On 12 January 1989 Kopp resigned with immediate effect.⁹ On 1 February 1989 the Federal Assembly elected Kaspar Villiger of Lucerne as her successor, and the canton of Zurich lost its seat in the Federal Council.¹⁰

The criminal proceedings ended in an acquittal. On 23 February 1990 the Federal Supreme Court, sitting as a federal criminal court in Lausanne, acquitted Elisabeth Kopp of the charge of breach of official secrecy. The political consequences outlasted the verdict. On 31 January 1989 Parliament had set up a parliamentary investigation commission to examine the Department of Justice and Police. Its inquiries uncovered the secret files that the federal police had kept on large numbers of citizens and organisations, which led to the “Fichen” affair of 1989 and 1990.¹¹

For the history of money laundering law, the Kopp affair mattered because it turned a technical reform into a question of national credibility. A Zurich lawyer on the board of a Zurich trading company allegedly involved in laundering drug money, a Justice Minister warning her husband, and a federal administration that seemed to protect its own: this was the picture that foreign newspapers painted of Switzerland in the winter of 1988–89. A swissinfo retrospective published in 2026 notes that the two anti-money-laundering provisions were enacted much faster than planned as a result of the resignation and of the drug money scandals.¹²

Notes

1. swissinfo.ch (RSI), “Dick Marty: Advokat der unverblümten Wahrheit”, 3 January 2024, https://www.swissinfo.ch/ger/wirtschaft/dick-marty-advokat-der-unverbluemten-wahrheit/49097226. ↩
2. Parliamentary Services, Documentation Service, 89.043 Strafgesetzbuch. Revision. Geldwäscherei (1989–1990), https://www.parlament.ch/centers/documents/de/verhandlungen-89043-1989-d-f.pdf. ↩
3. 20 Minuten, “Das Telefonat, das Kopp die Karriere kostete”, 8 December 2013, https://www.20min.ch/story/das-telefonat-das-kopp-die-karriere-kostete-297760576100. ↩
4. taz, “Geldwäsche vor Gericht”, 20 February 1990, https://taz.de/Geldwaesche-vor-Gericht/!1779529/. ↩
5. swissinfo.ch (RSI), “Dick Marty” (above), for the arrests ordered by Marty and the involvement of Shakarchi Trading; on Shakarchi as a Zurich-based firm and Hans W. Kopp as its vice-chairman, taz, “Geldwäsche vor Gericht” (above). ↩
6. Parliamentary Services, 89.043 Geldwäscherei (above). ↩
7. 20 Minuten, “Das Telefonat, das Kopp die Karriere kostete” (above). ↩
8. Année politique suisse, dossier “Affaire Kopp”, https://politchronik.swiss/fr/dossiers/681-affare-kopp. ↩
9. 20 Minuten, “Das Telefonat” (above); Année politique suisse, “Affaire Kopp” (above), according to which the inquiry found that she had informed her husband about files of the Federal Prosecutor’s Office and had advised him to contact her personal adviser. ↩
10. Année politique suisse, “Affaire Kopp” (above). ↩
11. 20 Minuten, “Das Telefonat” (above), for the acquittal and the date of the commission’s establishment; on the trial in Lausanne, taz, “Geldwäsche vor Gericht” (above); on the link to the Fichen affair, Blick, “Die Affäre Kopp löste Ende 1989 den Fichenskandal aus”, https://www.blick.ch/politik/ein-telefonat-mit-folgen-von-der-affaere-kopp-zum-fichenskandal-id18488380.html (title only consulted). ↩
12. swissinfo.ch, Bruppacher, “A brief history of Swiss banking oversight and its scandals” (above). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.