Unchecked empires: who watches Geneva’s million-franc foundations? 

illustration: SWI swissinfo.ch / Helen James

Wealthy donors come from around the world to create their non-profit foundations in Geneva, where they benefit from a flexible legal framework.  Where does their money come from, and where does it go? It is the job of supervisory authorities to find out. But Geneva’s philanthropists could easily slip through the system’s many cracks. 

Part 1 Welcome to Geneva!  

With more than 13,500 philanthropic foundations and assets of around CHF140 billion ($154 billion), Switzerland is one of the largest centres for philanthropy worldwide. The country has 15 foundations per 10,000 inhabitants, six times more than Germany or the United States.  

In its 2022 report, the Global philanthropy index ranked Switzerland as the second-best destination in the world for philanthropy, behind Liechtenstein. The report considers the ease of registering and operating a philanthropic organisation, the tax incentives they benefit from, the prospects of economic development in the region, or the framework for cross-border philanthropic flows.   

With 26 foundations per 10,000 inhabitants, Geneva is a leading city for non-profits in the country. In 2023, it saw the fastest growth in Switzerland, with the creation of 58 new foundations. This is partly due to encouraging local policies. Since 2013, the government has adopted strong measures to support the sector, improve administrative procedures and further simplify tax exemption procedures.   

Secrecy guaranteed  

Attracted by the presence of major international NGOs, wealthy donors come from around the world to set up their foundations in the city. There they find a “reliable and stable political and economic situation…that has contributed to creating a suitable climate for non-profits,” says Henry Peter, the director of the Centre for Philanthropy at the University of Geneva.  

Philanthropic foundations can be divided into two categories: those that distribute grants, like the Geneva-based Oak Foundation, and operating foundations, like the Aga Khan Foundation, that conduct programmes benefitting the public, such as building schools or providing health services in remote areas. 

Both types of structures are closely linked with NGOs, as they depend on their expertise or support their projects. In return, many NGOs rely on foundations’ money to finance their programs. The Oak Foundation, for example, granted a net amount of $481.62 million to NGOs worldwide in 2022. 

“This ecosystem is why major international foundations choose the city over other philanthropy centres in Switzerland like Zurich or Bern” says Peter. “For example, GAVI, the worldwide alliance for vaccines, of which Bill Gates is a key contributor, is in Geneva because of the presence of the WHO, not in Basel where all the big pharmaceutical companies are based.” 

The professor considers Geneva as Switzerland’s door to the world. Contrary to Zurich that only recently relaxed rules for philanthropic investments in foreign countries, Geneva has always favoured such projects and awarded the same tax privileges to international foundations as to local ones. 

Foundations also benefit from the city’s near sacrosanct respect of secrecy. Geneva is a city where “one does not show what they own or give in the public space,” Peter says.  

This attitude, key to Geneva’s international branding, can create controversy though. Recently, the Geneva-based WHO Foundation made the headlines for refusing to divulge the identity of 40% of its donors, raising accusations of undue influence. The same allegation was made against the former Interpol Foundation, when it received €50 million from the United Arab Emirates. “Certain observers may view secrecy as a way for foundations to escape scrutiny regarding their activities or tax obligations,” regrets the expert.  

Tax benefits 

One of the main advantages of setting up a foundation in Switzerland is the tax privileges they benefit from. To be eligible, foundations must prove they serve a public utility. This includes such varied topics as education, arts, health, human rights, animal protection, environmental work, etc. The only requirement is that these activities benefit society and not the investor. In return, donors and founders profit from tax exemptions that in most cantons amount to a maximum of 20% of their taxable income. This means for instance, that a philanthropist with a fortune aside and a net income of CHF2 million who invests CHF20 million in a foundation could save CHF158,000 in taxes on their donation. Furthermore, the registered capital and earnings of the foundation are tax-exempt. 

But what foundations do with this money remains relatively opaque. A foundation’s goals can comprise many different activities, some dormant, vague, or even changing over time, say experts. There is little oversight once foundations have registered their statutes.  

Lack of oversight  

This flexibility has, in some instances, led to abuse, such as in the reported case of the Geneva-based Marine Foundation. The foundation hid behind such varied themes as ecology, development banking, and the distribution of sports equipment to conceal fraudulent activities. In 2020, the foundation’s bank uncovered a money laundering scheme that had been going on for months. In addition to this fraud, the foundation is accused of having operated a fake trading platform, scamming at least three people who pressed charges. The organisation claimed it considered the EUR2,5 million (CHF2,4 million) diverted from this platform as donations. 

We can also cite the case of the Suleyman Kerimov Foundation, named after a Russian oligarch who invested his wealth in vague, potentially personal projects worldwide while benefitting from tax exemptions in Switzerland. He later transferred his whole fortune of $6 billion (CHF5.4 billion) to the structure. He was elected to represent the Republic of Dagestan in the Russian parliament, a position which forbade him from owning foreign funds in foreign countries.  

While there is no proof of widespread fraud among Geneva’s foundations, the lack of adequate supervision means that fraudulent activities could possibly fall through the cracks.  

Contrary to NGOs or associations, which do not report to any supervisory body, foundations are monitored by the Swiss authorities. This gives donors a sense of security that may not always be backed up by facts. In the cases mentioned above, the foundation’s bank or the media raised the alarm, not the supervisory authority whose job it is to control a foundation’s activities. 

Edited by Virginie Mangin/ds