Regulation

SECO and Swiss Commodity Regulation: Sanctions, Due Diligence, and ESG

The State Secretariat for Economic Affairs stands at the intersection of Swiss economic policy and the commodity trading industry's regulatory world. Once a relatively light-touch presence in the day-to-day operations of Geneva and Zug trading houses, SECO's role has been transformed by the Russia-Ukraine conflict, evolving AML standards, and the arrival of mandatory due diligence obligations.

Donovan Vanderbilt · 24 February 2026 · 8 min read

SECO’s Mandate and the Commodity Trading Sector

The State Secretariat for Economic Affairs (SECO — Staatssekretariat fur Wirtschaft in German, Secrétariat d’état à l’économie in French) is Switzerland’s principal federal economic authority. Within the Federal Department of Economic Affairs, Education and Research, SECO carries responsibility for economic and labour market policy, bilateral trade agreements, export controls, sanctions administration, and a range of economic cooperation programmes.

For Switzerland’s commodity trading community, SECO’s most consequential functions are in sanctions administration and export controls. The agency administers Switzerland’s implementation of the Swiss Embargo Act (Embargogesetz, EmbG), the legislative framework through which Switzerland restricts trade with specific countries, entities, and individuals. Historically, Switzerland’s embargo regime was narrower than those of the United States or European Union — a reflection of the country’s constitutional neutrality and its tradition of maintaining open commercial channels even with politically contentious counterparties.

That historical distinctiveness became a source of acute international tension in 2022 and has driven the most significant evolution in Switzerland’s commodity regulatory environment since the sector reached critical mass in the 1990s.

The Russia Watershed: 2022 and Its Aftermath

When Russia launched its full-scale invasion of Ukraine in February 2022, the Western response — sweeping sanctions on Russian entities, individuals, and financial flows — placed Switzerland in an uncomfortable position. The country’s constitutional neutrality has historically meant that Switzerland does not automatically adopt the sanctions regimes of other jurisdictions, a policy that had served the commodity trading community well for decades by allowing Swiss-based companies to maintain commercial relationships that US or EU-headquartered competitors could not.

The pressure to align with Western sanctions was intense and came from multiple directions simultaneously. The United States and European Union made clear that Swiss financial institutions facilitating sanctioned Russian transactions would face secondary consequences. Swiss civil society and the political opposition in Bern mounted sustained pressure on the Federal Council to align with European partners. And within the commodity trading industry itself, the practical reality — that banks, shipping companies, and end-customers were already implementing Western sanctions — meant that the commercial infrastructure for Russia-related Swiss commodity flows was collapsing even before formal Swiss sanctions adoption.

The Federal Council’s decision in March 2022 to adopt EU sanctions against Russia was a significant departure from Swiss neutrality doctrine, acknowledging that the gravity of Russia’s actions and the coherence of the Western response made non-alignment untenable. For SECO, the decision meant a rapid expansion of the sanctions perimeter it was required to administer — and a corresponding need to build the institutional capacity to monitor compliance by Swiss-based trading companies.

Impact on Trading Houses: Gunvor, Glencore, and Trafigura

The Russia sanctions created differentiated challenges for different Swiss trading houses depending on their historic exposure to Russian commodity flows.

Gunvor, the oil trading house co-founded by the Russian-Finnish businessman Gennady Timchenko, had the most acute reputational exposure. Timchenko — who had maintained close personal relationships with President Putin — sold his Gunvor stake in 2014, days before being named in US sanctions lists related to Russia’s annexation of Crimea. By 2022, Gunvor was under new ownership and management, but its historic Russian associations created ongoing scrutiny. The company moved aggressively to demonstrate its compliance with the new Swiss and Western sanctions architecture, commissioning independent audits and publishing detailed compliance statements.

Trafigura, which had historically sourced significant volumes of Russian crude oil for European refineries, began reducing its Russian exposure ahead of the formal sanctions implementation, recognising both the regulatory trajectory and the commercial signals from banking counterparties. The company ultimately committed to eliminating Russian oil purchases, at a commercial cost that was significant given the deep discounts at which Russian crude was trading in the immediate post-invasion period.

Glencore’s oil trading division faced similar decisions. The company’s Swiss base and its long history of operating in jurisdictions with complex political profiles made the Russia sanctions particularly salient — as did the attention that authorities in the United States and United Kingdom were already directing at Glencore following the 2022 bribery settlements.

The Swiss AML Framework and Commodity Traders

Alongside sanctions compliance, anti-money laundering (AML) obligations represent the second major regulatory pillar for commodity traders operating from Switzerland. The Swiss Anti-Money Laundering Act (Geldwäschereigesetz, GwG) establishes the framework within which financial intermediaries — and, increasingly, commodity traders acting as financial intermediaries — must implement customer due diligence, transaction monitoring, and suspicious activity reporting.

FINMA, the Swiss Financial Market Supervisory Authority, supervises the financial institutions that provide banking, brokerage, and payment services to commodity trading operations. Banks that finance commodity trades — through trade finance facilities, pre-payment structures, and revolving credit — bear significant AML compliance obligations under FINMA oversight.

A recurring debate in Swiss commodity regulation has concerned whether commodity trading companies themselves, as distinct from their banking counterparties, should be subject to direct AML obligations. Under Swiss law, commodity traders that handle physical goods are generally not classified as financial intermediaries and thus fall outside FINMA’s direct supervisory perimeter. This creates a regulatory gap — or, from the industry’s perspective, a proportionate approach that recognises the commercial nature of physical trading — that has drawn criticism from international bodies, including the Financial Action Task Force (FATF), which has recommended stronger AML oversight of physical commodity traders.

Corporate Due Diligence: The Gegenvorschlag

The most structurally significant regulatory development for Swiss commodity traders in the 2020s has been the introduction of mandatory human rights and environmental due diligence reporting obligations.

In 2020, Swiss voters narrowly rejected the Responsible Business Initiative (Konzernverantwortungsinitiative), which would have made Swiss parent companies legally liable for human rights and environmental violations by their subsidiaries worldwide. The initiative’s rejection was followed by the Federal Council’s implementation of the Gegenvorschlag — an indirect counter-proposal that established a less onerous but still meaningful reporting obligation.

Under the Gegenvorschlag, large Swiss companies and significant commodity traders operating from Switzerland are required to publish annual reports covering:

Child labour due diligence and supply chain practices
Conflict minerals sourcing (under OECD Guidance for Responsible Supply Chains)
Human rights risk assessment and remediation
Environmental impact reporting aligned with international standards

The conflict minerals obligations are particularly relevant for Swiss commodity traders with operations in or sourcing from conflict-affected regions. The DRC — where Glencore operates major copper and cobalt mines — is specifically designated as a conflict-affected area under the OECD framework, requiring enhanced due diligence, third-party auditing, and annual reporting on sourcing practices.

Climate Reporting and TCFD Alignment

A parallel regulatory development concerns climate-related financial disclosure. Switzerland’s approach to mandatory climate reporting has been shaped by both domestic policy evolution and international convergence around the Task Force on Climate-related Financial Disclosures (TCFD) framework.

From 2024, Swiss public interest entities — including large listed companies and, progressively, significant private companies above relevant revenue thresholds — must publish climate-related disclosures covering:

Governance of climate-related risks and opportunities
Strategy for managing physical and transition climate risks
Risk management processes integrating climate factors
Metrics and targets for greenhouse gas emissions and climate performance

For commodity trading houses, the transition risk element is particularly complex. Companies whose revenue is substantially derived from fossil fuel commodity flows — crude oil, coal, natural gas — must explain how their business models are resilient (or not) to various climate scenarios, including rapid decarbonisation pathways. This requirement creates pressure on trading houses to articulate credible transition strategies, even as their core business continues to involve fossil fuel commodities.

SECO’s Evolving Institutional Capacity

The regulatory demands placed on SECO by the Russia sanctions and the expanding due diligence framework have required significant institutional development. The agency has added specialist commodity sector expertise and has increased engagement with trading house compliance officers on a sector-specific basis.

SECO has also participated in international regulatory forums — including FATF evaluations, OECD working groups, and bilateral exchanges with US and EU counterparts — that have progressively shaped Swiss regulatory expectations toward the international mainstream. The long-term trajectory is clear: Swiss commodity regulation is converging with the standards of comparable jurisdictions, even as the country seeks to maintain the aspects of its regulatory environment — speed, pragmatism, reliability — that have attracted the industry.

For trading houses operating from Geneva and Zug, the implication is sustained compliance investment. The era of commodity trading from Switzerland with minimal regulatory overhead is definitively over. The question now is whether Switzerland’s regulatory evolution arrives at a stable equilibrium that is demanding but navigable — or whether escalating requirements begin to erode the locational advantages that have made Swiss addresses so attractive to commodity merchants.

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About the Author

Donovan Vanderbilt

Founder of The Vanderbilt Portfolio AG, Zurich. Institutional analyst covering Swiss commodity trading, Geneva's trading hub, trade finance, precious metals refining, and the regulatory frameworks governing global commodity flows through Switzerland.

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