Banks to shut doors on Saudi royal cash

Guardian/UK ^ | 7/17/02 | David Pallister and Owen Bowcott in Liechtenstein

[kattracks]

King Fahd is moving large sums through Liechtenstein

Western banks may refuse deposits from members of the Saudi royal family under guidelines drawn up to identify "politically exposed" wealthy individuals whose assets could in future be confiscated.

The move comes as details emerge of how King Fahd - head of the dynasty and one of the world's richest men - has transferred large sums through anonymous trusts in Liechtenstein where secrecy laws allow the Alpine mini-state to function as a bolt hole for rich clients.

The Guardian has found that the banks, notably in Switzerland, are increasingly wary. "We do not accept business from politicians in controversial countries," said one banker.

"Some banks take the view that we will not have anything to do with members of the Saudi royal family," said a source close to the Wolfsberg group, an alliance of 11 major banks - including HSBC, Barclays, Credit Suisse, Goldman Sachs, and the Dutch company ABN Amro - which convened to combat money laundering.

The anxiety of the banks follows the embarrassing experience of having to trace and hand back vast fortunes looted by such notorious former dictators as Ferdinand Marcos in the Philippines, Joseph Mobutu in Zaire, and General Sani Abacha in Nigeria.

All three salted away private funds overseas which were later recovered by successor governments. Marcos reportedly plundered between £3bn and £12.5bn before he was ousted; Mobutu exploited his impoverished state's natural resources to extract some £2.5bn before his death; while Gen Abacha and his associates took up to £2bn from the national finances, says the Nigerian government.

Last year the Basel committee on banking supervision, which is an influential international body, defined "politically exposed persons" (Peps) as those "entrusted with prominent public functions, including heads of state or of government".

"Accepting and managing funds from corrupt Peps will severely damage the bank's own reputation... even if the illegal origin of the assets is difficult to prove," the committee warned. It added: "The bank may be subject to costly information requests and seizure orders from law enforcement."

If the big banks decide to shun royal Saudi money it would be a huge blow to the House of Saud's prestige, reinforcing fears that the regime is less stable after September 11 and vulnerable to the rise of Islamic fundamentalism. Although the sums invested abroad by King Fahd may not be the product of corruption under current Saudi law, they may nevertheless be caught by the banks' new policy.

Professor Mark Pieth of Basel university, a consultant to the Wolfsberg meeting in Zurich which drew up anti-money laundering guidelines, confirms that a sub-group has been established to consider such "politically exposed" clients.

"They're looking at this issue very closely already with the Saudis," he said.

"It would be down to individual banks to decide whether to refuse new Saudi accounts."

Stanley Morris, an expert on money laundering at Interpol who also attended the Wolfsberg meeting, said that guidelines would identify those individuals so politically exposed that they constituted an excessive banking risk.

The 6,000 Saudi royals form a privileged caste whose collective overseas funds are thought to amount to £400bn. The ailing King Fahd is believed to have personally acquired at least £20bn.

Critics accuse them of greed and corruption on a grand scale but the royal family maintains that its wealth was legally acquired under the laws of the land.

Dr Saad Al-Fagih, the London-based head of the non-violent dissident group, the Movement for Islamic Reform in Arabia, said: "The way the country is run gives the royal family full chance to confiscate as much money as [it wants]."

One of the secretive Liechtenstein trusts, the Asturion Foundation, has been used by King Fahd for over 25 years to shelter his money abroad. It constitutes a legal entity that holds bank accounts of which he is the beneficiary; it also owns his worldwide property portfolio.

It is not known exactly how much money the foundation holds but among the assets registered in Britain under the foundation's name is Kenstead Hall, a mock Tudor mansion in north London's "Billionaire's Row" - The Bishop's Avenue in Hampstead.

Two years ago, the international Financial Action Task Force blacklisted Liechtenstein for failing to combat money laundering in general. It was taken off the list in June last year after improving its regulatory regime.

Earlier this year, however, the principality, along with six other countries, was placed on another blacklist of uncooperative tax havens by the Organisation for Economic Cooperation and Development.

It now faces penalties from world financial institutions if it fails to introduce further transparency and accountability into its offshore regime.

King Fahd's use of such foundations to hide his wealth abroad is embarrassing for his regent, Crown Prince Abdullah, who has tried to end his relatives' financial excesses.

In November, the Saudi government spent £5m on advertisements portraying King Fahd as a benevolent father figure to the nation. "For two decades he has been the quiet symbol of stability and diplomacy," the adverts stated.

The identity of Asturion's beneficiary was revealed in a CD-rom of internal files obtained by a defecting Liechtenstein law firm employee which was originally passed to the German magazine Der Spiegel.

Two trusts - Asturion and Norista - control most of King Fahd's opulent foreign residences. Two of his sons - Mohammed, governor of the Eastern province, and Saud, the deputy chief of intelligence - are trustees. The Asturion portfolio includes some of the most desirable addresses in Europe.

"Asturion and Norista are owners of various properties in Europe and... the beneficiaries are the [Saudi] royal family," agrees Herbert Batliner, who for decades headed the Liechtenstein law firm which administers the two foundations.

The Saudi embassy in London declined to comment on either the Liechtenstein foundations held by the royal family or the debate over whether Saudi royal money might be refused by western banks.

[truth_seeker]

Thanks for these posts. I think the realignment of the US-Saudi relationship is going to be the REAL issue of the decade. They are an unhealthy nation and we are in an unhealthy relationship with them.

Yeah, and notice the clever words about Iran, of late. We are going to reasert our power and influence in the ME.

Some governments are already convinced, after witnessing the change of government in Afghanistan.

Other governments will become convinced, after witnessing the coming change of government in Iraq.

In Iran, the mullahs must be wary of President Bush's comments, wary of the youth who demonstrate.

I see the deck of cards now layed out, for viewing. They KNOW that the US can easily absorb the terrorism, and that it justs pisses us off, and derives policy shifts opposite from THEIR interests (witness Israel). They know we WILL use force, we WILL change governments.

And the topic of this article: We WILL get at the money, sometimes sooner, sometimes later.

[monkeyshine]

The only place left for the Saudis to stash their loot is Israel. :-)

[monkeyshine]

Well then it's no secret why we bombed Afghanistan instead of the place where 15 of the 19 hijackers came from (and got their money). And Afghanistan isn't the place that terrorist groups like Hamas also got their money.