Money laundering claims prompt US investigation

Money laundering claims prompt US investigation
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Published September 27th, 2010 - 15:53 GMT

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US authorities are to begin an inquiry into allegations of large-scale money laundering involving Middle East and US financial institutions.

The House of Representatives, the lower house of the US Congress, will hold its first hearing on global money laundering tomorrow under the heading "A review of current and evolving trends in terrorism financing", according to the House website.

The House Committee on Financial Services will hear evidence from witnesses concerning the movement of US$1 trillion (Dh3.67tn) of funds between Middle East financial institutions and US banks over a six-year period up to early last year.

The magnitude of the sums involved makes the House inquiry especially significant, although there is no suggestion at this stage that the total amount was "dirty" money or that it was associated with terrorism.

Among the Middle East financial institutions under scrutiny are several connected with the al Gosaibi business family of Saudi Arabia or their former associate, Maan al Sanea, the head of the Saudi conglomerate the Saad Group.

The two sides have been locked in a bitter dispute since May last year when two of them defaulted on payments amid accusations of forgery, fraud and theft.

On the US side, many of the transactions allegedly went through Bank of America, according to court documents filed in New York during legal actions between the al Gosaibi family and Mr al Sanea. Members of Congress will question regulators, officials and financiers about the transactions.

In particular, they will ask whether they initiated "red flags" – notification of transactions requiring a "suspicious activity report" (SAR) by banks or regulators.

Eric Lewis, a New York lawyer acting for the al Gosaibi family, will give evidence at the first hearing, along with expert witnesses in money laundering and terrorism finance.

Further hearings could demand evidence from other authorities or executives involved in the transactions.

If it uncovers evidence to warrant further action, the House committee can also instruct the US department of justice to open a formal investigation into alleged money-laundering.

A spokesman for Mr al Sanea declined to comment on the hearing but repeated denials that his client had been involved in any illegal activity.

A spokesman for the al Gosaibi family confirmed Mr Lewis was appearing as a witness but declined to give further details ahead of the hearing.

A spokeswoman for Bank of America declined to comment.

The hearing may renew interest in the al Gosaibi affair after a New York court said in July that legal actions associated with their dispute would be best settled in Saudi Arabia. A judge in the Cayman Islands made a similar ruling.

An official committee in Saudi Arabia, comprising leaders from the business, financial and political establishment, has been examining the dispute for the past year but so far is no nearer a resolution.

Global creditors are still seeking repayment of $20 billion owed by the al Gosaibis and Mr al Sanea as a result of the defaults.

The other witnesses called by the House committee for the first hearing are: Victor Comras, a retired diplomat and specialist lawyer on terrorism finance; Stephen Landman, a counter-terrorism analyst; and David Caruso, a former US secret service agent and anti-money laundering expert. 

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