Thursday, 2 June 2011

Western banks hold Qadhafi's funds

Some of the world's biggest banks are key holders of funds from Libya's Colonel Mu'ammar Qadhafi's regime, according to a report obtained by anti-corruption group Global Witness.

A June 2010 document, leaked to Global Witness, showed the location of state oil revenues, managed through the state-owned Libyan Investment Authority (LIA).

As of 30 June 2010, the LIA had over US$53 billion invested. Japanese bank Nomura and the Bank of New York held US$500 million each. Over US$292 million is held by HSBC and Goldman Sachs has US$43 million.

Almost US$4 billion is held in structured products with banks, hedge funds and private firms: Societe Generale for example holds US$1 billion.

Some US$19 billion is held in Libyan and Middle Eastern banks.

The LIA also holds billions of dollars in shares, including global corporations such as BP, ExxonMobil, General Electric, Pearson and Halliburton.

Despite the fact that these are state assets, the Libyan people had no access to information on how the funds were invested because banks have no obligation to disclose state assets that they hold.

Global Witness is calling for new laws requiring banks and investment funds to disclose all state funds that they manage.

When Global Witness asked HSBC to confirm they held funds for the LIA, they reportedly refused, citing client confidentially.

"It is completely absurd that banks like HSBC and Goldman Sachs can hide behind customer confidentiality in a case like this. These are state accounts, so the customer is effectively the Libyan people and these banks are withholding vital information from them," said Global Witness director Charmian Gooch.

The Qadhafi family has significant person control over the LIA, which means it is essential that banks investigate whether they have done enough to ensure state funds have not been used for the family's personal benefit.

According to a prosecutor from the International Criminal Court, "Qadhafi makes no distinction between his personal assets and the resources of the country."

Global Witness is calling on banks holding Libya state funds to ensure they have done due diligence to prevent the transfer of state funds to accounts personally controlled by individuals with links to the regime.

According to the Sovereign Wealth Fund Institute, the LIA is the 13th largest sovereign wealth fund in the world. It scores two out of 10 on the institute's transparency ranking.

In May, the EU extended its economic sanctions against Libya to include the LIA and the country's central bank. It had already frozen assets of Qadhafi and some members of his family.

Sources: BBC News, Economic Times, Global Witness

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

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