British banks facing claims risk in $1trillion Saudi fraud case

British banks facing claims risk in Saudi fraud case HSBC and Standard Chartered could be dragged into a multi–billion dollar dispute between warring Saudi factions after the banks were forced to hand over thousands of potentially incriminating documents. A court in New York ordered the two British banks together with Citi and Bank of America to disclose confidential client documents, overruling pleadings that the evidence could be used against them. The documents relate to bank accounts held by Maan Al–Sanea, a Saudi billionaire who is being pursued for billions of dollars he is alleged to have stolen. Mr Al–Sanea is facing criminal and civil proceedings relating to billions of dollars allegedly defrauded from his wife’s family, the Algosaibis. Cases against the accused are being pursued in London, Bahrain, the Cayman Islands and Switzerland. The potential for claims against the four banks that handled more than $1trillion (£624bn) of Algosaibi money was revealed in a court transcript obtained by The Daily Telegraph. The four banks argued that the release of documents to the Algosaibis could be used as a “Trojan Horse” to bring cases against them. However, in the worst possible outcome for the banks, the argument was rejected by the judge who stated their potential liability. “I have never fully seen the force… of the Trojan Horse argument,” said the Honourable Jed Rakoff. “If it [the information] is genuinely relevant abroad, he [Algosaibi] gets it even if it hurts you, for lack of a better word. And if it’s not relevant abroad, he doesn’t get it.” The judge also acknowledged there could be a question mark over whether the banks had taken “reasonable steps to ascertain who their customer was”. As such, he admitted that there could be a “potential liability”. The ruling will be particularly embarrassing for HSBC which is understood to have handled the largest share of the $1trillion under question in the matter. As well as operating accounts for two of Mr Al–Sanea’s companies, the bank’s US arm loaned him millions of dollars and looked after his personal banking. Mr Al–Sanea was also a significant presence on the HSBC share register, at one point owning more than 3pc of the bank. The dispute between Al–Sanea and the Algosaibis is one of the biggest fraud cases ever to hit the courts. It concerns allegations that Mr Al–Sanea took control of the Algosaibis’ business empire AHAB and subsequently siphoned off billions of pounds. The huge losses built up under Mr Al–Sanea’s control led to the near collapse of the AHAB Group after the financial crisis hit in 2008. As well as facing criminal proceedings, Mr Al–Sanea is facing a $10bn claim brought by the Algosaibis. In turn, the family is being pursued for billions of dollars by the banks that lost out when loans failed. All four banks declined to comment. The Telegraph Maan Al–Sanea has $9bn freezing order lifted.

Daily Telegraph (UK)
07/11/2011

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