Al Yamamah: The Riggs Bank angle

The BBC’s Robert Peston has the Saudi reaction to the allegations about BAE payments to Prince Bandar:

A source close to Prince Bandar is denying that these
payments were made in the manner specified by Panorama, that is to a
branch of Riggs Bank in Washington.

That’s one denial. A second denial is that Prince Bandar was the beneficiary of any payments made.

So far, so confusing – which, of course, rather suits the British and Saudi Governments.

However, there is no on-the-record denial, as yet, and no denial that commission payments were made to senior Saudis by BAE. (BBC)

The Riggs Bank angle would tie the Al Yamamah story into another major scandal linked to Prince Bandar.

In 2002, it emerged that the FBI was investigating cheques sent by his
wife, Princess Haifa, to the wife of a man involved in aiding two of
the 9/11 hijackers. Although the FBI ultimately found no evidence
of a link to terrorist financing, their work prompted another
investigation, by banking regulators.

Problems with the Saudi accounts led regulators to issue a rare and
public cease-and-desist order against Riggs early last year, requiring
it to clean up its practices or face further penalties. But unexplained
transactions continued to flow through the Saudi accounts late last
year, and Prince Bandar refused to provide information about them to
Riggs, according to people with direct knowledge of the discussions.

Last March, the same month regulators told the bank it would receive
a heavy fine, Riggs said it had closed all Saudi accounts. Minutes of a
Riggs meeting on April 7 noted that Prince Bandar had recently
requested "$2 million in cash for traveling expenses," a request the
bank denied.

"Prince Bandar then asked that Riggs wire $2
million to another bank, which was done," the minutes said, adding that
the bank notified regulators about the transaction. In May, regulators
fined Riggs $25 million for failing to adequately monitor suspicious
activities, the largest such penalty ever imposed on an American bank. (New York Times, July 19 2004)

At the same time, parallel scandals erupted involving Riggs Bank accounts held by General Pinochet (also a major player in Thatcher’s arms trade) and Teodoro Obiang, the dictator of Equatorial Guinea. Once one of the most prestigious financial institutions in Washington, Riggs was sold to a Pittsburgh bank in 2004.

The Riggs Bank scandal was, potentially at least, a major embarassment for the Bush administration. Prince Bandar was so close to the Bush family that he became colloquially known as Bandar Bush, and President Bush’s uncle, Jonathan Bush, was actually an executive at the bank. It’s a small world.

Update 6pm

Here’s a few more bits and pieces of the picture. One of the sources cited by the BBC is David P. Caruso, an investigator for the Riggs Bank.

Eventually, Riggs hired a former Secret Service agent, David B. Caruso,
as its chief compliance officer. Caruso conducted an investigation into
the bank’s Equatorial Guinea dealings and discovered more than $35
million had been wired out of the country’s oil account from 1998 to
2002 to companies with accounts in "jurisdictions with bank secrecy
laws." In other words, Riggs could not identify the destination of the
money. Caruso set up a meeting with Equatorial Guinea officials,
including Obiang, at the Four Seasons Hotel in Georgetown in February
to ask about the transfers and other matters. Equatorial Guinea
officials declined to answer questions. Soon after, Riggs asked
Equatorial Guinea officials to close all their accounts at Riggs (Washington Post)

Things could get interesting if the US authorities have evidence about BAE payments to the Saudis.

It was disclosed recently that in January Washington
issued a formal protest to the UK about the halting of the SFO inquiry,
an investigation that Prime Minister Tony Blair said was doing
irreparable damage to British relations with Saudi.

And
now foreign relations committees in both the House of Representatives
and the Senate are raising concerns about why Britain halted the
inquiry and whether it affects the ability of BAE to do business in the
US. (Daily Telegraph)

Ironically, the Reagan administration was originally supposed to have supported the Al-Yamamah deal as a way of getting around the Israeli lobby in Congress.

Update 11 June: You can watch Jane Corbin’s Panorama report online.