Letter from London / Lucy Stuart: HSBC and Goldman managed $335 million of Libyan funds

In a report published on the 26th May, international NGO Global Witness calls for new laws requiring banks and financial institutions to disclose state funds under their management. The concern follows a leaked document to the organisation which reveals that $335 million of Libyan state funds, under the name of the Libyan Investment Authority (LIA), are managed by HSBC and Goldman Sachs, two of the biggest names in the banking world.

The LIA, a Libyan Sovereign Wealth Fund was established in 2006, and was widely known in the UK for making numerous property purchases in London; it is reported to own buildings in Mayfair, Oxford Circus and the City of London as well as the recently opened Corinthia Hotel on Whitehall Place. The Gaddafi family has significant control over the funds invested into the LIA, and according to the International Criminal Court Prosecutor, Louis Moreno-Ocampo, “In his position of absolute authority, Gaddafi has control of vast financial resources derived, primarily, from oil revenues. Gaddafi makes no distinction between his personal assets and the resources of the country.”

Robert Palmer, a campaigner from Global Witness said that “The LIA holds state, and therefore public money, which is the money of the Libyan people and they have the right to know where it is.”
Global Witness is calling for transparency when it comes to a country’s state funds being invested. It is campaigning for two actions from governments beyond those of sanctions.

Firstly, they believe that governments should by law require banks and investment firms to disclose the state funds that they manage. Robert Palmer explains that “Transparency over state assets would make it harder for those in power to use money for personal gain.”
Secondly, they believe that banks must undergo checks from financial regulators to ensure that the banks themselves have done appropriate checks to prevent state funds being transferred to accounts under Gaddafi’s personal control.

Robert Palmer continued, “Our concern is that doing business with someone like Gaddafi is high risk and we think that in the case of Gaddafi they should go in specifically and make sure that banks had proper checks in place so that the state funds cannot be used for his personal gain.”
The leaked document appears to show that some of world’s leading banks, including some in Britain held LIA investments of $53 billion, with HSBC holding $292.69 million across ten accounts and Goldman Sachs holding $43 million in three accounts. However the largest portion, $19 billion, of the investment is shown to be held in Libyan and Middle Eastern banks, including the Central Bank of Libya, the Arab Banking Corporation and the British Arab Commercial Bank.

Europe and the US have frozen billions in LIA assets following the violence that Libyan citizens have faced due to the uprising in Libya, but according to Global Witness, banks have still refused to confirm the reports.
Robert Palmer said: “We contacted both HSBC and Goldman Sachs, both refused to comment, with HSBC citing client confidentiality.”

(Lucy Stuart of Al Arabiya’s London bureau can be reached at: [email protected])