The Telegraph
Since 1st March, 1999
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Govt caught in Libya-US money transfer crossfire

New Delhi, April 24: The government has suddenly landed itself in the midst of an embarassing fight between the Libyan Embassy, the State Bank of India and the US Office of Foreign Assets Control.

The Libyan Embassy wanted some €200,000 it held in an Euro denominated account with SBI, Delhi, to be converted into dollars and transferred to another separate account for dollars it held with the same bank.

SBI converted the money in January but later shot off a letter to the embassy stating it was forced to block the tranfer as the US Office of Foreign Assets Control has advised SBI to “to block the amount”.

The letter stated it is mandatory for the bank to report the dollar exchange to USOFAC through its New York branch and hence the $2,53,090 due to the Libyans could be doled out only if the US authorities agreed.

A peeved Libyan Embassy has since shot off a legal notice to SBI complaining that USOFAC had “no authority or reason to interfere with transactions conducted by a sovereign nation in a third country”.

Neither the bank nor the USOFAC has explained why the fund transfer was blocked. Sources said the USOFAC routinely blocks dollar transfers it felt were suspicious “because of the size of funds being transferred or the source or destination of the money”.

An international convention against money laundering signed a few years back had resulted in banks across the globe cooperating with each other and with authorities charged with filtering suspect money.

SBI sources said they were trying to get the USOFAC to clear the transfer keeping in view India’s diplomatic relations and the fact that the Americans themselves have eased sanctions against Libya but it was taking time. An official spokesperson of the bank said “the entire issue is being processed”.

An US Embassy spokesperson said, “We have no information on this matter, we will not look into it.” The US has recently lifted trade sanctions on the North African state after suspected Libyan involvement in the terrorist attacks on Rome and Vienna airports in December of 1985. But sources pointed out it has retained certain restrictions on Libya which includes a stipulation that Libyan property blocked by the earlier sanction will “remain blocked”.

But the real flak is being faced by the Indian government which is caught in the embarassing situation of having to explain to a soveregin country why a bank owned by it has blocked money it genuinely owns and that too on the advice of another nation.

“Though legally we are in the right, it is embarassing for us as we will have to explain why we agreed to the blocking,” admitted North Block officials.

In fact, the Indian finance secretary along with ministers and central bank governors from certain key states like Indonesia, Saudi Arabia and Singapore held a meeting with G-7 central bank governors and ministers in Washington on intensifying the fight against terror financing just yesterday.

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