David Leigh

Suspicion that royal family siphoned off £100 million

London: The U.K. Serious Fraud Office (SFO) is on the brink of obtaining information from Swiss banks which may implicate the Saudi royal family in secret arms deal commissions of more than £100 million, sources close to the Attorney General's office confirmed on Sunday.

The SFO has been inquiring for three years, in some secrecy, into allegations of systematic corruption in international deals arranged by Britain's biggest arms company, BAE Systems.

But it was only this autumn that the Saudis, along with BAE executives and officials of the Ministry of Defence's arms sales department, DESO, became aware of how much progress the SFO has made. Sources close to the Swiss say the authorities there notified two middlemen that access to their bank accounts was being sought.

One is believed to be a prominent Lebanese politician, the other a wealthy Syrian. A process of formal appeal by them has been taking place in Geneva. Legal sources said the Swiss normally grant preliminary access in such criminal cases for accounts to be inspected. This would enable the SFO to trace any payments passed on to accounts belonging to the Saudi royals.

Since the Swiss disclosure to their account-holders, the British Attorney General in London has faced renewed political pressure from BAE to block the expanding SFO investigation.

The company has hired a firm, Allen & Overy, to protect its position with the SFO. BAE denies wrongdoing and says it is cooperating with the inquiry. Attorney General Lord Goldsmith is reported to have refused to intervene, and MPs say any move by him to do so would provoke uproar at Parliament. The Saudis also deny any wrongdoing.

Saudi officials are reported to have met British Prime Minister Tony Blair's Chief of Staff, Jonathan Powell, to discuss the fate of ``Al Yamamah 3'', the latest multi-billion pound instalment of BAE's warplane sales to the Saudis, amid fears for the deal if the Swiss probe is not blocked.

Reported threats from the Saudis to break diplomatic links and withdraw intelligence co-operation over Al-Qaeda have been discounted in parliamentary circles.

According to internal Cabinet Office documents, the Saudi royal family relies on a flow of information from MI6, the British intelligence service, on the neighbouring Shia Muslim regime in Iran.

The investigation, now one of the SFO's largest and most complex, began when allegations were published three years ago that BAE was running a Saudi ``slush fund'', and that it separately used an offshore conduit, Red Diamond, to make worldwide secret payments.

In the past year, the SFO inquiry has dramatically expanded, identifying alleged BAE agents in Chile, Romania, the Czech Republic, South Africa, and, most recently, in Tanzania.

Another document in the archives quoted a dispatch from a British ambassador saying the family of Crown Prince Sultan ``had an interest in all contracts''.

Guardian Newspapers Limited 2006