As factions face off in war-torn Libya, money slips through sanctions.

By Giulia Paravicini

Six years after Gaddafi’s death, his regime’s frozen funds in Brussels are generating tens of millions of euros in interest for mystery beneficiaries, despite international sanctions.

Belgian green light

Belgium’s finance ministry insists that the interest payments are legal, and that no special authorization had to be given.

Georges Gilkinet, a lawmaker and a member of the Belgian parliament’s finance and budget oversight committee, called on Finance Minister Johan Van Overtveldt to explain the interest payments during a session of the assembly on September 26, 2017.

In a response during that session, Van Overtveldt justified the payments by saying they were in accordance with an “interpretation” of the sanctions’ rules by RELEX, an expert group at the Council of the EU composed of diplomats from member countries.

Van Overtveldt did not respond to Gilkinet’s questions about whether the interest was paid to Belgian companies, owners of the frozen assets or the Libyan state.

Alexandre De Geest, treasury chief at Belgium’s finance ministry, confirmed to POLITICO that the country allowed earnings from frozen Libyan assets to be paid based on the RELEX decision.

From 16 September 2011, interests or any other earnings related to the frozen funds of the four entities [listed in sanctions], such as dividends on shares, are not frozen.

This conclusion was agreed upon during the RELEX meeting of 20 October 2011 by the European External Action Service and the legal service of the Council,” De Geest wrote in an email.

He added that providing further information on the frozen assets was “prohibited” under EU law. A finance ministry spokesman also did not reply to a question on whether he knew who was claiming the money in the LIA accounts.

Despite LIA’s prominence on the international stage, it is difficult to determine who can access its various accounts.

A spokeswoman for the Council legal service agreed with the Belgian interpretation of the law — saying that the RELEX decision limited the freeze only to assets before September 16, 2011.

Didier Reynders served as finance minister at the time of the RELEX decision but a spokesman for him said that he had “no information” on the case.

De Geest said that the RELEX ruling meant that Belgium’s finance ministry did not need to grant any special license or authorization to green light interest payments from Gaddafi’s assets.

Final destination

Despite LIA’s prominence on the international stage, it is difficult to determine who can access its various accounts.

In the past few years, LIA has engaged in high-profile court battles with Goldman Sachs and Société Générale over investments and trades hailing from the Gaddafi era.

The London-based lawyers working for LIA in these cases declined to respond when approached by POLITICO to ask which group was currently controlling LIA or paying fees for court cases.

Derregia, who taught at Britain’s University of Nottingham business school before heading LIA, insists that none of the millions of euros of interest and dividends ever reached the Libyan people.

 “So far these funds have been spent on legal cases and on legal feuds within the LIA, nothing went to the people. With all that money we could have launched education and health projects for all the Libyans,” he said. “But politics, not economics or the people, are what they care about.”

Euroclear is transacting transactions on behalf of the custodian — be it ABC Bahrain, or HSBC Luxembourg” — Abdul Magid Breish, former chairman of LIA

Enyo, a London-based law firm that represented the LIA in its proceedings against Goldman Sachs and Société Générale, referred all questions on LIA to an advisory company, Osborne & Partners. Osborne & Partners declined to “provide guidance on LIA financial or operational matters.”

LIA lost the case against Goldman in 2016, in which it claimed unsuccessfully that it had been misled into risky derivative trades by the U.S. bank. It was more successful in May 2017, when it won a €963 million settlement with Société Générale, in which LIA complained about the way the French bank handled five transactions between 2007 and 2009.

While several claimants are still battling to be recognized as the rightful head of LIA, they have agreed to create a special, temporary legal entity to “receive and manage” LIA’s affairs in the Goldman Sachs and Société Générale cases, run through BDO LLP, an accountancy and advisory firm.

This “Receiver and Manager,” as recognized under British law, is intended to handle LIA’s goods and money until the disputes between the rivals are settled.

BDO LLP declined to comment.

Breish, who was forced aside as chairman last summer, told POLITICO that some of the money won in the Société Générale case was intended for litigation costs.

Chasing the money

In an interview with POLITICO, Breish said rivalries over the control of LIA created confusion in sorting out where the final payments from Euroclear transactions ended up.

He said he did not receive any such payments in his time in charge, but reckoned that other rivals to the LIA title might have done so.

Euroclear is transacting transactions on behalf of the custodian — be it ABC Bahrain, or HSBC Luxembourg … If a dividend or interest coupon is paid, it comes through Euroclear to be settled and then it is credited to the account of the custodian, then that custodian has already accounts in the name of LIA.

And that custodian will then credit these amounts. When all of these procedures are finished then the problem starts,” Breish said.

If somebody approached, for instance, ABC Bahrain whether it is the LIA in Tripoli or LIA in Tobruk or a claimant who says: ‘I am the chairman of the LIA’ and asks them to transfer money coming from dividends on an account in a third bank … or sends a telex requesting a transfer, the custodian should say that there is an authority problem.”

However, Breish said that “there may have been some custodians who may have honored requests from this LIA or that LIA.”

POLITICO attempted to contact Mahmoud’s LIA operations in Tripoli and Malta by telephone and email, but received no reply. 

Joanne Benecke, an administrator for the Maltese headquarters of the LIA, declined to comment and said that the Valletta office served simply as a “LIA advisory.” She declined to provide further details about the management.

The administration in Tobruk has nominated Ali Shamekh as its chief executive of LIA. Emails and telephone calls to him, his predecessor and the regional government, the Libyan House of Representatives, in eastern Libya all went unanswered.


Giulia Paravicini – Reporter @ POLITICO Europe — covering security, terrorism and fraud.


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