Message: Kuwait asks Dubai to release frozen funds in money laundering investigation

Message: Kuwait asks Dubai to release frozen funds in money laundering investigation

By David Barbuchia

DUBAI, Nov 9 (Reuters) – Kuwait's prosecutors have asked Dubai to release $ 500 million in funds for a Kuwaiti direct investment fund that was frozen as part of a money-laundering investigation, a letter seen by Reuters showed.

The funds, deposited at a Dubai-based bank, were frozen at the request of the UAE Central Bank in November 2017, according to a source with direct knowledge of the matter, legal documents and correspondence between the parties involved in the case seen by Reuters.

A senior UAE official said the investigation, which had not been announced before, was conducted by the Dubai authorities to determine whether money sent from a bank in the Philippines to a Kuwaiti direct investment account in Dubai involved money laundering.

The investigation comes as the United Arab Emirates tightens financial rules in an effort to erase some foreign investors' perception of a hotbed of illicit money flowing from its free trade zones and proximity to Iran, which is targeted by US sanctions.

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But freezing the funds, which Kuwait says some are owed to two of its government entities, may test the relationship with the regional ally Dubai, which has not disclosed the cause of the money laundering investigation.

In a letter dated October 16, the Kuwaiti attorney general asked his Dubai counterpart to help release the money.

The letter stated that two local government entities, the country's port authority and its pension fund, were entitled to a total of about $ 200 million.

The Kuwaiti letter requested cooperation in the release of the funds, the transfer of $ 125 million to the account of the Kuwait Ports Corporation and $ 79.2 million to the account of the General Organization for Social Security.

Both entities are among the investors in the Port Vand Fund, a registered direct investment fund in the Cayman Islands.

The Kuwaiti attorney general said the rest of the frozen funds would be distributed to other rights holders without naming them.

The Kuwaiti prosecutor's office did not respond to Reuters's request to comment on the content of the letter.

A Dubai government spokeswoman confirmed that the investigation into the frozen funds at Noor Bank was continuing. When asked about the Kuwaiti Attorney General's request for the release of the funds, the spokeswoman said the government did not want to make further comments on the matter.

The Dubai authorities are investigating the initial transfer of $ 500 million to an account owned by Port Link, which operates Port Vand, in Dubai-based Noor Bank, according to a July 2011 letter sent by the UAE central bank governor to the country's ambassador to the United States.

The letter, also seen by Reuters, said the case involved money laundering offenses involving individuals in Kuwait suspected of involvement in embezzlement of public funds and corruption.

The letter did not name any of these individuals and did not elaborate on the allegations.

At the time, Nyabata Dubai and Kuwait were in contact with each other to investigate the legality of the deal, she said.

US-based law firm Carroll and Moring, representing Port Vand, told Reuters the money was legitimate payments after Port Vand sold its investments in the Philippines.

The amount of $ 496 million on 14 November 2017 from BDO Bank or Unibank in the Philippines was transferred to the Portlink account in Dubai, according to bank correspondence between the Philippine Bank and Citibank, American in the conversion process, which was also seen by Reuters.

"The deal is legitimate and complies with all banking rules," BDO said in a statement. A Citi spokesman declined to comment.

"The bank is committed to the highest standards of compliance, governance and internal control," said Noor Bank spokeswoman Susan Shore.

(Prepared by Abdel Moneim Darrar for the Arabic Bulletin – Edit Mohamed Al Yamani)

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