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Saudi Arabia’s Top Bank At Center of Another Scandal

Political instability in Saudi Arabia is damaging business in more than just the Kingdom. The recent Aramco drone attacks created a roller coaster week for the global oil market, one that spread to oil-trading desks from Tokyo to Houston. The Tadawul All Share Index fell by more than 3%, led by dips in Al Rajhi Bank and Saudi Basic Industries Corp.

But the real impact in Al Rajhi will come, not from a drone attack, but from the bank’s own
malfeasance.

The Al Rajhi brand is one of the best known and regarded names across the Middle East. There is no one who doesn’t know it. After the Royal family itself, Al Rajhi is probably the most important family in Saudi Arabia.

The brand certainly carries some baggage. Following the Sept. 11, 2001, attacks, the bank set off an intense debate within the U.S. government over whether to take action against its alleged role in financing terror. Confidential reports by the Central Intelligence Agency and other U.S. agencies, reviewed by The Wall Street Journal, detail for the first time how much the U.S. learned about the use of Al Rajhi Bank by alleged extremists, and the deliberation over how to respond.

Today the bank is led by its five brothers, presided over by the eldest brother Abdullah Al Rajhi. Their influence has even found its way into the front lines of politics with Ahmed Al Rajhi’s appointment as minister, due in no small part to his close relations with Saudi Crown Prince Mohammad Bin Salman Al Saud.

With that fame has come infamy: today the Al Rajhi brand has become known for lawsuits in the billions of dollars, criminal charges, and flight bans for some of the brothers.. The business has shifted away from its reputation of integrity and governance, something the deceased Al Rajhi patriarch held dearly, to allegations of funding terrorism and fraud.

The Al Rajhi Bank is today at the heart of a $1 billion fraud case that has been before the UAE’s Dubai courts. Despite attempts to undermine due process by corruption and threats, the case is tipping towards a ruling against the Al Rajhi brothers and their management team, in what are perhaps the largest fraud cases before courts in the Middle East.

Leaked documents, validated by the Dubai Courts, confirm a premeditated documented plan to misappropriate Tameer Holding Investments monies. The Al Rajhi brothers, along with executives including their CEO Federico Tauber and CLO Aasma Khan, appear to have misappropriated assets and dismantled staff to defraud the founding partner of Tameer, Omar Ayesh, and hundreds of victims.

Although Abdullah Al Rajhi had no legal ties to Tameer, according to hundreds of emails and documents referenced in court he was the king maker on key decisions related to the company and the misappropriation of assets. Abdullah gave the green light to fraudulently transfer Tameer assets to shell companies they owned to dissolve Tameer and deplete its value, including Ayesh’s share, and deposits paid by hundreds of customers.

The Al Rajhi’s have tried to justify the asset transfers to Dubai courts as mitigation of economic challenges and a lack of real estate offers. A leaked email from October 10, 2013 shows, however, that they received an unconditional offer by a buyer at market value for Tameer’s three Business Bay plots at about $245 million. On October 11, 2013, Federico Tauber emailed Abdullah and cc’d Ahmed Al Rajhi about the unconditional offer, but the offer was refused.

The assets were transferred to shell companies Sunstone and Moonstone at diminished values shortly thereafter to create the guise of a sale at approximately $66 million. Another property, the Hard Rock cafe plot, received a purchase offer for $200 million and ultimately was sold at $28 million.

Creating so-called shell companies is not criminal, but it is a crime to frame an entire structure of companies exclusively around furthering a fraud. In the United States, the Al Rajhis’ scheme would constitute financial fraud, embezzlement, conflict of interest, breach of fiduciary duty, and misappropriation of assets.

The lack of accountability is a risk for the UAE, whose reputation as a safe place for international business is jeopardized when this kind of criminal behavior goes unpunished. Indeed, last December, Sheikh Mohammed Bin Rashid of Dubai pledged that “No one is above the law in Dubai” and that “justice delayed is justice denied.”

Justice in this case isn’t just the moral thing to do; it’s in the UAE’s best interests. The Reputation Institute dropped the UAE’s ranking from No. 27 in 2017 to No. 36 in 2018. If the
country can’t deliver justice to victims, who knows how much further it will drop?

Jared Whitley is a long-time DC politico who writes about the impact of government regulation on business. He worked in the US Senate, the White House, and the defense industry. He is a graduate of Hult International Business School in Dubai and an associate of the Global Justice Foundation.


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