UBS Indian Plans Stymied Over Money Transfer Investigation

Christopher Owen

7 February 2008

The Reserve Bank of India has put a bank licence application by UBS on hold pending the outcome of an investigation. The decision is understood to have stemmed from the Swiss bank’s reluctance to assist Indian investigators in tracking international money transfers between an Indian horse dealer and a fugitive Saudi arms dealer, according to local press reports. The licence would have allowed UBS, the world's largest wealth manager, to launch private banking operations catering to rich clients in India. "An in-principle approval given to UBS has been kept on hold pending investigations," said RBI spokeswoman Alpana Killawalla. The delay is the second blow to UBS' efforts to expand in India in recent months. In December, UBS was forced to abandon plans to buy Standard Chartered Bank's mutual funds business in India after authorities let the application expire. The deal had been valued at $120 million. The Hindustan Times reported that a top Enforcement Directorate source had confirmed that its officials had, in December 2007, advised the Indian government not to clear the deal. Officials were investigating $8 billion in the Swiss bank accounts of a Pune-based horse dealer Hassan Ali Khan. They claimed to have evidence of a $300-million transfer from billionaire Saudi arms dealer Adnan Khashoggi. The Directorate source told the newspaper that UBS directed Indian investigators to get a letter rogatory, a formal request from an Indian court to a Swiss court. In December, Standard Chartered, the parent company of Standard Chartered Bank in India, sent a notice to stock exchanges in London and Hong Kong, where it is listed, saying it would not proceed with the proposed sale to UBS Global Asset Management. It did not give any reason other than saying the “contract with UBS ... has expired. Standard Chartered will now seek a new buyer”. Mr Khashoggi now lives in Monaco. There is a British warrant out for his arrest. “As a truly global entity, our policy on such issues is to comply with the laws and regulations in each host country, while at the same time, complying with banking laws in Switzerland,” a UBS spokesperson said in an email to the Hindustan Times.