TNAG-2027-FCO40-2889-Hong-Kong-freezing-of-Kuwaiti-and-Iraqi-assets-1990 — Page 121

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026333

MDHIAN 1267

HKB 020 / 26

TANUG 1990

CONFIDENTIAL

FM HONG KONG

TO DESKBY 03113OZ FCO

TELNO 2428 )

OF 031031Z AUGUST 90

INFO IMMEDIATE WASHINGTON, GIBRALTAR, GRAND CAYMAN, GRAND TURK INFO IMMEDIATE HAMILTON, MONTSERRAT (PLYMOUTH), TORTOLA

نکار

YOUR TELNO 1458: KUWAITI ASSETS IN HONG KONG

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A QUICK SEARCH FOR KUWAITI MONEY IN HONG KONG HAS IDENTIFIED

ROUGHLY USD150 MILLION INTERBANK DEPOSITS PLACED WITH BANKS IN HONG

KONG AND ABOUT USD320 MILLION IN THE FORM OF MONEY UNDER

DISCRETIONARY MANAGEMENT IN HONG KONG. THERE WILL CERTAINLY BE

OTHER ASSETS BELONG, FOR EXAMPLE, TO INDIVIDUALS BUT IT WILL BE

DIFFICULT TO IDENTIFY THESE.

2. THE INTERBANK DEPOSITS ARE MOSTLY US DOLLAR DEPOSITS PLACED WITH

JAPANESE BANKS IN HONG KONG. WE HAVE SPOKEN WITH THE BANK OF JAPAN

REPRESENTATIVE HERE AND HAVE OBTAINED THE INFORMATION THAT THE

MINISTRY OF FINANCE OF JAPAN HAS ISSUED GUIDELINES TO JAPANESE

BANKS TO WITHHOLD FUNDS BUT THAT THE JAPANESE GOVERNMENT LEGALLY CANNOT ORDER COMMERCIAL BANKS TO STOP PAYMENT. WE HAVE INFORMALLY, THROUGH THE BANK OF JAPAN REPRESENTATIVE, ENCOURAGED JAPANESE BANKS TO DO THE SAME AND HAVE RECEIVED SUPPORT. IN PRACTICE, AS THE CLEARING OF KUWAITI FUNDS HAS BEEN SUSPENDED IN NEW YORK, IT WILL

NOT BE POSSIBLE FOR US DOLLAR DEPOSITS TO BE REPAID.

3. AS TO THE MONEY UNDER DISCRETIONARY MANAGEMENT, ONLY A FEW FINANCIAL INSTITUTIONS ARE INVOLVED. AS FAR AS WE CAN ASCERTAIN, THEY ARE ALL TAKING A COMMERCIAL DECISION ON THEIR OWN TO FREEZE

THE FUNDS, PENDING CLARIFICATION OF THE SITUATION.

4. ON THE OTHER SIDE OF THE EQUATION, BANK IN HONG KONG HAVE CLAIMS ON KUWAITIS BANKS AMOUNTING TO ONLY USD15 MILLION. WE HAVE NOT BEEN

APPROACHED FOR ASSISTANCE.

5. WE MAY HAVE A PROBLEM WITH A LOCALLY INCORPORATED BANK, THE DAO HANG BANK, WHICH IS 33 PER CENT OWNED BY THE KUWAITI INVESTMENT OFFICE. BANKERS TRUST, DAO HANG'S CORRESPONDENT BANK IN NEW YORK, HAS UNFORTUNATELY STOPPED MAKING PAYMENTS ON BEHALF OF DAO HANG, EVEN IN RESPECT OF TRANSACTIONS BETWEEN DAO AND NON-KUWAITI

CONCERNS. SO FAT THIS INVOLVED USD160 MILLION. THIS HAS THE CLEAR

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