Plan to grab £1bn in Libyan banknotes foiled

Treasury managed to stall the export of uncirculated notes to the Gaddafi regime

British authorities have thwarted an attempt to export nearly one billion pounds worth of mint Libyan banknotes back to Tripoli.

Last night the Government moved to officially freeze the assets held by the Libyan regime in the UK following sanctions imposed by the UN Security Council. But yesterday it emerged that an attempt was made last week to move £900m of uncirculated notes held in a secure storage facility in the UK back into Libya.

Managers at the facility contracted the Treasury who devised a plan to stall the export – which would have been legal at that stage – until a wider ban could be put in place.

They feared the money could be used to pay mercenaries – known to be operating in the country – to continue the regime's campaign of violence against protesters.

At first the Libyan representatives were told it would take four or five days to find an aircraft prepared to fly the money back to Tripoli. They then offered to send their own aircraft to pick the money up. Managers at the facility agreed and told them to fly to an airfield in Manston in Kent.

However, the notes were being held in the North-east – which would have required several hours of travelling time and several vehicles to collect the cash. The stalling tactics worked and yesterday the notes were impounded along with an estimated £20bn worth of other assets directly or indirectly controlled by the Gaddafi regime.

In a statement the Treasury said that all assets controlled by Gaddafi, his four sons and one daughter would be covered by the freeze. In addition, anyone with suspicion that funds could belong to the named beneficiaries is also covered. This means, in practice, all the assets held by the Libyan Investment Authority, which has offices in London, will be impounded.

The assets also include money held in bank accounts, some commercial property and a £10m mansion in London. Last week it was reported that Gaddafi has deposited £3bn with one of Mayfair's private wealth managers in a bid to protect his family's fortunes.

A Swiss-based intermediary brokered the deal after previously approaching a City stockbroking firm five weeks ago with a view to depositing funds. However, when that stockbroker discovered the ultimate identity of the source of the funds, it advised the intermediary to take his business elsewhere.

In a statement George Osborne, the Chancellor said: "I have today taken action to freeze the assets in the UK of Colonel Gaddafi and his family or those acting on their behalf so that they cannot be used against the interests of the Libyan people. This follows the UN Security Council Resolution tabled by the UK and France.

He went on: "This is a strong message for the Libyan regime that violence against its own people is not acceptable."