Barclays' Paris chief quizzed in money laundering inquiry

Barclays is being investigated by the French authorities over allegations that senior executives failed to spot a long-established money laundering network spanning France and Israel.

Barclays' managing director in France, Henri-Paul Pelligrino, is understood to have been placed under formal investigation with two other senior officials of the bank.

The Barclays employees were questioned last Friday after they failed to report very large withdrawals of allegedly illegitimate cash being made through the bank's branches.

The withdrawals are understood to be part of a suspected money laundering ring operating through a string of small Jewish textile companies in the Santier district of Paris.

The companies, which are on trial in France, are alleged to have obtained loans in the country on the basis of fake orders. They are charged with washing the money through a series of financial institutions in France and Israel so that the loans were no longer traceable between 1996 and October of this year.

The French authorities have also placed several rabbis under formal investigation, as well as workers from two small French banks. These are BRED, which is part of Banques Populaires, and Société Marseillaise.

Barclays confirmed that the investigation was under way. A spokeswoman for the bank said: "A number of employees of Barclays in France are assisting the police with the investigation. We take money laundering very seriously."

The investigation is the latest in a series of high-profile interventions by the French authorities into the financial sector.

Two months ago, an inquiry was opened into the chairman of the insurance company Axa, who had allegedly allowed customers to avoid paying tax by taking out life-cover policies in Luxembourg.

Under French law, a senior employee of an organisation is allowed to be investigated even if he or she is unlikely to have been aware of a crime. A formal investigation is one stage before being charged for a criminal act.

French law says that institutions both have a duty to report money laundering and can also be held responsible for not identifying the crime.