BAE 'paid Saudi prince £1bn in secret'

British arms company BAE Systems secretly paid a Saudi prince more than £1bn over a period of more than 10 years, an investigation has revealed.

Prince Bandar bin Sultan received the money with the full knowledge of the Ministry of Defence, according to the BBC's Panorama programme. BAE sent up to £120m a year to two Saudi embassy accounts which the BBC says were a "conduit" to Prince Bandar. The prince, who was the Saudi ambassador to the US for 20 years, was the architect of the Al Yamamah deal to sell military aircraft to Saudi Arabia. The deal, worth £43bn, was signed in 1985.

David Caruso, an investigator who worked for the American bank which held the accounts, told the BBC: "There wasn't a distinction between the accounts of the embassy, or official government accounts as we would call them, and the accounts of the royal family."

Panorama says the payments were listed on the arms deal contract as "support services," and were authorised every quarter by the MoD. The Serious Fraud Office discovered the payments during an investigation into the Al Yamamah deal which was halted last year after a review by the attorney general, Lord Goldsmith. He said it was in Britain's national interest to drop the investigation.

Prince Bandar and the MoD declined to comment on the matter, and BAE said that the company acted lawfully at all times.