Saudi Arabia’s Al-Rajhi Bank has written to its key international clients in a bid to restore its reputation after the bank was accused of being involved in funding terrorist activities by a US Senate committee.

The accusations were made, and widely reported around the world, following the 17 July publication of a US Senate report into UK lender HSBC. The report focused on potential money-laundering and terrorist financing activities that the UK bank may have been involved in. It also included a large section on alleged links between Al-Rajhi Bank, which HSBC has a long history of working with, and terrorism funding.

Although the committee’s report contains no fresh allegations against Al-Rajhi Bank, nor any legal action against them, sources inside the bank say it has had a damaging impact on their relations with international clients.

The letter has been sent after several clients, including European banks, threatened to pull out of deals that Al-Rajhi Bank was also involved in. “We have had other banks say that unless these issues are clarified they can’t be in the same deal as us,” says one banker at the firm.

“Every part of our business could be affected by this,” says another Al-Rajhi source.

“For compliance reasons it could become a serious issue for us. We don’t want to end up being named in the press as linked to this,” says one banker at a European lender that deals with Al-Rajhi Bank.

The letter, a copy of which has been seen by MEED, says: “We wish to take this opportunity to assure you that the allegations contained in these reports are absolutely false. Al-Rajhi Bank categorically denies that it has knowingly supported or facilitated terrorist activities in any way and at any time.”

“The subject report is not a determination by US law enforcement or regulatory authorities, none of which have ever taken any action against the bank or its shareholders despite these accusations and years of newspaper stories containing them.”

It was sent in the name of the bank’s chief executive officer, Suliman Azzabin.

Over the past decade, there has been intense speculation about links between the bank, its key founders and the financing of Al-Qaeda terrorists. No links have been proven, but the allegations have continued to circle the bank.

According to one former senior banker at the firm, the recent communication is just the latest attempt to reassure international clients. “For compliance reasons, banks start to ask a lot of questions when these things start getting a lot of press coverage. To my knowledge there has only been one bank that in the past has severed its ties with Al-Rajhi because it was not satisfied with the response it got.”

Whether the communication, sent on 23 July, to a select number of banks, will be enough to reassure them is unclear, but in the past the bank has generally managed to keep relations with international banks. “Getting the level of comfort and confidence that most people need to reassure them has been done in the past, and once the dust settles people should be a little less nervous about it,” say the former Al-Rajhi banker.

The report has been intensely damaging for HSBC. David Bagley, the bank’s head of compliance, resigned as a result and the bank could face huge fines after investigations by three US authorities are completed.

Despite the concern about reputational damage, the allegations had little impact on the Al-Rajhi Bank’s share price, which fell from SR73.7 ($19.6) on 16 July at the end of trading, to SR71.5 by the end of 18 July.

Al-Rajhi could not be reached for comment.

For its part, HSBC said in a statement about the US Senate Committee report, that it acknowledged its failures, and was taking steps to strengthen its compliance and risk management.