Saudi Arabia has nominated its former intelligence chief, who had several meetings with Osama bin Laden, to be its next ambassador in London. Oxford-educated Prince Turki al-Faisal is likely to take up his post within a few weeks, though he is dogged by controversy.

He is one of several prominent Saudis facing a compensation claim of more than $600bn (£400bn) brought in the United States by families of the September 11 victims.

The lawsuit alleges that the 57-year-old prince was among those who helped to fund Bin Laden's al-Qaida network.

The Saudi move came as a US Treasury official set off for talks in Europe aimed at freezing the assets of about a dozen individuals accused of financing terrorism. Most of them are said to be wealthy Saudis.

Although this will be Prince Turki's first diplomatic posting, other Arab diplomats in London were enthusiastic about the decision to send such a high-profile figure to Britain.

One, who asked not to be named, said he expected the controversy over the prince's links with Bin Laden to blow over quickly. "The people who complain would do better to question George Tenet [head of the CIA] about his shortcomings," he said.

The previous Saudi ambassador, Dr Ghazi Algosaibi, was last month recalled to Riyadh where he has been appointed minister of water.

His removal was widely viewed as a reprimand for public comments apparently sympathising with Palestinian suicide bombers, though some say he is highly regarded in Riyadh and played a key role in drafting Crown Prince Abdullah's Middle East peace plan this year.

Prince Turki's contacts with Bin Laden occurred mainly during the Soviet occupation of Afghanistan at a time when the Islamic resistance fighters were regarded far more favourably in the west than they are now.

As head of Saudi intelligence, Prince Turki was later involved in negotiations with the Taliban regime in Afghanistan - encouraged by the United States - to try to secure Bin Laden's extradition.

In an interview with the Jeddah-based Arab News and Saudi-owned MBC television last year, the prince described two secret visits he made to Kandahar, the first in June 1998. "King Fahd and Crown Prince Abdullah sent me to meet Mullah Omar [the Taliban leader] to persuade him to hand Bin Laden over," he said.

"Mullah Omar asked me to inform the king and the crown prince that he wanted to set up a joint committee to arrange procedures for the handover."

Two months later, Bin Laden's supporters bombed the US embassies in Nairobi and Dar es Salaam, killing hundreds of people. The US then launched reprisal attacks on Afghanistan and Sudan which scuppered the handover plans.

Prince Turki, 57, was relieved of his intelligence post last year amid suggestions that the US had become unhappy about his contacts with the Taliban.

The US Treasury undersecretary for enforcement, Jimmy Gurule, is due to to arrive in Europe tomorrow for a new offensive against terrorist financing. He is expected to meet bankers and law enforcement officials in Switzerland, Liechtenstein, Denmark and Sweden.

According to a report in the Washington Post yesterday, US officials have not, until recently, been able to trace al-Qaida's money to its source. But now, through intelligence gathered in interviews with arrested militants and other methods, they believe they have a clearer picture of where the money originates.

Mr Gurule told the paper he would be presenting European authorities with "specific information on selective, high-impact targets" - believed to be mainly Saudis - so they can "be designated terrorist financiers and have their assets blocked".

The US Council on Foreign Relations yesterday called for new measures to clamp down on terrorist funds. "After an initially robust attempt to curtail financing for international terrorism, the Bush administration's current efforts are strategically inadequate to assure the sustained results needed to protect US security," it said.

It called for the appointment of a special assistant to the US president with power to make various American agencies co-operate more closely, and the creation of a new international organisation "dedicated solely to curbing terrorist financing".