UPDATE 1-After Saudi pressure, EU states move to block dirty-money list

The adoption of a European Union money-laundering blacklist, which includes Saudi Arabia as well as Puerto Rico and three other U.S. territories, could be blocked by EU governments under a procedure launched on Thursday, two EU diplomats told Reuters. At a meeting on Thursday, some national envoys opposed adopting the list, triggering a process that could lead to it being delayed or withdrawn, the diplomats said.

The move came after Saudi Arabia's King Salman sent letters to all 28 EU leaders urging them to reconsider the inclusion of Riyadh on the list, one of the letters seen by Reuters showed. The listing of the Saudi Kingdom "will damage its reputation on the one hand and it will create difficulties in trade and investment flows between the Kingdom and the European Union on the other," the King wrote.

One diplomat said Washington has also pressured EU countries to scrap the list. The U.S. Treasury said when the list was approved by the European Commission that the listing process was "flawed" and it rejected the inclusion of the four U.S. territories.

The diplomat said the Saudi lobby had intensified at the summit of EU and Arab League leaders earlier this week in Sharm el-Sheikh. At that meeting, British Prime Minister Theresa May discussed the issue with the Saudi King, the diplomat said, adding that Britain and France are leading the group of EU countries opposed to the kingdom's inclusion on the list, confirming a Reuters report earlier in February.

For the list to be blocked, a majority of 21 states is necessary. EU officials said that around 15 countries have already declared their opposition to the listing. The list was first adopted by the European Commission on Feb 13 and lists 23 jurisdictions including Nigeria, Panama, Libya, the Bahamas and the four U.S. territories of American Samoa, U.S. Virgin Islands, Puerto Rico and Guam.

For the first time, the EU listing used different criteria from those used by the Financial Action Task Force (FATF), which is the global standard-setter for anti-money laundering. The FATF list is much smaller and does not include Saudi Arabia and U.S. territories. (Reporting by Francesco Guarascio; Editing by Hugh Lawson)