Goldman confirmed that Haitem Zarti, brother of Mustafa Zarti, the Libyan Investment Authority’s former deputy head, worked for the bank in London and Dubai for almost a year.

An initial three-month stint was extended due to good performance, the bank said The arrangement highlights links between Muammer Gaddafi’s regime and international financial institutions .

The US Securities and Exchange Commission is investigating financial institutions’ dealings with sovereign wealth funds and whether any banks improperly paid officials for access.

Both Goldman and Mustafa Zarti said the internship had nothing to do with the bank’s relationship with the LIA and insist there was nothing improper about his employment.

Goldman was one of many banks to build relationships with the LIA after economic sanctions were rescinded in 2003-04.

Goldman structured a $1.2 billion equity and currency derivatives portfolio for the authority that lost 98.5 percent of its value as of the end of June 2010, internal LIA records show. Goldman said the LIA chose the investments.

Goldman took Haitem Zarti on as an intern in June 2008, as the bank was wrapping up its derivatives trades for the fund. Mustafa Zarti said his brother, who is now 29 and could not be reached for comment, joined the bank after finishing his MBA.

According to Goldman, Haitem Zarti worked in its investment banking division, did not deal with Libyan matters and left in May 2009.

Goldman said: “We, and other companies, including many news organisations and banks, have offered internships and run training programmes for a number of foreign government entities and central banks.” The LIA owns 3 percent of Pearson, the FT’s parent company.

Pearson said it was not aware that any internships had been offered to anyone connected with the LIA.

Goldman added that Haitem Zarti’s internship did not breach US anti-corruption laws, which forbid companies offering advantages to foreign government officials to help them win business