Harry, 24, issued an apology Saturday after the News of the World reported that in 2006 he had referred to a Pakistani colleague as a "Paki" and dubbed another member of his platoon a "raghead."
"Prince Harry fully understands how offensive this term can be, and is extremely sorry for any offence his words might cause," said a statement from the prince's office at St. James's Palace. "However, on this occasion three years ago, Prince Harry used the term without any malice and as a nickname about a highly popular member of his platoon."
The statement goes on to say: "There is no question that Prince Harry was in any way seeking to insult his friend. Prince Harry used the term 'raghead' to mean Taliban or Iraqi insurgent."
Faces InvestigationArmy bosses said that Harry faces an investigation but that no complaint had been made against him. The Ministry of Defense issued its own statement saying, "Neither the army nor the Armed Forces tolerates inappropriate behaviour in any shape or form."
Harry is believed to be at his country home, Highgrove, while he awaits his orders to see his superiors. He is soon expected to have a one-on-one meeting with his superior Colonel Fullerton, commanding officer of the Household Cavalry Regiment.
A spokesman for the Muslim Council of Britain, Inayat Bunglawala, accepted the prince's apology. "Clearly his comments were crass and insensitive," Bunglawala tells PEOPLE. "The Royal Family is meant to unite people not divide them by making derogatory references to someone’s ethnicity."
He added, "Having said that, it was three years ago and people say things they later regret. It is right to take his apology at face value. In the larger scheme of things there are more pressing issues such as the continuing carnage in Gaza to concern us."
2005: Prince Harry dresses as a Nazi soldier
2002: Harry gets caught smoking marijuana and partying hard