The first comment from the Iraqi Central Bank on the ‘New York Times’ investigation
Baghdad – A new press report, Wednesday, shed light on the corruption suspicions surrounding the work of the currency sale window in the Central Bank of Iraq, which it considered “a major corruption gateway.”
The report published by the Independent Arabia website, followed by People (12 August 2020), stated that “the basic idea of the currency auction is focused on“ selling the dollar to private banks and money transfer companies to manage the import of goods ”and its daily sales of dollars reach 180 A million dollars, but several suspicions affect influential political figures standing behind these banks to run corruption operations. ”
In the report, the Director General of the Accounting Department at the Central Bank of Iraq, Ihssan Shamran, comments on the accusations leveled against the bank indicating its connection with “suspicious operations or managing transfers outside the general framework of its laws,” and included in the “New York Times” investigation entitled “The rule of thieves in Iraq.” .
The following is the text of the report:
Since the compass of the Iraqi Prime Minister Mustafa Al-Kazemi’s movement began to become clear, his focus on economic issues has become clear, as he sets his sights on four main files: controlling border crossings, fighting corruption, dismantling the influence of armed factions on financial outlets, and strengthening local industry.
But the road to these files necessarily passes through the gate of the Central Bank, specifically, the so-called currency auction, so Al-Kazemi will need the help of the governor of the “central” Ali Alaq.
Informed sources say that the two men (Al-Kazemi and Al-Alaq) enjoy a “distinguished” relationship, which may facilitate the settlement of these issues.
However, signs of progress in this file have not been clear so far, with members of the Finance Committee in the Iraqi parliament speaking about the Central Bank’s “exploitation” of its powers as an “independent body” in not dealing with the problems that the legislative and executive authority are raising.
The basic idea of the currency auction revolves around “selling dollars to private banks and money transfer companies to manage the import of goods.” Its daily sales of dollars reach 180 million dollars. However, several suspicions affect influential political figures standing behind those banks to manage corruption operations.
And the Treasury Department has included Iraqi banks – dealing with the auction – in the sanctions list on more than one occasion.
With economists describing the currency auction as a “dollar depletion front and an opportunity for some banks owned by influential parties to achieve large profits,” most of the estimates talk about more than 500 billion dinars sold by the Central Bank in its continuous daily operations since 2003.
Washington and adjust the currency auction
The issue of the currency auction remains a matter of questions and suspicions, especially with frequent talks about Washington’s ability to control the financial movements of the entire Central Bank of Iraq, as all major Iraqi transfers pass through the US Federal Reserve.
Close to Iran accuses the governor of the Central Bank of being an ally of the United States, given the quick response that he shows whenever decisions or sanctions are issued by the US Treasury, especially those that have targeted armed faction leaders linked to Iran.
People close to Al-Alaq reject these “allegations”, and stress that one of the central bank’s most complicated tasks is to maintain the flow of dollars into the local market and prevent problems that may cause sanctions against Iraq in the event of failure to respond.
But the issue does not appear to be limited to managing the dispute between Washington and Tehran. Many observers accuse the central bank of running a “corruption balancing act” between the United States and Iran’s allies in Iraq. What was reported by “The New York Times” in its last report, about the possibility of “American complicity” in facilitating the work of the Central Bank, was not a conversation that was heard for the first time in Iraq.
The United States is facing charges of overlooking the flow of money to Iran through Iraq. The American newspaper report says that “the US Treasury Department often turns a blind eye to money laundering operations taking place in Iraq,” while the report explicitly accuses central bank officials of colluding with companies that provide cover for the participation of terrorists in the auction.
“Washington eases pressure on Iran via Baghdad.”
Abdul Rahman Al-Mashhadani, a professor of political economy at the Iraqi University, said, “All financial operations of Iraq are monitored by the United States, but there is a clear overlook of them.”
It reveals “the entry of non-Iraqi banks into the currency outlet, including Lebanese and Iranian banks, which receive daily quotas estimated at 5-8 million dollars.”
He points out that “Iraq’s commercial dealings with Iran do not take place through the banking system due to the penalties imposed on it, and most transactions are done through direct payment,” indicating that “several evidences for this, including very inflated numbers regarding the import of roses, tomatoes and watermelons at inflated prices.” Exceeds Iraq’s need. ”
15 percent money laundering rate at auction
On the money laundering operations that mar the currency auction sales in the Central Bank, Al-Mashhadani estimated that the money laundering proceeds from the daily sales of the Central Bank would be about 15 percent, indicating that “the talk about currency auction being a gateway to corruption and money laundering abroad has been taking place since 2010.” .
He added, “There are influential political parties standing behind the banks that own shares of the auction, which have also become outlets for merchants’ transfers, and a percentage of them are tainted by money laundering operations.”
He points out that “despite the central bank throwing the responsibility for these suspicious operations on other parties, but it cannot get out of the liability framework,” indicating that “he must check after raising suspicions for years that the auction has become an open space for corruption and any bank is supposed to be excluded.” Suspicions are answered. ”
He continues, “Numerous evidence of banks submitting invoices in the names of fake companies and these files are supposed to be referred to integrity, and this raises questions about the central failure to take strict measures.”
An outlet for money laundering and financing armed groups
The European Commission had included Iraq, along with other countries, in the list of countries that pose financial risks to the Union because of the failure to combat money laundering and terrorist financing.
The sensitivity of the currency auction file is based on being the only outlet for the removal of hard currency from the country, as it is considered an anchor for economic security, but the accusations against this outlet went beyond money laundering for reasons of profit, until it became a front for other suspicious operations that reach the limits of financing armed groups.
“The currency auction has become a front for the depletion of the dollar from Iraq and the opportunity to make profits from corrupt money in favor of influential political parties that have influence over local banks,” says the expert on economics, Salam Sumaisem.
She adds, “Currency window controls do not have the necessary degrees of transparency to monitor the country’s actual need for import, and this raises major questions about the credibility of opening credits related to imports through the Ministry of Trade, and why the regulatory authorities do not track those processes”, adding, “We do not know exactly what it is. The role of the money laundering department in the central bank in following up on these cases.
Sumaisem points out that one of the causes of the problem is that “banking leaders within the central bank and other considerations cannot be excluded.”
The central denies the charges
The Director General of the Accounting Department at the Central Bank of Iraq, Ihssan Shamran, denied that the bank has a link in any suspicious operations or managing transfers outside the general framework of its laws, indicating that “according to the Central Bank Law, the sale of dollars is done through what is called a simple sale without imposing any complications. As long as the dinar is intact, “as he put it.
He added to “The Independent Arabia”: “Commercial banks submit a request to buy dollars for their customers according to documents and import licenses submitted later, and based on the bank’s controls to verify the integrity of the funds with no suspicions of money laundering or terrorist financing, the Central Bank receives the dinar from the bank and deposits the amount in dollars. In his favor with the exporter’s private bank, adding that after a period the commercial bank submits a report to the bank on the import process.
And while he indicated that “suspicions related to non-entry of goods in exchange for money sold by the central bank are related to other departments,” he pointed out that “the investigation function belongs to important institutions including the customs authority, the Ministry of Trade that gives import licenses, and the General Tax Authority that has a tax office in the customs.”
He pointed out that “the most important manipulation takes place at the border outlets, where some employees force the customer to reduce the recorded imported quantities,” noting that this process leads to “the corrupt obtaining four times what the state gets through customs duties,” expressing his hope That “the Ports Authority shall monitor and control the violations and the processes of changing the identity of imported goods.”
Responsibility of “sectoral entities”
Official and press reports circulated huge numbers regarding Iraq’s import of goods that exceed the limits of its need, while official documents show that some of these imported materials have doubled up to a thousand times over what Iraq had imported in previous years, including the import of tomatoes from Iran in 2017, worth 1.66 billion dollars.
In the context, Shamran points out that “the bank is not specialized in assessing Iraq’s need for the materials to be imported, which is the responsibility of the sectoral authorities and according to which the bank deals”, indicating that “the authority that issues import licenses is the one that determines the country’s need for the commodity to be imported, and the Central Bank has no responsibility for Determining the country’s needs to link this with its sales, “explaining that” Iraq suffers from the absence of a national information system. ”
He pointed out that Iraq used to link most of the imports with the subject of “estimating the need for imports,” and in light of which an import license is issued from the Ministry of Trade, and based on the license, the Central transfers funds, but they stopped after 2003. ”
And Shamran added, “Transfer operations in the central bank are very strict and under the supervision of the US Federal Reserve Bank, which has strict rules in tracking money, as well as the Anti-Money Laundering Office. We have imposed on banks to activate reporting units for money laundering and terrorist financing operations,” adding “stories Corruption can be believed if the central bank carries money on its side and gives it to merchants directly and not through this complex network. ”
On the importance of the window for selling the dollar, Shamran said that it “funds the needs of Iraq from the importer as well as financing the needs of the Ministry of Finance of Iraqi cash.”
He concluded that “the accusations received against the bank by deputies and officials affect confidence in state institutions and waste their reputation, and this harms Iraq and removes foreign investment opportunities.”
Authority without authority
As for the representative of the Finance Committee in the Iraqi Parliament, Ahmed Hama Rashid, he says that “the majority of the committee members agree that the currency auction is a great suspicion of corruption.”
He continues, “The prime minister’s pledges to control outlets, dismantle the power of some financial factions, activate industry and fight corruption, are directly related to the issue of currency auction,” noting that “it has become a public opinion issue and one of the factors that shatter the economy.”
He points out that “there is a blackout on this issue, and the central bank’s response to questions about the currency auction does not go beyond the data limits, and the legislative authority is not efficient in this area.”
He concludes that “there are no tools available to solve the auction problem except through the cooperation of the Central Bank, and Parliament or the Council of Ministers cannot solve it due to the independence of the monetary authority.”
Currency auction and Chalabi “killed”
The opening of suspicions about the currency auction dates back to previous years, when the late head of the Iraqi Parliament’s Finance Committee, Ahmed Chalabi, presented files related to corruption in the currency auction in 2015, and as a result, the Supreme Judicial Council formed a judicial investigative body, and a statement by the Council said on November 10 (November). The second) of the same year, he decided to form a judicial investigative body to look into the documents submitted by Chalabi, explaining that “the documents are related to money laundering and foreign currency smuggling cases bought from the Iraqi Central Bank auction.”
The statement stated that “the investigative body is made up of the judges of the Integrity and Economic Crime Investigation Court, and that the public prosecution will appear before the investigative body to express its requests and follow-up, and this decision will be implemented as of 11/10/2015.”
The Iraqi Integrity Commission issued a statement on December 11, 2019, talking about the details of the penal cases related to the “currency auction” file, where it said that “among these cases are major corruption cases in the work of a private bank and indicators of cases of smuggling foreign currency outside Iraq. By the bank buying foreign currency for the benefit of companies claiming to import goods, “noting that upon investigation and scrutiny, it was found that” these companies have not imported goods into Iraq since 2004. ”
The department explained that “the cases included fraud by some governmental and private banks, entering the auction of selling currency in the names of companies and private account holders without their knowledge, submitting forged import invoices, as well as violating the Central Bank’s instructions when entering the auction in accordance with the provisions of Article 3 of the Money Laundering Law.” No. 93 of 2004. ”
Iraqi politician Laith Shubbar said in a series of tweets on Twitter, “Yesterday, I received from the famous journalist, Robert Worth, author of the article on Iraq under the rule of thieves, the complete file prepared by Ahmed Chalabi about the corruption of the sale of currency in the Central Bank, which ended with his death and the closure of the file permanently.”
He added, “I spent two hours reading it and came to the complete conviction that the first head of corruption is this dangerous suspicious auction.” He explained that “the file of corruption that I received from the currency auction that is held daily by the Central Bank is frightening and dangerous, and because of it, Chalabi was assassinated.”
He pointed out that “there is no doubt that the file has existed for years in the Integrity Commission, and the names mentioned in this file are still arriving and wandering. Some of them even founded a party and became a deputy after spending millions, but the heads happened and there is no problem.”