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1 SIGIR QUARTERLY REPORT on Wed Oct 31, 2012 6:57 pm



2 Re: SIGIR QUARTERLY REPORT on Thu Nov 01, 2012 2:57 am


Excerpts from the report--windreader1

2530 Crystal Drive • Arlington Virginia 22202
I am pleased to present our 35th Quarterly Report to the U.S. Congress and the Secretaries of State and Defense.

On October 16, 2012, the Council of Ministers dismissed Central Bank of Iraq (CBI) Governor Sinan al-Shabibi, amid allegations of corruption leveled against him. This peremptory and constitutionally questionable move occurred as an audit of the CBI’s foreign currency auctions surfaced. The audit purportedly found that perhaps 80% of the $1 billion purchased at weekly CBI-managed auctions was tied to illegal transactions, with the funds subject to those transactions potentially lost abroad to money laundering. This development is symptomatic of a troubled year in Iraq, evidenced by increasing corruption, resurgent violence, deepening ethnosectarian strains, growing apprehensions about the conflict in Syria, and widening divides within the coalition government.

Corruption at the Central Bank of Iraq?

On October 16, 2012, the Council of Ministers dismissed CBI Governor Dr. Sinan al-Shabibi, replacing him, on an interim basis, with the President of the Board of Supreme Audit (BSA), Dr. Abdul Basit Turki al-Sae’ed. The decision to replace Dr. al-Shabibi came amid claims that the CBI’s role in supervising the country’s banking system was compromised and that corruption was growing to unprecedented levels. Dr. al- Shabibi was said to be under investigation for possible misconduct, and a warrant was issued for his arrest. The former CBI Governor is credited by many analysts for maintaining the stability of the Iraqi dinar and for keeping inflation and interest rates low—all viewed as crucially important prerequisites for the kind of well managed economic growth Iraq hopes to achieve with its enormous oil wealth.

Political opponents of Prime Minister al-Maliki, along with many banking and financial experts, expressed immediate concern that the dismissal of Dr. al-Shabibi—who is widely viewed as personally honest and professionally effective—was an attempt to bring the CBI and its $63 billion in reserves under executive branch control. They pointed to the CoM’s action as just one of among several steps the Prime Minister has taken to concentrate power within his office. For example, in 2010, al-Maliki won a legal case that effectively shifted control of independent agencies, such as the CBI, from the Council of Representatives (CoR) to the CoM. In an advisory opinion issued in February 2012, the Higher Judicial Council affirmed the earlier ruling, this time naming the CBI. The ruling drew criticism at the time as a violation of the CBI’s independence as guaranteed under the 2005 Iraqi Constitution.

An audit of the CBI and its daily currency auctions completed by the BSA this quarter and personally supervised by Dr. Abdul Basit concluded that, of the $1 billion transferred out of Iraq each week, at least $800 million is laundered money—that is, transferred illegally under false pretenses. In a meeting with the Inspector General in mid-September, Dr. Abdul Basit talked about the BSA audit and what he called a triangle of sectarianism, corruption, and violence, in which each element feeds off the others in a dynamic that threatens the well-being of the state.

Money Laundering

Money laundering plays an important role in corruption. The recent BSA audit alleges that the principal mechanism for money laundering in Iraq is the daily currency auction operated by the CBI through which it sells U.S. dollars to commercial banks, which, in turn, provide those dollars to customers for a fee. The customer, who provides a large amount of Iraqi dinars possibly obtained by taking a bribe or via fraudulent withdrawal of money from ministry accounts—“launders” the illegal funds, requesting the commercial bank to transfer the dinar purchased dollars to a bank outside Iraq.

Before the transaction can occur, the commercial bank is obligated to determine that the customer has a legitimate reason to transfer the money by demanding documentation, such as a contract to buy goods from a foreign company. Recent BSA reviews of the documentation offered for such purchases have shown that a large portion of the transactions have been based on fraudulent representations.

Improperly documented capital flight over the past year is draining Iraq of its capital, possibly reaching 80% of the estimated $1 billion in U.S. currency that is transferred out of the country
each week, according to recent BSA findings.

3 Re: SIGIR QUARTERLY REPORT on Thu Nov 01, 2012 3:00 pm


The money laundering doesn't surprise me, especially with all the banks everywhere being ivestigated as of late. Thx wind

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