US: Iraqi audit points to huge money laundering

[October 31, 2012]  BAGHDAD (AP) -- Iraqi auditors believe as much as $800 million in U.S. dollars is being sent out of the country illegally each week, draining it of hard currency, according to a report by American inspectors released Tuesday.

The findings point to widespread money laundering and could focus further attention on oversight at Iraq's central bank, which is at the heart of a probe into alleged financial wrongdoing involving its former governor and other top officials.

The U.S. Special Inspector General for Iraq Reconstruction said in a report that auditors in Baghdad fear up to 80 percent of an estimated $1 billion leaving the country weekly lacks proper documentation.

The American watchdog said that Iraq's top auditor, Abdul-Basit Turki, disclosed the findings about the extent of the alleged money laundering to American officials last month.

Turki also raised concerns about "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," according to the SIGIR report.

Turki's office, the Board of Supreme Audit, recently carried out a probe into Iraq's central bank and daily auctions it holds to exchange Iraqi dinars for dollars.

Commercial banks sell their dinars to the central bank and then pass on the dollars they receive to customers for a fee. Those customers are supposed to provide documentation to the banks before transferring the dollars abroad, but Iraqi auditors have found that most of the transactions are based on fraudulent paperwork, according to the SIGIR report.

A spokesman for the Iraqi audit board, Imad Ismail, acknowledged that a meeting was held with American officials in recent weeks, but said he didn't immediately have details about the audit. Turki was not available for comment.

Earlier this year, deputy central bank governor, Mudhhir Mohammed Salih, warned that Iraq had seen a sharp increase in demand for U.S. dollars it sells. He blamed the spike on Iraqi traders reselling the greenbacks to customers in Iran, which is being squeezed by U.S. and international sanctions, and in civil war-wracked Syria.

The American report's release comes two weeks after the longtime governor of Iraq's central bank was removed from office after he and other bank officials were targeted in an investigation into alleged financial wrongdoing.

Turki, the audit board head, has been named as the bank's interim chief.

Specific details about the allegations against the ousted bank governor, Sinan al-Shabibi, have not been made clear. But comments from lawmakers and other officials familiar with the investigation suggest that the charges are linked to alleged irregularities involving the foreign exchange auction and improper currency transfer documentation.

Al-Shabibi is considered to be a politically independent economist -- a point the SIGIR report highlighted by noting that he "is widely viewed as personally honest and professionally effective."

The allegations against him have raised concerns of political interference in the bank. Iraqi Prime Minister Nouri al-Maliki has tried to distance himself from suggestions that the case is politically motivated, saying his administration was not behind the investigation that led to the arrest warrants.

Also on Tuesday, Iraqi government spokesman Ali al-Dabbagh said that the date for upcoming provincial elections has been set for April 20. Iraq last held elections for its local governorates in January 2009.

[Associated Press; By ADAM SCHRECK]

Associated Press writers Sinan Salaheddin and Sameer N. Yacoub contributed reporting.

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