Private Banks Investigated for Money Laundering

By Amina al-Dahabi for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

A prominent economic official in the Iraqi government, who preferred to remain anonymous, said in an interview with Al-Monitor that out of the 33 private Iraqi banks operating in the country, 29 were under investigation on charges of corruption and money laundering.

According to an article published Oct. 16 and based on the report issued by Special Inspector General for Iraq Reconstruction Stuart Bowen, money laundering through the Central Bank of Iraq has resulted in the loss of over $100 billion in the past 10 years, most of which was transferred into banks in Dubai and Beirut.

The economic adviser to the prime minister, Mazhar Mohammad Saleh, told Al-Monitor that he considered this phenomenon to be a major loss in the private financial sector, on which the recovery of Iraq’s economy was based. Saleh said the high number of banks under investigation was due to the government’s absence in private financial administration, and to the weakness of cash credit, pushing banks to look for profit-making operations that are often nonfinancial.

He said the audit policy of the Central Bank changed after 2003 from compliance auditing to preventive auditing. This new role is a supervisory task, not a controlling one, as the Central Bank monitors credit and liquidity to ensure their safety in accordance with financial ratios.

Saleh said the lack of credit ratings in banks led to the decrease of trust in the credit-worthiness of private banks. A third party, a specialized international company, usually conducts such operations, which would later be adopted by the Central Bank.

A major shareholder in one of the banks accused of illegal financial operations told Al-Monitor on condition of anonymity that former staff members of banks — who were trained in both Rafidain and Rasheed banks and who were still working in the private banking sector until recently — were laid off from private banks. The new CEOs that took over started meeting the demands of major shareholders leading illegal operations. This is why those currently under investigation are the CEOS of the 29 banks, whose inexperience contributed to the charges.

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