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Iraqi audit indicates money laundering, US says

Up to $800m sent out weekly, inspectors report

BAGHDAD — Iraqi auditors believe as much as $800 million in US 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 an investigation into alleged financial wrongdoing involving its former governor and other top officials.

The US 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 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 special inspector general report.

Turki’s office, the Board of Supreme Audit, recently carried out an investigation 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 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 did not immediately have details about the audit. Turki was not available for comment.

Earlier this year, Mudhhir Mohammed Salih, deputy central bank governor, warned that Iraq had seen a sharp increase in demand for US dollars it sells. He blamed the spike on Iraqi traders reselling the greenbacks to customers in Iran, which is being squeezed by US 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 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. Prime Minister Nouri al-Maliki of Iraq 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.