International Transparency organization: Iraq among the most corrupt six countries in the world ..
money laundering:
The subject of money laundering is still the hot ones on the world arena , which attract the interest of governments and security agencies in general, and financial and banking institutions in particular. and tackled by the media daily; what constitutes a serious threat to global peace and security, according to the statistics of the international Monetary Fund, the size of money laundering trade of between $ 950 billion and $ 1.5 trillion, a figure is a guarantor itself to put the global economy at a critical place. (1)
in order to combat money laundering, the organization of Economic Cooperation and Development ( OECD ) formed an international financial committee of 26 member states , including the Group of Seven major industrialized nations, as well as the European Commission, and worked on scheduling countries where suspected money laundering operations are in progress.
the money laundering is economically defined as: ” the transfer of funds resulting from the practice of illegal activities to funds enjoy a proper legal appearance , especially in terms of its sources.”
Known legally as “accepting deposits or funds derived from illegal act or a criminal, and hide the source, or covered up, or help a person , who is principal actor or partner in that work , to escape from the legal consequences of his action.”
The most important sources of laundered money :
studies indicate that 70% of the size of the laundered money comes from the drug trade, and the rest from other activities such as arms trade and the White mercury and counterfeiting, embezzlement, theft, extortion, government bribery, organized crime and tax evasion.
New York is the world ‘s largest center for money laundering , but London is a strong competitor, and the increase of the popularity of London because of the non-complexity of the system and the ability to conduct large transactions related to money laundering.
The United Nations estimates have indicated that the size of dirty money that are exposed to the process of washing in the world has become a very large size, so as to exceed the size of international trade of Petroleum , it comes in second place for the size of the international arms trade. (2)
and money laundering operations are passing in practice in several stages, namely:
* Replacement phase: Any aggregation of large quantities of liquid money (Cash Money) and money launderers avoid at this stage, the use of instruments or credit cards and other means of payment by documents, This is the most difficult stage in the other stages, to the possibility of the exposure of money, but Once to accept this money in the banking system as the cash deposits or checks, it becomes easy to complete the other phases.
* Layering stage: It is less serious than the first phase, in which the dirty money is inserted in the banking system and institutions working or associated with it, where it is to hide the relationship of these funds with its of illegal sources , that means its original sources.
* Integration phase : This is the last stage, which is the integration of the illegal funds in various financial and economic processes, and the movement of funds from one bank to another or moving out of state.
There are other factors that encourage such illegal acts in Arab homeland as the Arab banking system makes it possible, which depends on the complete banking secrecy , the fertile ground for the maphia which tries to take advantage from the secrecy to carry out money laundering operations , where it constitutes an impediment in front of and watching these funds and heavy dealing with foreign currency in stead of the national currency the banking accounts and operations of sell and buy and the transference among all currencies from and to these states unconditionally and the large remittances from residents abroad for example in Lebanon it is converted more than $6 billion annually according to data statistics and endorsement of instruments more than once , so that makes it difficult to go back to the starting point.
Money laundering operation in Iraq
after the occupation in 2003 and Iraq witnessed the absence of government control in all its institutions , and what was left of the destruction of infrastructure and the exposure of the Iraqi market, Iraq has become a favorable environment for the occurrence of the crimes on the one hand and money laundering on the other hand.
And the internal environment created the atmosphere after 2003 and the absence of a state with its complete apparatus and its institutions to the birth of this phenomenon clearly; and the absence of the rule of law and the regulatory bodies and the policy of dumping, and the black market, and the adoption of an open market policy with global markets , including new and shoddy goods, as well as the opening of borders with the world unconditionally supported by the ease of the circulation of funds and convert them to the outside and the weakness of the productive sectors to provide goods and services.
And several economic activities have stopped either because of sabotage or destruction or raw materials or interruption of the power supply. and economic and political instability and security chaos and non-existence of stable and clear economic policy to be used on it and spread the trade of drugs and commodities that are not subject to the control and the increase of crime rates of all its types .
the components of internal environment are interacted with the components of the external environment to create a favorable environment; and encourage the growth of the phenomenon of money laundering in Iraq , where the process of opening – up policies on the global economy after the exposure of the Iraqi market led to the formation of fertile land.
and Iraq became a safe haven for the crime of money laundering by the mafia, as well as new markets , which were created in the world in the shadow of globalization and has no geographical location can be controlled and the increasing volume of economic crime in the world, and the announcement of some countries accepting illegal money and provide facilities in return for high interest rates to enable access to high profitability without supervision and legal accountability.
The money laundering is the most serious financial crimes due to direct repercussions on economic, political, moral and intellectual aspects at the level of individuals, society and institutions, and it is one of the more complex economic problems ; because it creates a state of imbalance of economic balance and stability , which is the basic foundation for achieving prosperity and development and the development of society.
The process of money laundering in Iraq is not complicated in terms of stages where money enters with high easiness without going through stages, as a result of the deteriorating security situation in Iraq and the lack of government regulatory efficiency; which makes the Iraqi economy vulnerable to sabotage.
Thousands cases have been recorded of some regulators, especially in Iraq ‘s central and southern provinces where the people exercise the money – laundering activities easily; and helping them to do so the development in the financial and banking sector , which accelerated to circumvent operations, in addition to the automated system to transfer funds, which facilitated the completion of suspicious transactions of money laundering, and the use of the internet has led the others to expand circumvent operations through the use of it by money laundering gangs to take advantage of the flash speed of cash transfers across the world, or between accounts in a single state, it shows that 25% of e – mails sent between banks and people do not include detailed information about these transfers, helped by the exceptional circumstance that Iraq is going through at the escalation of terrorist operations with the support of other countries.
Illegal money sources in Iraq.
There are many sources that are in the pot of illegitimate money and most important: –
* bank robberies and banks after the occupation of Iraq, which represents a high proportion in the formation of a pot of money laundering in Iraq.
* Funds derived from the theft of precious antiquities and smuggling, and sold them on the world markets ,
* smuggling of oil and petroleum products , and smuggling of machinery, plant and equipment and factories abroad, and the industrial and commercial fraud after the exposure of the Iraqi market and the absence of the role of the state and its institutions, and gangs of robberies, kidnappings, and allocated funds heading toward the establishment of projects and providing fake services.
* Drug trafficking and bribery and administrative corruption, and profiteering from public office and the money that was owed by finance officials in some state institutions during the recent war, .fake companies.
The most important implications of this phenomenon economically, socially and politically:
1 – weakening the national income through depletion of capital (foreign exchange) that has been stolen from banks and convert them to invest in outside the country, and the smuggling of machinery, plant and equipment and factories out of Iraq, and sell them at low prices , and It represents the constant capital, which led to the suspension of industrial projects and l country lost its production capacity , which is already low, and the weakness of the productive sectors due to poor savings and investment.
2 – capital escape abroad , which led to an imbalance between savings and consumption, making the country abide by external transfer switching state if the indebtedness was increased .
3 – monetary instability (exchange rate) and a fear of future volatility , which means that individuals buy foreign currencies and saved it inside Iraq and outside it .
4 – poor income distribution and concentration of it in the hands of a small group had negatively impacted the community.
5.introdction of adulterated goods to the Iraqi market that has led to the elimination of the national industry and according to the principle of the ibn Khaldoon: ( shoddy commodity expel good commodity) and contributed to the political , economic and social chaos .
6.Drain the national economy for the benefit of overseas economies and deductions of the national income, which led to the penetration of organized economic crime widely and rapidly in a legitimate business, and the difficulty of detecting the laundered money and tracking of it as a result of technological development .
- the control of the domestic market has become , however , in the hands of a small group of delusional entrepreneurs , which has negative impact on the balance of payment and trade balance in the state and the spread of unemployment and the disruption of the balance of social structure and increasing the problem of poverty and low living standards of the majority of the Iraqi people .
- money laundering operations contributed tothe spread of corruption and social crimes and administrative corruption, bribery and other, lower living standards of citizens through the spread of adulterated goods and services .
Finance Committee in the Iraqi parliament issued a report which confirmed what was said by Transparency International organization that Iraq is the most advanced country among the six corrupt countries in the world .
The Committee also emphasized in its report the existence of a large financial corruption in the era of the former prime minister Nuri al – Maliki, and symbols of this corruption, are banks, banking offices , companies, and personalities falsified documents to evade huge sums of money around several countries.
The Commission explained the reasons why Iraq among the most corrupt six countries in the world , as published official documents about the organized smuggling operations for billions of dollars, took place through the auction of the sale of foreign currency for a number of banks and financial companies between 2006 and 2014 when Nuri al – Maliki was prime minister. (3)
The former head of the integrity commission the Judge Rahim al-Uqaili says in8-9-2015 : there are reports of financial control in 2010 about the corruption of money laundering in Iraq but political , authoritarian influence of the corrupt has not allowed to pursue and to disclose the facts of those who waste with state funds , and this explains the desire of al-Malki to remove Dr. Sinan Shabibi from the Iraqi Central Bank management and the seizure of wealth or the enormous treasure inside this institution , to control the Iraqi currency , and that is what happened later after the removal of al-Shabibi from the Central Bank of Iraq as the manipulation of the exchange rate has been increased and this is confirmed by the speech of the head of the parliamentary Finance Committee in the Iraqi parliament in 2013, Dr. Ahmad Chalabi , as he was talking about the manipulation of exchange rates of the Central Bank of Iraq and the crisis of low level of the Iraqi dinar and the rise of the dollar , as a result of the control of political party in the Iraq ‘s Central Bank on the difference of the exchange rate , which gained (aprofit of billions of dollars .(3
Ugaili pointed out that he gathered information about a person transferred to Jordan amount $ 1.5 million to buy a property and it was shown that this person was close to the prime minister, and the Central Bank of Jordan doubted about the transfer of the amount; as Jordan is one of the developed countries to combat money laundering. (4)
And what helps in money laundering operations in Iraq are the lack of transparency in the work of the Iraqi Central Bank and the scarcity of information pertaining to foreign remittances of Iraqi funds reported within the official institutions of the Iraqi Central Bank, which is still insisting on the adoption of banking secrecy, which in fact does not help in the face of money laundering crimes.
Ugaili added that since 2004 , the anti – money Laundering Office did not provide one crime to investigate it , noting that $ 551 billion of oil revenues did not enter the state treasury, but fled abroad, but the funds smuggling were not carried out by the banks only.
And the same source confirms that the bags were filled with billions of dollars , it was an Iraqi stolen money and carried by the
aircrafts or by road also to Syria and Lebanon and then to Iran and used in many purposes, and many of the Iraqi funds in fact had helped Iran to overcome its economic crisis.
The following table shows the wasted money and smuggled out of Iraq ( billions of dollars)
It means that the CBI was involved and possibly subject to the pressures and instructions from political parties, and Ugaili speaks about the corruption of some in the Iraqi judiciary, he says that in 2500 issue of money laundering were closed by Iraqi judge, so he was rewarded on that by money and leave of a six-months that he has spent in Lebanon, according to the source.
And the economist expert Humam Shamaa said the smuggled money was resorted to safe havens outside Iraq and the intervention of banking network to become clean after it was dirty, pointing out that the Central Bank of Iraq is that it legitimizes dirty money laundering.
and the money laundering routes include that some of the banks are buying from the daily auction of the Central Bank by providing forged documents to prove that the party that buys the dollar imported goods, services or paid funds abroad in exchange of certain things, and banks conducting extensive funds smuggling, including Huda Bank
noting that earnings of Huda Bank of currency auction of 18 billion dinars during only four months in 2015, in return for foreign remittances were estimated at $ 1.8 billion.
Documents revealed , which published by the Rawbet Centre for Research and Strategic Studies, and al-Medah within the corruption files of the banks and fake companies , that theHuda bank has conducted of 163 remittance operation of the dollar to abroad for dozens of local companies . According to the documents, which included communications of the Central Bank, 85 of these operations took place without statements of accounts of these companies.
The central bank has expressed his doubts about the safety of these transfers to the magnitude of the amount and the volume of goods imported by companies dealing with Huda Bank noting that there are 163 process of converting conducted by Huda Bank during the six months where 85 of them are without statements. (5)
and circulating in Iraq ,the trade of remittances that means the one who has Money does not import goods by its value but be sold at a higher price and there are parties or intermediaries are buying these remittances at exorbitant prices making high profits for the seller of remittance and achieve greater profits for banks that buy money orders.
Al-Shama pointed out that between 2009-2011 the financial surplus remained in Iraq stable despite the existence of 83 billions of dollars that the represents the surplus in trade balance, the difference between imports and exports in Iraq that did not add anything to thr international reserve of Iraq and then the international reserve remains stable till the year of 2013 that indicates he surplus was transferred abroad under various pretexts and different ways under the eye and supervision of the Central Bank which is under the direct supervision of prime minister .
After a short time of the publication of official documents of the Finance Committee in Parliament showing the organized smuggling process of billions of dollars out of the country, the central bank has taken actions that came against the backdrop of the smell of corruption that filled noses in Iraq and it was said to have taken place through auctions in violation of the regulations for a number of banks and financial companies in the period since 2006 until 2014.
And the Iraqi Central Bank began to take a series of legal actions against banks and customers described as violators of the instructions for auction for the sale of foreign currency during the past years and among those actions the judicial prosecution and the imposition of heavy financial fines, and stated that the audit teams of the bank is currently working on an application in coordination with the competent judicial institutions ,
and pointed out that the government is primarily responsible , and that the muggers remit funds under the protection of the responsibility of the Iraqi government to other countries, which is a safe haven in order the banking network interferes and then the money to become a clean money, and paying on it high commissions, without hesitation because they got money priceless after being dirty money which came from illegal sources, the world does not accept dirty money , therefore it is converted via the central bank , which it performed the function of legitimizing theft and money laundering for the benefit of thieves who looted the Iraq money and wealth.
Finance Committee revealed the value of the corruption of currency laundering, which has cost the country a loss of $ 360 billion during the period between 2006 and 2014 , or about 4 billion per month, and it has been confirmed in one way or another by the international transparency organization by the inclusion Iraq among the most corrupt six countries in the world ,
and there is a talk at different levels that the former Prime Minister Nuri al – Maliki, is still in control of events from behind the scenes , despite his departure from office before the years.
Finally, the strong political influence of the corrupt destinations in Iraq makes it difficult to prosecute the corrupt, and there is no intention to restore Iraq ‘s stolen money , not the actual ability to do so because Iraq is living the stage of the weakness of the political point of both internal and external level , and its international relations are weak internationally and does not have the ability to simulate the international public opinion so that there would be pressure from states that funds went to it in addition that the relation of Iraq is not friendly and not based on the transparency in complete way and there are accurate data about the sources that the funds have gone to it noting that the thieves when they transfer funds to a certain country , they soon transfer it to another countries despite it cost them a huge commission may be high but they got it in cheap price .
This is reflected on the Iraqi economy and its citizens, who still suffer hunger and deprivation where the injustice include all the components of the people, and Iraq today live a real financial crisis, the money is scarce , the industry and development are stopped , salaries have become unstable or fear of the future, the low price of oil, which is of concern, and the real crisis of economic, political and social system in Iraq, which was built on the basis of sectarian quotas and sectarian division and this leads to the destruction of the state and the destruction of democracy and the experience, and even the country’s infrastructure and the Iraqi citizen.
The central bank is still ongoing with the currency auction , which is the basis of corruption of financial laundering and smuggling in the country, and in addition of the weakness of the legal proceedings and the prosecution of the corrupt , who emptied the state treasury.
According to the central bank ‘s website that the quantity sold to banks from the date 2/1/2017 until the date of 02.02.2017 (3,910,845,189) billion dollars, and cash sales price (1190) dinars per dollar (6)
why this waste of money of countries and everyone knows that money does not go for Import and economic development, and as a result we get to that money laundering which is a compound crime of several crimes noting that Iraq has established ( Redemption Fund of Iraqi funds ). Under Law No. 9 for the year 2012, this fund regulates the work of the department of Economic and Financial prosecutions and recovery of funds and deposits.
The Recovery Fund did not hold , which was established in 2012 , only 9 meetings in spite of the existence of a financial allocations in the federal budget up to 20 billion dinars annually. The fund was unable to recover any amounts remember. (7)
The responsible bodies of the Finance Committee and the integrity , the Iraqi judiciary and the fund to recover the Iraqi looted funds , and the preservation of the sovereignty of the Iraqi state to maintain the state treasury and the need to work on a special law to combat money laundering phenomenon in Iraq.
And tighten special procedures to open accounts and facilitate the task of private detectives to verify the crime of money laundering to enable the investigation authorities to trace the money generated by illegal activities, with particular care for all the complex banking operations or massive unusual ones , especially those operations relating to the large sums of deposits or withdrawals, and the application strict laws and regulations relating to banking work and effective cooperation between the banks and with law enforcement authorities, and banks must establish and develop internal control procedures; in order to foil the operations related to money laundering and prevention of it, such as the appointment of a coordinator at the level of the administration, with finding a control entity to check all procedures related to combat money laundering operations. (8)
Shatha Khalil
Unit Economic Studies
Translated by: Mudhaffar al-Kusairi
Rawabet Center for Research and Strategic Studies