Tuesday, July 9, 2013

Controversial Case Against Central Bank Of Iraq Officials Continues

In June 2013, the controversy surrounding the Central Bank of Iraq returned to the news. Back in October 2012, the governor of the bank and many of his top officials faced arrest warrants over wasting government funds by not properly overseeing its weekly money auctions. The former deputy governor of the bank recently went to the press attacking the case against him and others as the work of political parties who were trying to manipulate the country’s finances for their own gain. Several politicians are concerned about the new management of the bank as well. They are worried about stories of money manipulations and laundering through the weekly auctions, which were the same reasons why the former bank officials were charged. The story shows that the reason why the previous bank leadership was removed might have been to stop them from trying to control the currency since so many are profiting from its current lax regulation.

Former Deputy Governor of the Central Bank Salah accused political parties being behind the charges that he other bank officials face (Al Masalah)

Former Deputy Governor of the Central Bank of Iraq Matheher Mohammed Mudher Salah blamed political parties for interfering with the running of the bank in an article published in Al-Mada in June 2013. Last year, Salah, and 29 other bank officials received arrest warrants. He was detained, and released on bail in March. The case against the group involved the wasting of government funds, and the decline of the value of the dinar due to the weekly auctions the bank held. Salah claimed there was never an investigation to check whether the charges against him and the others were true or not. He went on to accuse the new bank administration of having more money auctions than the old leadership did, which was only making the situation worse with regards to the value of the currency. In the end, Salah said that political parties were behind the removal of the bank officials, so that loyalists could be placed in charge of the bank. Three days before, a parliamentary source told Al Rafidayn that the investigation into the Bank was done, and that likely only seven officials would go to court including former Bank Governor Sinan Shabibi who would be tried in absentia as he was out of the country when his arrest warrant was issued, and he has not returned as a result. The others are a member of the Board of Directors, an adviser to the bank, the assistant to the director general of the money laundering department, the director of accounts, and the general manager of banking and credit, all of which had been arrested and held for months with no charges until being released around June. The Central Bank case was controversial from the beginning. Many saw it as a power grab by Prime Minister Nouri al-Maliki. It’s his State of Law that Salah is probably accusing of interfering with the bank’s operation. The way the case came about was what raised questions about it.

Former Central Bank Governor Shabibi had a number of disagreements with Premier Maliki over bank policy including whether to regulate the weekly money auctions more (AP)

Governor Shabibi had a number of differences with Prime Minister Maliki, and it was a group of his supporters that later brought charges against the bank. Originally, the finance committee started to look into the Central Bank’s monetary policy. Later, another committee was formed that came up with a case against Shabibi and the other bank officials without the finance committee’s knowledge. The new committee was led by the deputy speaker of parliament Qusay Abdul Wahab Suhail from the Sadr bloc, two State of Law members, and one member of the Board of Supreme Audit. Arrest warrants were then issued in October 2012. One member of the original investigative committee said they found no improprieties, while the integrity committee claimed that Shabibi was being targeted, because he turned down a request by Maliki for money to help finance the government. Beforehand, the premier asked to have access to part of the Iraqi Federal Reserve managed by the Central Bank, and also wanted it to help fund power plants outside of the national budget. Shabibi refused. The governor was also trying to stem the flow of dollars being sold at auctions, which was opposed by the prime minister. The bank believed that there was money laundering and smuggling going on through those auctions, which it said was the work of high-level politicians. Finally, Maliki was opposed to Shabibi’s plans to revalue the dinar. All together there was plenty to point to the charges against the bank officials being political. The committee that made the case against Shabibi and the others was led by Deputy Speaker Suhail who was recently accused of being too close to the prime minister by Moqtada al-Sadr who tried to force him to resign. That meant three of the four committee members were pro-Maliki. Second, Shabibi and the premier were at odds over a number of major issues, which would give him motivation to get rid of the governor. Last, Maliki has used corruption charges to get rid of a number of independent officials who stood in his way in the recent past, so the Shabibi case would just be another example of that.

To add to the matter, there are complaints that the new bank administration is doing exactly what Shabibi and the others were charged with. There are continued concerns about the decline in the value of the dinar, and the increasing number of dollars being sold at auctions. Money smugglers, political parties, Iran and Syria, and bank officials have all been accused of manipulating the auctions for their own gain. The Board of Supreme Audit claimed that up to $800 million was being smuggled out of the country as a result. Iran and Syria are involved, because they are trying to get around international sanctions, which are cutting off their access to hard currency, by buying up dollars in neighboring Iraq. For the money launderers, politicians, and bank officials they are just in it for the profit. Another issue is that state-run banks are charging higher prices to exchange dinars for dollars to maintain the value of the currency than money exchangers are, and people are using that difference to make a profit. For example, at the end of May one dollar was going for around 1,900 dinars at public banks, but 1,200 dinars at money exchanges. That meant someone could take a dollar to a state-run bank and get 1,900 dinars, and then buy a dollar at a money exchange for only 1,200 dinars making a 700 dinar profit. Members of parliament want to question acting Central Bank Governor Abdul Basit Turki what he is doing about these issues. If the reason why Shabibi and the others had arrest warrants issued for them was the money auctions, and the decline in the value of the dinar then the current management should be charged as well. All the problems that existed under the old leadership are continuing with the new one except at a seemingly larger scale. That might have been Maliki’s reason to get rid of Shabibi who was trying to stem the flow of dollars and hold the currency at a stable rate. The premier opposed these actions, because his followers and other political parties were profiting from them, and he didn’t want that to stop. Rather than stemming corruption the bank officials might have been charged to allow it to continue.

Prime Minister Maliki has been trying to gain control of Iraq’s independent institutions for the last few years. The move against the Central Bank of Iraq was part of that effort. Like with the heads of the Integrity Commission and the Election Commission, Governor Shabibi was charged with corruption. The case was formulated by a number of supporters of the premier, and the charges were very questionable since the governor was attempting to stop the very issues included in his arrest warrant. That ultimately might have led to Shabibi’s removal, as the prime minister seems happy with the current status quo that allows politicians, gangs, and foreign countries to continue to manipulate bank auctions. In the longer term it is important to find out whether Maliki also succeeded in gaining access to the country’s reserves and obtained financing for development projects. Since there’s little transparency in the Iraqi government it might be months or years before the larger implications of the Central Bank case are known.


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