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Fraudsters Strike

Financial authorities duped by major coounterfeiting scam.
By Ziyad Khalaf

The Iraqi authorities estimate billions of dinars have been lost due to financial fraud, mainly involving people exchanging fake old dinars for new ones.


Authorities say the problem began when the government eased the requirements for opening a bank account in an attempt to liberalise the economy.


Under the Saddam Hussein regime, it was difficult to do so because you needed someone to guarantee your account - but this was no longer required after May 2003.


During a three-month period beginning October 15, 2003, when Iraqis could exchange their old dinars for the new currency, faudsters swapped huge amounts of counterfeit old currency for new dinars.


Just before the currency swap began, the authorites announced on October 1, 2003 that they discovered a counterfeit printing operation where 100 billion dinars (683,000 US dollars) had been produced.


A supervisor at the state-owned al-Rafidain bank said in one case three billion fake dinars was exchanged for the new currency.


“These cases have a big influence on Iraq’s economy since it costs the government a lot of money,” he said.


The head of a criminal court in Baghdad said he was investigating many such cases. He added that a number of those facing prosecution were bank tellers, which he said was unfair because it was difficult to differentiate between real and counterfeit currency.


In one of the most recent cases, a bank teller was sentenced to 10 years in prison after confessing that she got commissions from customers who gave her fake currency to deposit.


Still, the criminal court official said it was difficult to identify such cases, “We find out about them only through tip-offs from ordinary people or government employees.”


Economist Sabach Kachachee said financial fraud is rampant because of the poor regulatory environment. “There is no vital legal investment activity in Iraq’s economy,” he said.


Courts are working with the Impartiality Commission, an anti-corruption government committee, to investigate cases of fraud.


Dhiya al-Khayoon, CEO of the al-Rafidain bank, said the Central Bank of Iraq, CBI, issued instruction a few months ago to deter the criminals, including requiring people making bank deposits to fill out forms indicating where the money came from.


But a director of an al-Rafidain bank branch, who spoke on condition of anonymity, said his office did not receive any such instructions from the CBI.


“A man [recently] deposited 500 million Iraqi dinars and he was not questioned about its source,” he said.


Ziyad Khalaf al-Ajely is an IWPR trainee in Baghdad.


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