“Theft of the century” .. The possibilities of the Government of Iraq to recover the looted funds

Iraq’s prime minister, Muhammad Shia’ al-Sudani, appeared on Sunday with piles of cash in US dollars and Iraqi currency at his side, which he said were equivalent to 182 billion dinars (about $121.3 million) that the Iraqi government managed to recover the amount of 3.75 trillion dinars (2.5 billion dollars) that disappeared from the accounts of the Iraqi tax administration.

The returned amount is part of the 1.6 trillion dinars stolen by an Iraqi businessman named Noor Zuhair, according to Al-Sudani.

Zuhair is currently in jail following his arrest due to the background of the case, but Al-Sudani revealed that a settlement has been reached whereby Zuhair will be released on bail by “liquidators owned by him” in exchange for the return of the stolen amount “within two weeks. ” He said the judiciary would oversee the sale of financial assets owned by Zuhair, the value of which is believed to be “greater than the sum”.

Iraqi legal expert Ali Al-Tamimi says: “The release of the accused on bail is possible under the Criminal Procedure Law, and it is under the jurisdiction of the investigating judge,” adding that “bail is conditional on the delivery of monetary amounts in the case.”

However, Al-Tamimi told Al-Hurr that this “does not mean that the legal proceedings against the accused have been dropped. Rather, the case will be referred to the competent court according to the article of indictment after the completion of investigative procedures.”

Al-Tamimi believes that “this procedure refers to a criminal policy that aims to achieve the public interest according to the rule that if two interests are in conflict, the public interest takes precedence over the private.”

The discovery of the money theft caused shock inside Iraq due to the large amount of money, although the country is somewhat coexisting with the corruption that dominates state facilities.

Transparency International, a global watchdog, ranked Iraq 157th out of 180 countries on its 2021 Clean Governance Index.

The scandal is an early test for the new Iraqi government, which was formed late last month after a long political crisis.

The prime minister, Mohamed Shia al-Sudani, has vowed to crack down on corruption, but few expect any senior officials or political leaders to be held accountable, the Associated Press writes.

The embezzled amount is about 2.8 percent of the state budget for 2021.

The auditor’s report, obtained by the Associated Press and first published by the Guardian, indicates that the theft was orchestrated by a vast network of officials, civil servants and businessmen. In Iraq’s entrenched patronage system, these individuals often have ties to powerful political factions.

Iraqi lawyer and legal expert, Hussein Al-Saadoun, says: “The next steps are for the judiciary to complete its investigations through a specialized court, which is the Court of Integrity, and it is also possible to request an administrative investigation.”

Al-Saadoun adds to the “Al-Hurra” website: “It appears from the news published by the media that the laws applied in this case are embezzlement laws, the maximum penalties of which vary between 10 years and life imprisonment, according to the position and function of the employee who participated in it.”

He says that the accused Nour Zuhair benefited from the legal text which says that bribed persons have their sentences reduced if they provide the court with information about the case that leads to the discovery of associates.

Organized corruption

The “theft of the century” scheme, as it is called in the country, came to light last month when an internal audit by the Ministry of Finance reported that the General Tax Administration – the Iraqi Tax Service – fraudulently paid about 3.7 trillion Iraqi dinars, or about 2.5 billion dollars, five companies.

The payment was made through 247 checks that were cashed between September 9, 2021 and August 11 this year, from a branch of the state-owned Rafidain Bank, located within the Tax Board.

The account contains billions of dollars in deposits made by companies that were supposed to be returned to them after taxes were deducted and the companies submitted updated financial statements.

Allegedly, five companies fraudulently withdrew refunds without depositing anything.

The then acting finance minister, Ihsan Abdul-Jabbar, who was also oil minister, began the review. He discovered the theft after receiving complaints from an oil company that was unable to recover its tax deposits, according to a senior official close to the investigation.

When the minister inquired about the remaining balance in the account, the official said, the IRS said there was about $2.5 billion in it, but further inspection revealed the actual balance was off at $100 million.

It was the first sign of a grand theft. A subsequent audit submitted to the Parliamentary Finance Committee revealed the rest. The Associated Press obtained a copy of that report this week.

Long before the audit, the bank’s money laundering department raised concerns with the Ministry of Finance about the large volume of cash withdrawals.

The official said that Abdul-Jabbar’s predecessor, former finance minister Ali Allawi, had requested that the approval of all large withdrawals be limited to his office, but that key managers at the Internal Revenue Service had ignored the request.

Allawi resigned in August in protest against corruption and foreign interference in Iraqi affairs.

Weeks before the first checks were cashed, authorities removed a key level of oversight, reportedly because companies complained about long waits.

The decision came at the request of Deputy Haitham al-Jubouri, who was then the head of the Parliament’s Finance Committee.

The review found that the companies, three of which were founded just weeks before the payments, submitted false documents to claim the payments. The auditors could not trace the funds further because they were withdrawn in cash.

The application process requires lengthy paperwork and signatures from at least three departments within the Tax Administration, as well as the director and deputy director of the finance department.

Rafidain Bank also contacted the IRS to verify the authenticity of the checks before cashing them, as instructed.

In late October, Noor Zuhair Jasim, a well-connected businessman, was arrested at Baghdad International Airport.

Two IRS officials were also arrested, and the judiciary says it has seized several properties and assets worth millions of dollars.

Political factions in Iraq have long competed for control of ministries and other government agencies, which they then use to secure jobs and other favors for their supporters.

A number of factions are linked to various government agencies involved in the tax scheme, according to the Associated Press.

Bickering between powerful factions turned into deadly street fighting earlier this year, and any attempt to hold political leaders accountable for the fraud could spark further unrest, the agency said.

Proposal of “amnesty” for the corrupt

An Iraqi lawyer and legal expert, Hussein Al-Saadoun, says he supports “softening” sentences for the corrupt to allow the government to hold them accountable, a view that has sparked controversy among other observers Al-Hurra spoke to.

However, Al-Saadoun tells Al-Hurr that harsh penalties in corruption and bribery cases, even minor ones, prevent complainants from reporting these cases of corruption. Therefore, Al-Saadoun says, “It is logical to impose lesser penalties for simple cases.”

Al-Saadoun also says that issuing an amnesty to the corrupt in exchange for forcing them to hand over most of the money they stole will contribute to the recovery of that money and encourages the opening of a new page after which the government can toughen penalties for those convicted of bribery and theft of public money.

According to Al-Saadoun, “laundering” some of the corrupt money will contribute to its retention inside Iraq and its transfer to legitimate activities. It also “contributes to preventing unrest that may arise from the accusation of corrupt people with political connections.”

“This solution is theoretically possible, but there are many problems,” said Raouf Ahmed, an Iraqi legal expert specializing in corruption cases.

Ahmed adds for the “Al-Hurra” website that “the solution presupposes the existence of a strong state and effective, transparent and deep corruption investigations that uncover massive corruption.”

Refunds outside of Iraq

Lawyer Al-Saadoun says: “It is possible to prosecute the accused and the money outside of Iraq if there are agreements with the countries where they seek refuge.”

Iraqi legal expert, Ali Al-Tamimi, says that a provision in the United Nations Charter allows countries fighting terrorist states or groups, under Chapter VII of the UN Charter, to ask the Security Council for economic assistance, including the recovery of those funds, and there is and the agreement issued in connection with the recovery of funds. The smuggled money was issued by the United Nations in 2004 and signed by Iraq in 2007. It makes it possible to claim these illegally smuggled funds.

However, Al-Tamimi says the matter requires coordination between integrity, the Ministry of Foreign Affairs and the intelligence services to activate it.