Identifier
Created
Classification
Origin
09BAGHDAD565
2009-03-05 08:02:00
CONFIDENTIAL
Embassy Baghdad
Cable title:  

IRAQ'S NEGLECTED MONEY LAUNDERING REPORTING OFFICE

Tags:  EFIN PTER KCRM PGOV SNAR IZ 
pdf how-to read a cable
VZCZCXRO0251
RR RUEHDE RUEHDH RUEHDIR
DE RUEHGB #0565/01 0640802
ZNY CCCCC ZZH
R 050802Z MAR 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 1990
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000565 

SIPDIS

E.O. 12958: DECL: 03/02/2019
TAGS: EFIN PTER KCRM PGOV SNAR PGOB IZ
SUBJECT: IRAQ'S NEGLECTED MONEY LAUNDERING REPORTING OFFICE
EAGER TO IMPROVE

REF: A. INGALLS-ROLAND-NOVIS EMAILS JANUARY 2009

B. 08 BAGHDAD 2431

Classified By: Acting EMIN Michael Dodman, reasons 1.4 (b,d).

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000565

SIPDIS

E.O. 12958: DECL: 03/02/2019
TAGS: EFIN PTER KCRM PGOV SNAR PGOB IZ
SUBJECT: IRAQ'S NEGLECTED MONEY LAUNDERING REPORTING OFFICE
EAGER TO IMPROVE

REF: A. INGALLS-ROLAND-NOVIS EMAILS JANUARY 2009

B. 08 BAGHDAD 2431

Classified By: Acting EMIN Michael Dodman, reasons 1.4 (b,d).


1. (C) SUMMARY: Iraq's two year-old Money Laundering
Reporting Office (MLRO) is under-budgeted and under-staffed;
lacks capacity; works out of woeful office conditions; and
its work is hindered further by loophole-ridden anti-money
laundering legislation that is self-contradictory and
unenforceable. The MLRO leadership willingly admits that the
unit cannot effectively oversee financial transactions in
Iraq and lags well behind most of its regional counterparts.
It has drafted new financial crimes legislation, but has been
forced to cobble together its own standard operating
procedures while it waits for the bill to move through the
cumbersome GOI legislative process. Still, MRLO officials
appear eager to improve their capacity. They claim that they
benefited greatly from IMF-sponsored anti-money laundering
training in Beirut, and anticipate Iraq will participate in
the May MENA FATF meetings in Bahrain. MLRO officials
welcomed the U.S. offer to have a Financial Sector Assessment
Team (FSAT) conduct a baseline assessment this year, and
agreed that a full MENA-FATF peer review would be valuable at
a later date; however, CBI Governor Shabibi must still
approve these actions. END SUMMARY.

Lack of Infrastructure
--------------

2. (C) Treasury Attache and emboffs visited Iraq's MLRO and
met with Director Sahib Badr Abood, Deputy Director Fawziya
Kadhib Ali and Central Bank of Iraq (CBI) Legal Advisor Inam
Yaseen Mohammed on May 2. The MRLO, an independent agency
under the auspices of the CBI, employs about 30 staff and is
housed in a dilapidated annex above a branch office of the
state-owned Rafideen Bank. The Office suffers a lack of
computers and office equipment, as well as limited and poorly
operating telecommunications. A large generator in the
cramped central courtyard provides most electricity, when
fueled. MRLO personnel readily acknowledge that their office
surroundings are not conducive to carrying out their

regulatory and financial law enforcement responsibilities;
they are especially frustrated by the inability to
communicate with Iraqi banks electronically -- much less
monitor them. The CBI (which Legal Advisor Mohammed
described as "increasingly" supportive) has offered the MRLO
new office space sometime in the future, but plans are still
unclear. (NOTE: Since suffering a fire early last year, the
CBI and all its affiliates have faced difficulties in
securing adequate working space -- a problem that is expected
to be alleviated this year when it opens new facilities. See
Reftel B.)

Bad Legislation
--------------

3. (C) Abood and Mohammed also readily acknowledged that they
are seeking to enforce anti-money laundering legislation that
is woefully inadequate. CPA Order No. 93, the Anti-Money
Laundering Act of 2004, which U.S. Coalition Provisional
Authority (CPA) officials drafted and enacted, is the basis
of anti-money laundering law in Iraq. The Order generally
complies with international standards, as it was based on
model UN legislation; however, Mohammed explained, the Arabic
text (as well as the English language copy we have) does not
conform to Iraqi jurisprudence and contains
self-contradictory -- and therefore unenforceable -- clauses.
For example, one article states that banks must report
suspicious transactions and immediately freeze the assets of
Qsuspicious transactions and immediately freeze the assets of
any individual or institution seeking to make them, while
another section of Iraqi law forbids private banks from
freezing assets without a court order. (In practice, banks
do not freeze assets without a court order, Abood said.)


4. (C) To remedy the current legislation's shortcomings, a
GOI interagency committee (that includes the MRLO) drafted a
bill that, when enacted, will establish clearer procedures
for bank reporting and oversight; will clearly define
predicate money laundering offenses; will outline the MRLO's
ability to impose penalties; and will widen the MRLO's
authority over non-bank financial institutions such as, for
example, "hawala" sector money traders. Unfortunately, the
legislative process in Iraq is cumbersome and extremely slow,
and neither Abood nor Mohammed would speculate on when the
bill might ultimately be enacted. In the meantime, the MRLO
currently tries to conduct oversight through a hodge-podge of
SOPs derived from -- among other things -- CPA Order 93,
other countries' regulations, and what MRLO senior officials
can learn from regional training sessions and MENA-FATF
publications. "Despite the legislation's delays," Mohammed
said, "we are working to comply with MENA-FATF's '40

BAGHDAD 00000565 002 OF 002


Recommendations Plus 9,'" for example.

Eager to Improve Capacity
--------------

5. (C) Despite the lack of resources and decent legislation,
Abood, Ali and Mohammed all expressed a keen desire to
upgrade their unit's capacity through greater contact with
MENA-FATF and others with financial crime expertise.
Twenty-eight Iraqi officials from the MLRO, Customs, and the
Interior and Justice Ministries attended IMF-sponsored
anti-money laundering training in Beirut in January and found
it to be of great benefit. "We are a self-motivated office,"
and eager to learn from experiences of countries like Lebanon
and Egypt, Mohammed said. The MRLO is also urging the GOI to
ratify the UN conventions that address money laundering and
financial crime and to fulfill its commitments to the UN
Convention against Corruption. The CBI nominated Abood to
attend the MENA-FATF meetings in Bahrain in May -- marking
the first time Iraq will participate since 2007. Mohammed
and Abood understand that the MRLO is nowhere near ready for
a MENA-FATF peer review at this time. However, they welcomed
our offer to have a U.S. Financial Sector Assessment Team
(FSAT) visit to conduct a baseline assessment sometime this
year, pending the CBI Governor's approval.

Comment and Next Steps
--------------

6. (C) Iraq's MRLO has a long way to go before its
legislative and technical capacity are up to a standard that
will allow it to effectively oversee financial transactions
in Iraq. However, its leaders are eager to improve and to
conform with international standards, and have welcomed U.S.
assistance -- a positive development in itself. The Embassy
will continue its engagement, and MRLO officials have
committed to securing the CBI Governor's approval for an FSAT
visit and informing us of a suitable timeframe soon.
BUTENIS