Friday, July 28, 2023

"...Who Was Behind History's Biggest Bank Heist?"

From The Economist's 1843 Magazine, July 27:

Criminals stole $2,5bn from Iraq's largest state bank in broad daylight. Nicholas Pelham follows their trail.

 On a scorching September day last year, Hussein Kanber Agha reached the front door of his house in central Baghdad. He had got in the habit of scanning the street for anything out of the ordinary before turning the key. In his free hand he clutched a tattered brown leather briefcase. There was a chance someone might kill him for its contents.

Kanber wasn’t used to acting as though he were in a spy film. A 49-year-old consultant with a passion for digital banking, he was born in Iraq but had spent much of his adulthood in Stockholm. He led a quiet, orderly life there: working, going to the gym and drinking coffee. Then, last summer, Iraq’s finance minister asked him to return to Baghdad and investigate rumours about a theft at Rafidain, the country’s largest state-owned bank.

One particular account at Rafidain presented a tempting target to those in the know. Oil companies (and other firms operating in Iraq) are obliged to pay tax in advance when they receive a contract. The tax authority keeps these deposits in Account 60032. Firms can claim a rebate if they end up making less profit than expected but the bureaucratic hurdles are extensive. Unclaimed rebates hang around for five years before reverting to the treasury. Over time hundreds of millions of dollars accumulated in Account 60032, where they sat, alluringly. Then in mid-2022 word trickled out that huge amounts of this money were being withdrawn.

In theory the finance minister could have asked one of the country’s half-dozen oversight bodies to investigate. But Iraq is home to powerful militias, each with its own political wing and business empire. They are known collectively as the factions, and they exert vast influence over every aspect of government. Bribery is rampant. Those who cannot be bought are threatened (“You will leave Iraq horizontal,” an official recalls being told when she refused to do one faction’s bidding). A political outsider was needed. 

The accountants told Kanber they didn’t want anything more to do with the investigation. They were afraid of the consequences

 Kanber – thin, slightly stooped, the kind of man who drove an old Kia – seemed the perfect choice. He came from one of Baghdad’s old merchant families, and had fled Iraq in 1992 at the age of 19 after Saddam Hussein’s thugs detained him at a checkpoint. He moved to Sweden, where he earned a master’s degree at the Stockholm School of Economics and worked for a Swedish bank. He was on track for a conventional life as a European businessman until America overthrew the Iraqi regime in 2003.

Like many in the diaspora, Kanber was excited at the prospect of living in a free Iraq. He quit his job and moved to Baghdad to set up a mobile-payment system. But over the next five years the city was ravaged by sectarian violence. At one point 40 bodies were turning up on the streets every day. Eventually Kanber gave up and returned to Sweden.

In 2021 he was back in Iraq working on a banking-reform project for USAID, America’s international development agency. While there he heard rumours that the tax authority’s account at Rafidain was being plundered. When the finance minister asked him to investigate in August 2022, Kanber, by then back in Stockholm, didn’t relish the prospect, but he felt a duty to see that the inquiry was done “properly”. Also, he was curious: “Wouldn’t you want to know, if there was a huge theft like this?”

Kanber suggested that the finance minister discreetly assemble a team of trusted lawyers and accountants, then flew to Baghdad to join them. When they met he told the group to go to Rafidain immediately with a letter from the minister requesting copies of Account 60032’s statements. He knew that convenient fires often break out in Iraqi record departments when investigations begin. 

 The next day the team gathered in a conference room at the ministry of finance to examine the stack of print-outs. One of the accountants quickly spotted the two most important pieces of information: the balance at the start of the year and the most recent one. Account 60032 had been almost completely emptied.

The team called everyone they knew at the bank. Within a few hours their sources provided the names of five companies to whom the money had supposedly been transferred. None of them was a big oil firm. In fact, no one had even heard of them before.

At that point the lawyers and accountants told Kanber they didn’t want anything more to do with the investigation. It looked like looting on a huge scale, which meant at least one of Iraq’s murderous factions was likely to be involved. If Kanber wanted to dig further, he would have to do so alone.

First he had to prove that a theft had actually taken place. The tax authority, the nominal victim of the crime, denied that anything untoward had happened. Its balance sheets showed that all its money was still there, because technically no rebates had been claimed. Kanber needed to find out how and why the money had worked its way into the five companies’ accounts.

Iraqi state institutions, Kanber later told me, are profoundly opaque places. Records are incomplete; many officials have their own agenda. Yet there are some people working within them who simply want to do their job well. Kanber thought he could spot them by the way they dressed – if they didn’t wear brash clothes, they might be worth approaching. He had neither rewards nor threats to wield. But he believed some people might simply want to do the right thing.

“Your life is going to be threatened anyway, so you might as well be corrupt and make money”

To avoid attracting attention, Kanber met these middle managers in coffee shops and restaurants rather than at their offices. About a week into his investigation, one of his contacts sent Kanber a message saying that they had received a delivery that might be of interest. At the finance ministry the brown briefcase was waiting for him.

Kanber opened the briefcase when he got home. Copies of 247 cheques made out from Account 60032 to the five companies spread across the table and onto the floor. He spent hours sorting them into chronological order, the first dated September 2021 and the last August 2022. The document haul wasn’t proof of a fraud (though the amounts were often suspiciously round numbers), but it did irrefutably show where the missing funds had gone. Around $2.5bn, an amount comparable to the country’s entire health-care budget, had been diverted. It later transpired that it had been carried off in trucks in broad daylight. And the withdrawals had been approved by some of the highest officials in the land....

....MUCH MORE, one helluva story.