Corruption
Corruption remained a significant obstacle to effective governance at all institutional levels, including in the IKR. Bribery, money laundering, nepotism, and misappropriation of public funds were common at all levels and across all branches of government. Family, tribal, and ethnosectarian considerations significantly influenced government decisions at all levels and across all branches of government. Federal and KRG officials frequently engaged in corrupt practices with impunity.
In October 2022 UNAMI Special Representative stated in a briefing to the UN Security Council corruption was a core feature of the existing political economy in the country, and reform efforts had been actively undermined or obstructed. She added that, “pervasive corruption is a major root cause of Iraqi dysfunctionality,” and that “no [political] leader could claim to be shielded from it.”
Iraq ranked 157 of 180 in Transparency International’s 2022 Corruption Perception Index. Public corruption is a major obstacle to economic development and political stability. It is pervasive in government procurement, the awarding of licenses or concessions, dispute settlement, and customs for imports and exports.
While large-scale investment opportunities exist in Iraq, public corruption and private corruption remain a significant impediment to conducting business. Foreign investors can expect to contend with corruption in many forms, at all levels. While the GOI is trying to reduce procurement corruption in sectors such as electricity, oil, and gas, credible reports of corruption in government procurement are widespread, with examples ranging from bribery and kickbacks to awards involving companies connected to political leaders. Investors may come under pressure to take on well-connected local partners to avoid systemic bureaucratic hurdles to doing business. Similarly, there are credible reports of corruption involving large-scale problems with government payrolls, ranging from “ghost” employees and salary skimming to nepotism and patronage in personnel decisions.
Anticorruption efforts were hampered by a lack of agreement concerning institutional roles, political will, political influence, lack of transparency, and unclear governing legislation and regulatory processes. The existence of armed militias, which were directly involved in corruption and provided protection for corrupt officials, made serious and sustainable anticorruption efforts difficult to enforce.
Although anticorruption institutions continued to collaborate with civil society groups, the results remained limited. Media and NGOs attempted to expose corruption independently, but their capacity was limited. Anticorruption, law enforcement, and judicial officials, as well as members of civil society and media, faced threats, intimidation, and abuse in their efforts to combat corrupt practices.
After an unsuccessful Inspector General program, the GOI attempted several anti-corruption initiatives from 2004–2022. However, anti-corruption oversight remains with the Board of Supreme Audit (BSA), established in 1927. BSA is an analogue to the U.S. Government’s General Accountability Office. It is a financially and administratively independent body that derives its authority from Law 31 of 2011, the Law of the Board of Supreme Audit. It is charged with fiscal and regulatory oversight of all publicly funded bodies in Iraq and auditing all federal revenues, including any revenues received from the IKR.
In March 2022 the Permanent Committee to Investigate Corruption and Significant Crimes, established to investigate and prosecute major corruption cases, was dissolved by a Federal Supreme Court (FSC) ruling for violating the constitution. NGOs reported the FSC ruling disbanding the committee came under pressure from political parties with armed militias, because the committee’s work resulted in the prosecution, conviction, and imprisonment of several militia leaders, and officials affiliated with these militias. The committee also stood accused of torturing targets of its investigations.
In October 2022 numerous press outlets reported the theft of at least 3.65 trillion dinars ($2.5 billion) from the state tax commission through a scheme in which shell companies claimed and withdrew false or fabricated tax refunds. Audits of the transactions, which could have identified the theft, were cancelled by various government institutions, including the then Prime Minister’s Office. According to press reports, tax commission employees who called attention to the scheme were penalized or transferred to other positions. Press reported in November that when a whistleblower reported the suspected abuse to the integrity commission, the “commission quickly issued a memo stating the withdrawals posed ‘no harm.’” In August then Finance Minister Ali Allawi resigned, calling out a “vast octopus of corruption and deceit” within the government, although he did not refer directly to the tax refund scheme. When Allawi’s successor Ihsan Adbul Jabbar Ismael ordered an investigation, he was removed from his position. Experts interviewed on the issue by journalists concluded a corrupt scheme of this magnitude could not have taken place without the knowledge of a wide range of government institutions. As of November the judiciary had seized 55 properties and $250 million in other assets and arrested two tax authority officials and one businessman allegedly involved in the scheme.
In August 2022 the COI released its semiannual report, stating it issued 54 subpoenas against 32 officials with ministerial rank, and 147 subpoenas against 241 officials with director general rank or equivalent. Thirty-nine officials with ministerial rank, as well as 74 directors general, were referred for trial.
The KRG maintained its own COI, which reported it registered 799 official corruption complaints between January and July 2022. During this period COI sent 134 cases to the courts for further investigation and prosecution. Over the past five years, COI reported it has interrogated 72 senior KRG officials on corruption allegations, including several ministers, one IKP member, one governor, five mayors, and multiple directors general, advisors, and members of provincial councils. Between January and October, 40 individuals were convicted and sentenced for corruption crimes in the IKR.
Iraqis blamed days-long power outages, salty water and shortages of basic goods largely on corruption, which left the Iraqi government unable to function efficiently - one of the underlining causes of the Islamic State’s (IS's) rise to power in 2014. Corruption was also related to the Iraqi army’s apparent inability to beat back the militants, despite support from the US-led coalition.
On 09 August 2015, the prime minister announced, and the Council of Representatives approved, a series of reforms designed to eliminate official corruption and to improve public services. Reforms went into effect August, but implementation was inconsistent. His plan called for the end of sectarian quotas in determining senior positions, as well as the establishment of an executive committee to select ministers, advisors, and director generals based on merit and competence. The reforms reduced the number of government ministries from 33 to 22.
Although the canceled ministries lost their official mandate, in reality working-level employees continued at their posts and continued to be paid while the Council of Ministers engaged in protracted negotiations to merge ministries and reassign employees from canceled ministries. Finally, the reform package authorized a high commission to reopen and investigate old corruption cases. The government subsequently referred 2,000 corruption cases to the courts for prosecution; however, the vast majority of these cases dated from 2003 to 2005.
The prime minister also called on the judiciary to appoint expert judges known for their integrity to investigate and prosecute corruption cases. In September authorities appointed 34 new judges to courts across the country and 19 integrity judges to Baghdad courts. Baghdad Integrity Court--an investigation court that specializes in integrity cases--announced it was investigating dozens of corruption cases involving many government ministries. In September two new integrity courts opened in Basrah and Najaf to evaluate corruption cases in their districts.
Transparency International in its Corruption Perception Index (CPI) ranks Iraq in a tie for 4th-to-last place. Iraq's economy remains primarily cash-based. Public corruption pervades all levels of the government. Financial transfers from the government to provincial authorities or individuals, rather than business loans, is the major activity of the private banks. Years of economic stagnation under the former regime, as well as sanctions, created crippling distortions in Iraq's heavily centralized economy. A stifling bureaucracy and Byzantine legal and regulatory structures were hostile to private business. Iraq's state-run industries were inefficient and unproductive. Its private banking system lacked the ability to provide credit needed for domestic investment, and its state-run banking system served as little more than a cash transfer mechanism.
Corruption in all areas remains a significant problem. Corruption is a cancer that corrodes the rule of law, undermines economic development, and eats away at the fabric of civil society. In extreme cases, corruption can destabilize communities, and lead to failed states, lawlessness, and terrorism.
Although the law provides criminal penalties for official corruption, the government did not implement the law effectively. Large-scale corruption pervaded the government, and public perception of government corruption and impunity continued to be strong. Intimidation and political influence were factors in some allegations of corruption, and officials sometimes used the "de-Ba'athification" process to pursue political and personal agendas. The World Bank's worldwide governance indicators reflected that corruption was a serious problem.
In July 2010 the United Nations Office on Drugs and Crime, the United Nations Development Program, and the Central Organization for Statistics and Technology within the Ministry of Planning and Cooperation Development released a report on the working conditions and integrity of civil servants within four ministries. Among the findings, 24 percent of the staff that had daily contacts with private business within the Ministry of Trade received at least one bribe offer, and 72 percent of all civil servants would not feel adequately protected if they reported corruption within their ministries, of whom 73 percent would not feel adequately protected from physical harm. Government anticorruption officials and the media consistently commented on the pervasive corruption in society.
Under Saddam Hussein's regime, corruption was a fact of life for every Iraqi and touched upon every economic transaction. The former regime's control of the economy left a legacy of heavy state procurement and subsidies distorting market prices. Undoing this legacy will be a long process, and investors still may have to contend with requests for bribes or kickbacks at all levels. The Iraqi government must fight corruption as hard as it fights insurgency. Iraq has a history of massive corruption. The previous regime bankrupted the country through massive embezzlement of public funds for personal palaces and other conspicuous and wasteful consumption at the expense of the average citizen. Years of dictatorship and oppression have led to an apparent inability on the part of many Iraqis to know right from wrong and act accordingly. The habits adopted to survive under Saddam were not consistent with those needed to build a civil society.
In the new democratic Iraq, it was imperative that measures be put in place to eradicate corruption in all its manifestations. Iraq has immense oil wealth which leaves it open to the possibility of state capture. A form of grand corruption in which business or political elites manipulate the system to win procurement contracts, use favoritism or nepotism to get preferential treatment on jobs, and avoid taxes.
"[I]nexperienced officials, fear of decision-making, lack of communications, minimal security, no banks, and lots of money to spread around. This chaos I have referred to as a 'Wild West.'. [W]as waste of taxpayer's and Iraqi DFI dollars what it had to be? Were inefficiencies at a high level inevitably mandated by the circumstances? I would give a firm 'No' to both questions.." (Franklin Willis, former CPA Official, 2/14/2005)
"The Department of State has negligently, recklessly and sometimes intentionally misled the U.S. Congress, the American people, and the people of Iraq. In a sense, the Department of State has contributed to the killing and maiming of U.S. soldiers; the deaths of thousands of Iraqi civilians; the bolstering of illegal militias, insurgents and al Qaeda - and the enrichment and empowerment of the thieves controlling some of the Iraqi ministries. Billions of U.S. and Iraqi dollars have been lost, stolen and wasted. It is likely that some of that money is financing outlaws and insurgents such as the Mehdi Army." (Judge Arthur Brennan, former Director of the Department of State's Office of Accountability and Transparency, 5/12/2008)
"In the 11 months that I served in Iraq, the Office of Accountability and Transparency (OAT) was under-staffed for its mission and had NO operating budget. In fact, the proposed staffing of OAT was cut from 25 staff to 6 without knowledge or input from OAT staff, or any other known oversight. There was no transparency even within the office of transparency. Our job was to implement U.S. policy, but whenever we tried, our own officials blocked us." (James Mattil, former Chief of Staff at the Department of State's Office of Accountability and Transparency, 5/12/2008)
"Based on the cases that I have personally investigated, I believe that at least $18 billion have been lost in Iraq through corruption and waste -- more than half of which was American taxpayer money. Of this $18 billion, I believe at least $4 billion have been lost due to corruption and criminal acts in the Ministry of Defense alone." (Salam Adhoob, former Chief Investigator, Commission on Public Integrity in Baghdad, Government of Iraq, 9/22/2008)
"Corrupt Iraqi government officials within the Ministry of Oil have worked with Al-Qaeda terrorists at the major northern oil refinery at Baji to steal oil from the refinery and sell it on the black market to enrich themselves and fund Al-Qaeda terrorist attacks against U.S. and Iraqi troops." (Anonymous Witness, former Senior Advisor to the U.S. Government in Iraq, 9/22/2008)
"My Investigators discovered that one of the owners of Al-Aian Al-Jareya, Nair Mohammed Ahmed Jummaily, the brother-in-law of the current Minister of Defense, diverted...funds to Al-Qaeda in Iraq. Informers have told me that Mr. Jummaily traveled to Amman, Jordan to deposit money into accounts of Al-Qaeda operatives." (Salam Adhoob, former Chief Investigator, Commission on Public Integrity in Baghdad, Government of Iraq, 9/22/2008)
"As billions of dollars have been wasted on reconstruction projects.billions more have been lost due to rampant, widespread corruption in the Iraqi government. This corruption has gone largely undetected because the Iraqi judicial system has been corrupted as well." (Anonymous Witness, former Senior Advisor to the U.S. Government in Iraq, 9/22/2008)
"Large- and small-scale corruption is endemic in Iraqi society. Based on my experience and first-hand observations in Iraq, I would estimate that a significant percentage of Iraqi officials are involved in corruption in one way or another." (Testimony of Abbas Mehdi, Former Chairman of Iraqi National Investment Commission, Iraq, 9/22/2008)
"So, sadly, [the Commission of Public Integrity] efforts did not have the support of many in the Iraqi government -- most notably, the Prime Minister, who actively interfered with the anti-corruption efforts of CPI. Prime Minister Al-Maliki routinely blocked corruption investigations and directed government officials not to cooperate with our efforts." (Salam Adhoob, former Chief Investigator, Commission on Public Integrity in Baghdad, Government of Iraq, 9/22/2008)
"High-ranking Iraqi government officials, including Ministers, Members of Parliament and judges, have received monthly salaries and gifts from foreign governments, including Iran and Saudi Arabia." (Testimony of Anonymous Witness, former Senior Advisor to the U.S. Government in Iraq, 9/22/2008)
Although Iraq's anticorruption institutions are developing more auditing and investigative capacities, they remain understaff ed and undertrained. Judicial security continues to be a problem, with GOI offi cials reporting an 80% shortfall in the number of judicial security guards deemed necessary. Iraqis' lack of trust in the government has led to the widely held view that, to advance in society, one must inevitably either partake in corrupt activities or turn a blind eye to them.
Published on 24 March 2010, the government's Anticorruption Strategy for 2010-14 identifies more than 200 specific anticorruption challenges, along with an action plan for addressing each. The Joint Anticorruption Council, with the COI acting as the lead, has responsibility for supervising compliance with the strategy, which also seeks participation from religious and community leaders, civil society representatives, and journalists. At the end of the year, 29 of the 34 ministries had complied with the strategy's requirement to submit an anticorruption plan for COI review.
As of October 2010, Iraq's chief anticorruption official - the head of the Commission of Integrity (COI) - had yet to be confirmed in office, almost two years after taking the position. The Commission of Integrity (or Integrity Commission - COI) is an independent, autonomous Iraqi governmental agency, established by CPA Order No. 55, responsible for anti-corruption, law enforcement and crime prevention -- as well as public education on these topics. The COI investigates nationwide allegations of government corruption and refers cases to the Iraqi judiciary. The COI performs its duties in conjunction with the Board of Supreme Audit (BSA) and the Inspectors General (IG) from each ministry. There is a need to impose and enforce credible penalties for government corruption, specifically adherence to laws related to government contracts, procurement, and allegations of bribery. The number of corruption cases brought to a successful conclusion while limited, is growing, and mainly involves the lower levels. The statutory and regulatory provisions intended to control corruption will require substantial revision to be consistently effective.
Iraq signed and ratified the United Nations Convention against Corruption in March 2008 and has finalized a strategy to achieve compliance, a long-term endeavor. Iraq has also endorsed the World Bank's Extractive Industry Transparency Initiative and is making progress in fulfilling the criteria for full membership.
The US Department of Justice has been working closely with and through the International Contract Corruption Task Force ("ICCTF"), various inspectors general, and other law enforcement partners to investigate and prosecute procurement fraud relating to the wars in Iraq and Afghanistan, and the rebuilding of those countries. Established in October 2006, the ICCTF is a joint agency task force that deploys criminal investigative and intelligence assets worldwide to detect and investigate corruption and contract fraud resulting primarily from wars and reconstruction efforts in Iraq and Afghanistan (also referred to as "war-related contract fraud").
The FBI had special agents deployed in Iraq, Afghanistan, and Kuwait to provide full-time support to the International Contract Corruption Initiative, which addresses major fraud and corruption in the war and reconstruction efforts in Iraq and Afghanistan. These deployments are conducted in 120-day rotation cycles and special agents work jointly with the Defense Criminal Investigative Service, Army Criminal Investigation Command Major Procurement Fraud Unit, Special Inspector General for Iraq Reconstruction, and the U.S. Agency for International Development, which also have agents deployed to address this crime problem.
In mid-April 2011, Iraq’s Council of Representatives repealed Article 136(b) of the Iraqi Criminal Procedure Code. This provision had permitted Iraqi ministers to block investigations of their subordinates. Its repeal represented an important step toward implementing an effective rule-of-law system, but much remained to be done in this regard, including securing judges from attacks and stopping the assassinations of police officials.
Corruption remained a significant challenge for Iraq. While the country’s three main anti-corruption agencies — the Commission of Integrity [COI], Board of Supreme Audit [BSA], and ministry inspectors general (IGs) — had increased their capacities to investigate criminal activity since 2004, by 2012 they remained stymied by political resistance and lack of capacity and had difficulty pursuing cases involving complex crimes and high-level officials.
For instance, in February 2011, officials announced the arrest of an MOI major general in connection with the purchase of ineff ective bomb detectors from a British company in a case that SIGIR has been reporting on for the past two quarters. (The former Minister of Interior had earlier invoked Article 136(b) to block legal action against the general.) According to the charges, the general arranged for the GOI to sign five contracts purchasing these devices at vastly inflated prices. Furthermore, an Iraqi investigation found the devices to be completely ineffective at detecting explosives. Despite this finding, the COI reportedly cleared the general of any wrongdoing, but the parliaments’s Integrity Committee disagreed with the COI’s findings.
Corruption is rampant, with government positions that should be occupied by skilled technocrats instead filled with patronage appointees whose loyalties lie with politicians in Baghdad. Since government jobs are often the only employment to be had, corruption in the public sector affects the entire economy. Sectarianism is one factor contributing to corruption, as unqualified government officials use their positions to advance the financial and political interests of themselves and their particular affiliations.
A significant portion of major government contracts are given to companies controlled by powerful Iraqi political figures or their surrogates. Many of the major firms in Iraq are allied with a political faction, enabling them to win contracts at vastly inflated prices. Because of their close tie swith the government, these firms receive significant down payments prior to beginning work and usually are not at risk of suffering financial penalties in the event of non-performance or poor performance.
Iraq’s existing Anti-Money Laundering/Counter Terrorism Financing (AML/CTF) regime is inadequate, and international financial institutions frequently cite this as a major impediment to starting or increasing operations in Iraq. The country’s financial system needs a major overhaul of its anti-money laundering regime to meet the Middle East North Africa Financial Action Task Force (MENAFATF) standards. Iraq joined MENAFATF in 2005, and underwent its first ever Mutual Evaluation (ME) in 2012. The ME team was led by World Bank experts early in 2012 to determine if the GOI conformed to the international standards stated in the 40-plus-9 recommendations issued by FATF; the Mutual Evaluation Report (MER) on Iraq was published in November 2012. According to a February 2014 International Cooperative Review Group (ICRG) statement, Iraq has made a high-level political commitment to work with the FATF and MENAFATF to address its remaining strategic AML/CTF deficiencies, including through a draft law. The war on ISIL has prevented GOI from fully executing its plans.
There were reports alleging that senior officials involved in bribery schemes held illicit funds in overseas accounts, making bribery more difficult to detect. In August 2015 international media reported that the government launched a corruption investigation against the former deputy prime minister for energy affairs Baha al-Araji, accusing him of nine crimes, including property racketeering and financial corruption. Araji publicly admitted to owning as many as seven houses, a hotel, and other properties. He also had 300 guards paid by the state. There were no results publicly available by year’s end. In August the COI announced it would investigate the Ministry of Trade for corruption, due to complaints about irregularities in the ministry’s public distribution system. In October the judiciary announced it had issued an arrest warrant for Minister of Trade Milas Muhammad Abdul Karim on corruption charges. The minister left his post, but the corruption investigation continued at the end of 2015.
During the first half of the year, the COI investigated 13,398 cases and referred 2,171 cases to relevant courts, including 13 officials at the ministerial level and 80 at the director general level. The COI reportedly recovered 36 billion dinars ($32.7 million) in stolen assets and issued a court order to recover an additional 12 billion dinars ($10.9 million) during the year.
The Joint Anticorruption Council reporting to the Council of Ministers oversees and monitors compliance with the government’s 2010-14 anticorruption strategy. The secretary general for the Council of Ministers led the anticorruption council, which also included the chairperson of the Federal Board of Supreme Audit, the commissioner of the COI, and representatives of the Inspector Generals’ (IG) offices. When the agenda of the anticorruption council calls for high-level participation by the government, the Ministry of Interior’s head of economic crimes may attend. Despite the council’s mandate, the public generally regarded it as having little effect due to the scale of official corruption. The COI’s National Strategy to Combat Corruption (2015-19) aimed to increase training and development of staff of the IG’s office and COI staff. On April 14, the Council of Ministers established an anticorruption academy to conduct trainings and workshops for COI staff, offer postgraduate studies in anticorruption, and publish anticorruption research.
Government officials and the IGs frequently contended that corruption investigations were highly politicized. For example, in August 2015 the head of parliament’s integrity committee told international media that the body recommended 500 cases for investigation during the year but that the COI addressed only a few cases because judges in the commission were not independent. Human rights NGOs alleged that government officials sought to influence the outcome of corruption investigations or to stifle anticorruption efforts altogether.
Ministries effectively stalled investigations in 2015 by failing to comply with requests for information or for officials to appear in court. The IGs claimed some ministers stifled their oversight efforts or openly threatened IG staff with dismissal for performing basic oversight functions. Some government officials stated politically motivated corruption investigations hindered public administration because officials reportedly feared corruption allegations from political opponents.
Lack of agreement about institutional roles, insufficient political will, political influence, poor transparency, and unclear governing legislation and regulatory processes hampered joint efforts to combat corruption. The media and NGOs continue to attempt to expose corruption independently, although their capacity to do so was limited. Anticorruption, law enforcement, and judicial officials, as well as members of civil society and the media, faced threats and intimidation in their efforts to combat corrupt practices.
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