1.2 Objectives of Best Practices of Preventive Role FBSA’s preventive role is to avoid the occurrence of irregularities that’s would lead to a waste of public money, as well as work on the optimal use of the state’s resources through recommendations provided by the board. 1.3 Benefit of Best Practices of Preventive Role -auditees performance improvement through performance audit. -Evaluation of the internal control system. -Increase the community's confidence in SAI. -Disbursement of allocated funds wisely to provide the optimum benefit of such amounts.
1.4 Lesson Learned Needs for information to document corruption cases that’s violate laws and instructions To give materiality to each case and apply due diligence The outcome of auditing suspicious cases will present detailed description on the case concerned which will provide perfect assistant to investigators and judiciary to give judgment in the case concerned. Discovering risk is the most risk auditors can face during an audit.
2. Detective role 2.1 Best practice Supreme audit committee was formed to cross audit all employees names, retirees and grantees of all kinds. At the end of 2008 the committee conducted an advertising campaign in the media urges citizens to stop receiving duplicate salaries and grants starting from date of publication until a deadline ended at 31/12/2008. In 2009 the committee cross- audited most employees database, in 2010 the results showed series of irregularities estimated at (15475) violators, the details are as follows: Social warfare grants; 6773 violators Department of labor and vocational training loans; 2975 violators Pension; 3558 violators Duplicate salary; 2169 violators The work continued by issuing reports about the same subject for subsequent years (2011-2012) 4 and 2 reports respectively. Until 31/12/2012 the number of discovered irregularities reached 22921 irregularity. The total recovered amount is 4 billion Iraqi dinar.
2.2 Objectives of Best Practices of Detective Role Detecting corruption in the right time by SAIs can eliminate its negative effects, recovering such money, refer corruptors to justice and reduce the impact of such cases in the community to the lowest possible level. 2.3 Benefit of Best Practices of Detective Role To express a neutral technical opinion in the financial statements. To protect public money from waste and misuse To protect citizens from the negative effects of corruption The role of detection is a future protective one through development of precautionary measures fore non-recurrence of such cases. Increase citizens' confidence in the audit institutions
2.4 Lesson Learned The information required for an audit will be determined by the audit team and in case of existence of suspicions, the auditors will expand the auditing sample and request internal and external information to verify the validity of suspicions or not and document these cases with evidence. Auditing corruption cases will provide indicators about the prevalence of corruption and waste of public money. FBSA will provide reasonable assurance about the validity of financial statements for entities subject to audit. About corruption suspicions the board will audit these cases in detail to provide sufficient evidence of such cases. Adopting risk-based audit for the purpose of reducing the risk of audit to the lowest level, as well as other types of risk have been facing during performing their duties on suspicious cases such as threats, murder…etc.
3. Reporting and Following up Roles 3.1 best practices FBSA has an email to receive complaints or suspicions of corruption in government departments, as well as existence of a hotline to receive calls and tips by auditors and some of the information being gathered by auditees staff for the Board. These tips and informants will be dealt with secretly to ensure their safety. FBSA role in following up corruption cases is to deliver such cases to investigation and justice. The justice, Ministry of Justice or other specialized ministries, will judge and execute the sentences against perpetrators, such as imprison or pay penalties. 3.2 Objectives of Best Practices of Reporting and Following up Roles Making citizens aware of corruption cases and give them motivation to report on any case of corruption. FBSA will respond to these reports to reflect significant results on citizens and maintaining the confidentiality of informants from revenge. The discovery of corruption and following up procedures are very important to achieve audit and investigation objectives; recover corruption money and punish perpetrators which will impact positively on the community.
3.3 Benefit of Best Practices of Reporting and Following up Roles The reporting has more benefits than detecting because these cases can be detected when the violation has committed. This social behavior can provide protection for public funds by considering society members as one of the other SAIs. Enacting regulations and laws to prevent and obligate relevant to apply the recommendations. 3.4 Lesson Learned The reported corruption cases must be documented with supportive document to support the validity of the allegations, as well as the role of the follow-up requires from the SAI to study all procedures needed to correct errors, if the case did not delivered to the judiciary. If the case is referred to judiciary, the role of following up will end at this point. The primary source of reporting is the amount of information provided by the informant to be starting point to obtain information about other documented cases. As for the role of follow-up the board should obtain the basic information, whether internal or external sources for the purpose of verification when addressing that situation The risk of the reporting role is the probability of these report being false, that may cause loosing of time and efforts by the auditors. Not implementing the recommendations is the risk of following up.
B. Anti-Money Laundering 1.Preventive Role 1.1 Best practices during auditing foreign currency auctions, FBSA has noticed differences in the size of imports than funds transfers, therefore regulation and instruction have been set by our SAI and central bank of Iraq to monitor private sector imports against the sold money through a network installed between Central bank of Iraq, customs and General Commission for Taxation. 1.2 Objectives of Best Practices of Preventive Role The preventive role in the fight against money laundering is to avoid the process of giving legitimacy to illegal money obtained, as well as avoid transferring funds illegally aboard or inboard to suspicious bank accounts that’s may be used in financing terrorist activities. The Central Bank of Iraq has the greater role of developing regulation that would provide preventive control on the funds.
1.3 Benefit of Best Practices of Preventive Role Protect the lives of citizens by preventing the flow of money from being used in terrorist operations. The protection of the national income and gross national product from smuggling money abroad. Increased reliability in the banking system, which represents one of the main pillars of the economic policy of the country. 1.4 Lesson Learned Availability of a database for all government and private banks that’s work under Central Bank law No. 94 and other laws concerned. We can not determine the size of staff needed because each case has its nature and materiality. We needs to examine and evaluate the case and see the qualification of auditors needed before determine resources. Lack of database and instructions of foreign currency auctions for the shareholders is the great threat in this scope, also the loopholes that’s can be used for money laundering.
2. Detective Role 2.1 Best practice (Mediation in buying foreign currency for exchange offices) The main branch of bank (X) has accepted checks being withdrawn in foreign currency in the same day by the same person before their amount being credited into account, as follows: An authorized foreign currency company had deposited forged check withdrawn for account the (No. 60072) opened in the name of general trade company for food stuff at Rafidain Bank which is also fake account. The company’s authorizer withdrew the forged checks amount from his current account at the agriculture bank on the second day of deposit. Check numberDate of depositClient nameCheck amount Date of withdrawal 34803895/2/2009S3189500008/2/2009 355787828/4/2009M115500000028/4/2009
The audit office, during auditing the customer current account in the bank mentioned above, found that there was a number of forged checks (offset credit) been accepted by from the other bank accepted depositing such checks before verifying that the amount are being collected, thus the customer will be withdrawing the amount to funs his activity, especially buying dollars, as depicted: Return dateAmount/dinarAmount/dollarExchange rate 12/1/2009400000000034305311166 12/1/200945000000003589348 12/2/200920000000001715265 13/7/200930000000002572898
2.2 Objectives of Best Practices of Detective Role The detection of money laundering helps to avoid using such money in suspicious activities and suing perpetrators, as well as the possibility of recovering such money and illicit funds transferred from abroad through international assistance. 2.3 Benefit of Best Practices of Detective Role Reduce the level of banking risks to its lowest level through the development of solutions in the banking systems and addressing the weaknesses in the internal control systems of banks. Increase the trust of the community in banking transactions.
2.4 Lesson Learned Compliance with laws and regulations by the banks under scrutiny of board, including the law of the Iraqi Central Bank and the Banking Act and the Money Laundering Act, which regulates the work of those banks since the money- launderer can exploit any loophole in these laws and regulations for the implementation of the money laundering operations. Depends on materiality and size of auditees, FBSA will distributes auditors on these auditees and if corruption have detected it will provide specialized auditors to achieve best results. Proposing recommendations to the banks for the purpose of strengthening internal control systems in which the diagnosis of gaps and weaknesses in the laws and regulations, and work to avoid problems in the future. The auditors will face many types of risk of in case money launderer found that FBSA conducting auditing such case.
3. Reporting and Following up Roles 3.1 Best Practices During monitoring the money laundering office in the central bank of Iraq, Several weaknesses have been diagnosed in the reports addressed by the Office, in addition to the weakness in the office staff in terms of quality and quantity. All these weaknesses were addressed to the Council of Ministers, which has taken a series of measures. also the board has reported the results of the office activity to Central Bank management and made recommendations on how to activate the role of the office. FBSA will follow up the actions of Money laundering reporting office and provide specialized staff, if necessary, technical support to affiliated bodies as well as monitor and audit the activities of private banks with central bank of Iraq.
3.2 Objectives of Best Practices of Reporting and Following up Roles Increasing social awareness by protecting public funds and the bad effect of money laundering citizens on various aspects of life. Following up of detected money laundering cases have its impotency to recover such money and prevent engaging these funds in the terrorist activities. 3.3 Benefit of Best Practices of Reporting and Following up Roles Optimum use of money laundering reports to avoid the access of criminals to these funds and using them in terrorist attacks. The responsible for these suspicious operations can be identified by these reports directly. Make sure that money laundered have recovered Following-up role and execute recommendation regarding detected cases will help eliminate this phenomenon by enacting regulations and laws to prevent and obligate relevant to apply the recommendations.
3.4 Lesson Learned The reported money laundering cases must be documented with supportive document to support the validity of allegations, as well as the role of the follow-up requires the SAI study its all the procedures that will correct errors if the case did not delivered to the judiciary. If the case referred to judiciary, the role of following up will end at this point. The primary source of the reporting is the amount of information provided about the case to be a starting point to obtain information about other documented case. As for the role of follow-up the board to get the basic information, whether internal or external sources for the purpose of verification when addressing that situation The risk of the reporting role is the probability of these report being false, that may cause loosing of time and efforts by the auditors. Not implementing the recommendations is the risk of following up.