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A relic of the U.S. occupation of Iraq, the dollar auction was set up to direct money from Iraqi oil sales to importers through an account at the Federal Reserve Bank in New York. Iraq’s central bank sells the dollars to commercial banks, which apply for the funds on behalf of companies so they can pay for imported goods, like spices or hygiene supplies.
Down, Sabbagh, and colleague Lara Dihmis began researching the system, unsure of what they would find. They built dossiers of Iraqi banks and their owners, spoke to a researcher in Washington D.C. who had analyzed dollar flows from the auction, scraped information from the Iraqi central bank’s website, and began interviewing sources. Months later, someone came to Down with a tip: They knew someone in Baghdad with documents from a 2015 Iraqi parliamentary committee investigation into the system, which had never been made public.
She and Sabbagh worked together to build trust with the source over months. “We eventually, through a lot of meetings, negotiated that we would go to Baghdad and get this cache of documents.”
When the reporters landed in the Iraqi capital in spring 2023, their first voyage was to a series of dusty shopping malls in search of a scanner. Down and Sabbagh spent the next three days making copies of thousands of documents, which were bound and neatly organized in a clear, multi-gallon storage container.
Once the documents were in hand, Down spent months poring over the dollar applications. Dihmis, an expert researcher, was meanwhile using public records to track down the mysterious names and shell companies listed in the files.
The research uncovered clear signs of fraud. Many of the applications had contradictory information about the type or amount of product, country of origin, or the name of the ship transporting the goods, Down said. It was common to find no customs slip or other documentation attached to applications — just invoices that appeared to be poorly photo-copied. Often, reporters found replicas of the same invoice, with small alterations of the company’s name and logo. They were “lazy photocopies,” said Down, equating the results to a phoned-in middle-school book report.
OCCRP’s North America Editor Kevin G. Hall tracked down U.S. officials familiar with the auction system. Half a dozen U.S. and Iraqi experts reviewed the documents with OCCRP, confirming the team’s findings.
At the applicant bank’s request, money “did not go to pay for imports. The money just went to random places, from Turkey to China to Dubai to Jordan, with no correlation with what was said to be imported — except for one case, which was a massive import of refrigerators,” said Down.
OCCRP analysis indicates that over 99 percent of the money obtained by one bank in a single month in 2012 was cleared based on documents that appeared fraudulent. Reporters corroborated and expanded claims by the Iraqi parliamentary committee that several Iraqi banks were committing fraud through the auction — and that little was done by the U.S. to stop it.
The investigation found that billions of dollars flowed to institutions linked to alleged financiers of U.S. adversaries: Al-Huda, an Iraqi bank whose owner was sanctioned after a January drone attack on U.S. forces and a company that handled funds for a financier of Yemen’s Houthi rebels were among them.
“The numbers are stunning,” said Down of the fraud scheme. “The consequence is that it’s funding people who are bombing our soldiers, and it’s funding them in vast amounts… This is an artery and it’s going straight through the Federal Reserve.”
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We’ll have more for you on the dollar auction soon.
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