Title: “Libyan Central Bank’s Letter of Credit System: Suspected of Massive Financial Fraud”

Date: 25 February 2021

London, U.K. - Global Witness investigates potential large-scale manipulation of Libya’s Central Bank’s LC system

Global Witness, an anti-corruption campaign group, has released a damning report indicating that Libya’s central bank’s letter of credit (LC) system may have been manipulated on a large scale, leading to potential financial losses for the already troubled North African country.

Report findings

1. Significant discrepancy between LC transaction volumes and actual imports
2. Suspicious transactions in meat imports
3. Potential for trade-based money laundering and funding for armed groups

Background

During the period between April and July 2020, the Libyan national LC system, which is the sole means for importing certain food, medicine, and other goods, facilitated transactions worth nearly US$2.5 billion. However, data from the United Nations Comtrade revealed that a substantial amount of money was leaving Libya faster than goods were entering, suggesting ongoing financial crimes.

Concerns and potential motivations behind the discrepancy

1. Misalignment between LC transaction volumes and actual trade flows
2. Plausible explanations (temporary LC approval halts, Covid-19 pandemic) versus unlikely scenarios
3. Trade-based money laundering and generating funding for armed groups

Testimonies and evidence

1. Reports of lucrative import deals involving substantial price discrepancies
2. Former central bank employees’ accounts of meat and livestock imports being manipulated via falsified invoices and shell companies

Potential Risks and Recommendations

1. International banks as intermediaries of LC transactions and exposure to illicit funds
2. Call for more robust anti-money laundering measures by international banks involved in handling LCs for Libyan imports

Specific Cases and Instances of Fraudulent Practices

Bank ABC and Central Bank of Libya (CBL)

1. Close ties between the two institutions
2. Bank ABC’s European operations as the primary intermediary for LCs tied to Libyan imports
3. Conflicts of interest and complexities in identifying and preventing financial crimes.

Reactions from Bank ABC and Central Bank of Libya (CBL)

1. Bank ABC’s dedication to complying with regulatory requirements and international best practices
2. The CBL’s denial of the claims and call for sufficient evidence to support them.