Financial Fraudsters Hit ‘Dollar Market’ In Iraqi Kurdistan

In Iraq, locals tend not to trust banks, no matter how big. They feel that they may as well hide money under their beds; Iraqi banks are likely to go out of business at any time, they suspect, due to corruption or possibly political changes. So instead, many locals treat the small exchange shops that operate everywhere around the region more like banks. 

The same situation applies in Iraqi Kurdistan, where locals are more likely to trust the guy running the small exchange shop on the corner than your average bank teller.

And in recent years, a new form of savings and investment has arisen in the semi-autonomous northern region. Basically, ordinary people would give their money to businesspeople and traders that they knew and trusted in the money markets of their city. These individuals would invest or otherwise use the money and pay monthly dividends back to the investors. So, for instance, if you gave a local businessperson US$10,000, you might get US$200 back every month until the whole amount had been returned to you. You could claim the whole amount – the US$10,000 for example – back at any stage, if necessary.

I heard that two exchange companies recently smuggled US$98 million out of the region and escaped from the city!

This kind of trade commonly takes place at what is known in the city of Sulaymaniyah’s “dollar market”, where locals go to exchange their Iraqi dinars for US dollars. Locals often use US dollars to make big ticket purchases because, due to exchange rates, one would need to carry suitcases stuffed with dinars to buy anything like a car. A handful of dollars can be substituted instead.

The problem is, the informal nature of these kinds of deals also leaves them open to fraudsters and swindlers.

One of the local currency traders, Yassin Mahmoud – known by locals as Mullah Yassin – confirms that there have been a rising number of incidents recently, where businesspeople have taken money off locals but then have either not been able to pay it back, or have fled the area, taking the cash with them.

Baryar Fakhr-Addin owns a store selling children’s clothing in Sulaymaniyah, and he recently gave US$70,000 to another local man who used to run a currency exchange counter – the plan was to transfer the money to Turkey where Fakhr-Addin often travels, in order to buy more stock for his store.

“This guy was working in the market for more than 20 years,” Fakhr-Addin recounts. “He was very well trusted, to the extent that we did not even ask him for receipts when we gave him cash. But he is now bankrupt. We don’t know what will become of our money,” he laments.

“He was not deliberately trying to deceive people,” says Hareem Saleh, the businessman in question’s lawyer. “He suffered huge losses because of the financial crisis [in Iraqi Kurdistan]. He has already tried to pay back about 40 percent of what he owes, by giving away property or reaching other settlements. But not everything has been finalized.”

Some of the culprits, like the latter, have been arrested. But many others have simply fled the city. Rumours abound, with some suggesting that the individuals in question have escaped Iraqi Kurdistan with millions. 

“I heard that two exchange companies recently smuggled US$98 million out of the region and escaped from the city,” adds Sirwan Mohammed, who also works in the dollar market.

“The financial crisis has led to major disaster for many local businesses,” confirms Yassin Mahmoud Rashid, the spokesperson for the Kurdistan Investors’ Union, adding that his organization knows of two local businessmen who simply took the money that had been loaned to them and went to Europe. Rashid believes that the whole financial system in Iraqi Kurdistan needs better organization and better policing, in order to prevent these kinds of situations.

The policing side is tricky, he admits; when they are approached by the police, many of the people involved say they have gone bankrupt, even if that is not always true. 

“We have arrested people here and we have also tried to track down those who went overseas,” Sarkout Ahmad, a spokesperson for the Sulaymaniyah police, told NIQASH.  “But they tend to do things like change their names and even their country of origin. It’s not an easy mission.”

There are a lot of these kinds of cases coming before the Kurdish courts, says a senior public prosecutor, Bakhtiar Ali.

“Unfortunately the failure of citizens to exercise due diligence in these cases has led to some people losing a lot of money,” Majid Othman, a local politician who heads the Kurdish parliament’s committee to protect consumer rights, told NIQASH. The question of wrong doing in the local dollar markets has been discussed in parliament but no resolution has been agreed upon, he added.

Which means that for now, those locals who have lost money, simply have to wait and see; they don’t know if they will ever get their money back.

source: Niqash

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