2. INTRODUCTION Financial and administrative corruption and money laundering operations are one of the organized crimes that’s have negative impacts on society, economic, and security in communities. Furthermore, it’s a world wide problem that’s can cross boarders and terrorize other countries. For the elimination of this phenomena international cooperation required to reach comprehensive and effective measures against this phenomena. Through reviewing questionnaires and case studies for the last two years of our RP, a report has developed to represent a summary of what have been done so far, and to be part of the final report of our RP, we have divided the report into parts as following:

3. Part one: FBSA background The Federal board of supreme audit (FBSA) is the state’s leading institution with the mission of protecting public funds, detecting fraud and manipulations, combating financial and administrative corruption and effectively contributing to supporting the national economy. The board also plays a major role in building new Iraq resting for its governance, on financial and economic foundations as well as sound and established scientific and legal standards. The Board was established in 1927 and has passed through successive stages each one represented by issuance law of the laws of financial audit.

4. Board’s relations with regional and international supreme audit institutions: The board has joined the International Organization of Supreme Audit Institutions (INTOSAI) in 1953. The board is a member in the Asian organization of supreme audit institutions (ASOSAI) since the establishment of the organization in 1978. The board has joined the Arab Supreme Institutions (ARABOSAI) in 1976. The board has been elected as a member of the executive board to the Arab Supreme Institutions (ARABOSAI) in 2007. During the 11 th meeting of the general assembly, the board has been elected as a member of ASOSAI’s governing board.

5. Board’s relations on the local level: SAI is an active member of the Joint Council for the fight against corruption, which formed in 2007 Participate in the development of the national strategy in the fight against corruption for years (2010-2014) that respond to the UN Convention against Corruption to serve as a comprehensive and detailed plan and manual work to combat corruption at all levels Contributing with other control bodies, which is (the Integrity Commission and the offices of inspectors general) to refer reports that include indicators of corruption for the purposes of verification and investigation Developing national indicators of corruption in Iraq and measure citizen awareness of corruption.

6. Part two: current situation of corruption and money laundering in Iraq In this part a questionnaire has been adopted by participants to use its results in evaluation of the current situation of corruption and money laundering in Iraq. Summary of results were as following: The corruption is moderate and widespread among some public sectors Corruption is slightly lower than past years and the score of the Global Integrity Index are not fair enough to reflect the reality of corruption in Iraq Government reaction against corruption considered good and society do not accept this phenomena Petty corruption is wide spread and caused by Medium Management/Supervisors and grand corruption in Iraq is moderate and Powerful government officials behind it. Bribery is the common type of corruption in Iraq and most vulnerable sector to corruption is custom.

7. Money and asset gained from corruption is often used for bank deposits this because the complicated and cumbersome administrative procedures and Weak accounting practices. Monitoring situation of corruption in the country has high priority by FBSA. About money laundering, the situation of money laundering is serious and increased in recent years. Both public and private sectors are facing corruption, especially banking and financial sectors, where transforming illegal money to legal is prevailed. These phenomena will have serious consequences such as increasing crimes and corruption, weakened financial institutions, Negative impact on foreign investment and weakened government control over the economy.

8. Part three: Current situation of the fight against corruption and money laundering In this part we also adopted a questionnaire to evaluate the fight against corruption and money laundering: SAI of Iraq has its own national strategic plan for combating corruption and money laundering, where a work plan has been developed to achieve the strategic objective on specific government institutions to attain these goals the plan has circulated on institutions with rules to be followed, such as “opining, transparency, develop and implement rules, standards and programs, administration reformation, professional codes of conduct, financial disclosure). Anti-corruption council has formed to monitor, assess and implement the anti-corruption strategy, conduct investigation, raise public awareness for fighting corruption and data base for annual statistic corruption cases, in addition develop assessments for ministries for indicators periodically.

9. Corruption is considered a crime punished by law. The law have criminalizes this phenomenon and in place procedures to tackle corruption; such as investigation, punishment and precaution procedures. The level of international cooperation is moderate regarding suspicious turning over, assets recovery and cooperation with law enforcements. The level of anti- corruption efforts much higher than past years. Money laundering is considered a criminal offence in Iraq. And there are a specific laws and/or regulations in place covering anti-money laundering in Iraq. Existence of money laundering office in central bank of Iraq specialized in fighting money laundering operations by creating precaution procedures and detecting money laundering operations. There is cooperation between money laundry office and anti-corruption joint council. All financial institutions have legal obligation with anti-money laundering law. The most common types of suspicious transaction reports (STR) from financial institutions are Refusals to show identification, suspicious behaviors, unusual account activities, unusually large cash transactions and Inconsistencies with the financial profile of the customer or account. Factors that’s inhibit the results of the fight against money laundering are Money laundering criminals are not severely punished, Lack of competent and experienced staff to handle money laundering cases and Limitation of citizen’s knowledge about money laundering criminal.

10. Part four: FBSA’s role in detecting corruption and money laundering In this part we used a questionnaire model and the results were as following: FBSA established by virtue of the Constitution and enjoys a permanent legal status. The organizational structure of FBSA is parliamentary model and enjoys with a fixed term so as to isolate it from the influence politics. FBSA administratively independent from the executive, legislative and judicial departments of the state. FBSA’S yearly budget undergoes the scrutiny and review process of the ministry of finance and the Parliament. FBSA have legal mandate and authority to audit on Private entities, government and non-governmental organizations receiving loans, subsidy or grants from the state. Types of audit services our SAI render is Compliance Audit, Performance Audit….etc. Detecting corruption is already embedded in the regular audit services that our SAI performing. Numbers of employees whom have sufficient skills are moderate and our SAI has periodic training program for auditors.

11. The most adopted approach to deal with corruption is interactive precaution approach were the suspicious cases be turned to affiliated bodies. FBSA has available facilities or mechanism to promote and intensify detection of corrupt activities and transactions in government such as Promulgation of accounting and auditing rules, regulations and Governing Code of Ethics for Government Accountants and Auditors. Compliance audit is the most effective tool in detecting corruption. FBSA initiation of legal prosecution against perpetrators and provide recommendations. Factors hamper our SAI’s role in the fight against corruption are corrupt people not severely punished and some superiors cover up for their subordinates. About money laundering, FBSA’S law contains specific articles about his roles and responsibilities on the prevention and detection of money laundering Detecting money laundering already embedded in the regular audit services of our SAI and suspicious cases turns to affiliate bodies. FBSA do have citizens help desk that caters money laundering complaints and Promulgation of relevant accounting and auditing rules and regulations. Very few personnel have adequate training in the detection and investigation of money laundering.

12. Part five: best practices Case study has been adopted to conclude results regarding this RP, where FBSA determined some best practices and roles that’s have divided into: Preventive role: Preventive role is to avoid the occurrence of irregularities to get the optimal use of the state’s resources. Benefits of Best Practices of Preventive Role auditees performance improvement. Protect citizen lives. Increase the community's confidence in SAI. Disbursement of allocated funds wisely. Examples of this role are government contracts and foreign currency auctions of the private sector.

13. 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. 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 Examples on this role are: Cross audit on government employee’s dual salaries Grants from more than one institution Depositing forging checks on an open account belong to one of the public companies in Rafidain bank.

14. Reporting role: Reporting role objectives: Making citizens aware of corruption cases, give motivation to report on any case of corruption and reporting has more benefits than detecting because these cases can be detected when the violation has committed and This social behavior can provide protection for public funds by considering society members as one of the other SAIs. Examples on this role are: Existence of a hotline to receive calls and tips about corruption Reporting office in the central bank of Iraq to receive money laundering information. Follow up role: Follow up role objectives: The discovery of corruption and following up procedures are very important to achieve audit function and investigation objectives and recover corruption money and punish perpetrators will impact positively on the community. Benefits of this role are to reduce the effects of corruption and help to eliminate this phenomenon. FBSA role is to deliver these cases to judiciary and the role of following up will end at this point.

15. Part six: Measures to improve audit function in detecting and eliminating corruption and money laundering. We can elaborate this part as following: SAI’s measures in international level Sharing knowledge and experience and work on unify audit standards to be appropriate in all countries. Affiliated organizations could play positive role in fight against corruption and money laundering, such as “world bank, International Monetary Fund, International Chamber of Commerce,.etc.” These organizations could provide information to the SAIs about any red flags in the country concerned. Other technical and professional specialized organizations in auditing fields could play roles in development of SAIs by providing related researches and studies. Adopting peer review to evaluate audit institutions and work on strengthens its functions to cope with the development of communities and its environments.

16. SAI’s measures on national level This part is the mandate of the SAIs in the fight against corruption and cooperation frameworks between the SAI and anti-corruption agencies with other local organizations. In addition to the laws that serve the fight against corruption, the cooperation between the agencies involved in combating corruption must be continuous, integrated and non- interference in the powers and duties. SAIs measures on the organizational level Measures should be taken regarding audit methodology and the possibility of developing such methodology in line with the fight against corruption and money laundering, noting that the development of audit methodology is an continuous process and coincides with the development and continuation of business community. We can enlist some of these measures as follows: Planning of an audit Methods and mechanism of an audit Using audit results

17. Part seven: conclusions 1.Corruption is moderate and widespread among some public sectors, slightly lower than past years and petty corruption is wide spread and caused by Medium Management and customs more vulnerable to corruption. 2.Situation of money laundering is serious on the economic, social and political level and continuously increases as technologies increased. We can numerate some of the reasons as follows: give money legitimacy Hide the illegal wealth Increase Profits 3.The most common type of corruption that needs to enact special laws is the misuse of position or authority; this was associated with a lack of organizing the financing of political parties’ process laws. The level of international cooperation is average for the aspects of the (extradition, asset recovery). 4.The refusal to show the identity is the most types of suspicious transactions are in the financial institutions, as well as penalties does not fit with the nature of the offense. 5.Factors that’s inhibit the result of the fight against money laundering are criminals are not severely punished, covering some officials on their subordinates and Lack of competent and experienced staff to handle money laundering cases which is considered medium to the number of SAI staff.

18. 6. FBSA’s law does not contain clear paragraphs showing the role and responsibility of the SAI in detecting and eliminating money laundering operation and number of qualified auditors are few compared with total number of the staff. 7. Prioritize detective role and not giving the same importance to the roles of the preventive, reporting, follow-up roles in our SAI, while these roles are almost integrated because, that’s because of legal restrictions on the SAI’s work and distribution of tasks with the rest of the anti- corruption agencies. 8. Cooperation on all international, regional and local levels should be established to eliminate the phenomena of corruption and money laundering, in other word everyone should realize that the impact of this phenomenon is beyond the limits of any State. 9. Provide legal and regulatory support for SAIs in the areas of investigation into suspicions of corruption, which provides integrated picture of those operations until it’s presented to the judicial authorities.

19. Part eight: recommendations 1.Undermine the phenomenon of corruption through the development of internal financial control systems of government institutions, which prevents middle administrations and staff from conducting suspicious acts as well as a focus on the most vulnerable sectors to this phenomenon, and prioritize the fight against corruption and money laundering. 2.enacting laws that’s restrain the abuse of position, emplace of deterrent penalties, international cooperation in the in the field of turning over perpetrators and assets recovery resulting from the corruption or money laundering through the development of international protocols states on this matter explicitly. 3.Adoption of transparency principle in the identification of bank’s customers in order to verify any suspicions of money laundering. 4.Develop severe punishments fit the offense committed perpetrators of corruption or money laundering in order to make them examples to others not to do any suspicious acts.

20. 5. Involve auditors in training courses related to the field of corruption and money laundering for the purpose of providing qualified cadres to combat these phenomena. 6. Strengthen FBSA with laws and powers to perform his roles effectively (preventive, reporting and follow-up). 7. Unify the efforts and developing of protocols among all states for the purpose of cooperation to eliminate these negative phenomena. 8. Give broader investigative powers to FBSA for the purpose of complete audit function and to use evidence discovered from audits as inputs to the investigation until the image is completed and transferred to the judicial authorities. 9. Drafting a standard in the field of anti-corruption and money laundering that would be a guide to SAIs in their work and give this standard acceptance in the areas of audit and investigation.