LONDON, 22 February 2021 – Libya may be losing millions of dollars a year through fraudulent use of its Letters of Credit system, the London-based NGO Global Witness said Saturday.
Global Witness used financial disclosures published on Facebook by the Central Bank of Libya to create a searchable database of nearly $2.5 billion worth of Letters of Credit issued over 13 weeks between April and July 2020.
“Our investigation and ground-breaking database sheds new light on the flow of funds… revealing the scale of the fraud and following the money trail from Libya to London and beyond,” said Colin Tinto, Senior Consultant Adviser at Global Witness.
“It is clear that Libya’s letters of credit system has been abused on a huge scale, and it is the Libyan public who are picking up the tab,” Tinto added.
The NGO found that money from the Letters of Credit was exiting Libya far faster than the relevant goods had come in, likely pointing to financial crimes, at significant costs to Libyan public finances.
Weaknesses in anti-money laundering rules leave the United Kingdom’s banking system wide open to this and other financial crimes, the report by Global Witness pointed out.
Issued by the Tripoli Central Bank of Libya, they are the only official pipeline of foreign currency for Libyan businesses and public authorities to buy food, medicine, equipment and services from overseas.
Global Witness found that the fraudulent deals pass through correspondent banks in London, abusing Letters of Credit used to channel Libya’s oil dollars to fund the country’s imports.
The London-based NGO said the system has been widely abused since the 2011 revolution by powerful interests in Libya, including armed groups, political actors and well-connected business magnets.
The Global Witness report explores how a $110 million in Letters of Credit for power generators was diverted to an unrelated company in the United Arab Emirates via a tweak in the contractor name.
The money had begun to be paid out through a Libyan-owned bank in London before the Letter of Credit was later stopped “on suspicion of corruption”.
“We are publishing our open source database in the hope that Libyan law enforcement, journalists and citizens can use it to track where public money is going so that there is greater accountability in the Letters of Credit system,” Tinto said.