Global Witness says Libya loses millions via fraudulent L/Cs, central bank defends position

A new report published by Global Witness (GW) claims to show that Libya continues to lose millions of dollars a year through the fraudulent use of its letters of credit (LC) system run by the Central Bank of Libya (CBL).

In response, the CBL has issued a statement saying it recognises that abuses of its L/C system is a priority, but claims that the information it willingly gave to GW has been “ignored and not reflected in the report’’.

Continuing abuse

A vital cog in satisfying Libya’s import reliance, the country’s L/C system has been plagued by abuse which GW says it has new evidence suggests is continuing.

The report by the non-profit focused on natural resource-related conflict, corruption and associated environmental and human rights abuses also focuses on the many L/C deals that pass through correspondent banks in the heart of the City of London, where GW says weaknesses in anti-money laundering rules leave the UK’s banking system wide open to financial crime.

CBL response

The report prompted a big response on Libyan social media and drew this response from CBL:

‘‘The Global Witness report emphasises the importance of eliminating abuses within the L/C system, a challenge the CBL has made a top priority. The report notes that this is not a problem confined to Libya and is common in other countries.

However, the report also contains numerous factual errors and draws misleading conclusions. In the spirit of cooperation, the CBL provided Global Witness with accurate and objective information which has been ignored and not reflected in the report.”

Searchable L/C database

A searchable database of nearly US$2.5 billion of private sector L/Cs approved between April and July 2020 has been created by GW.

It says that by comparing this with trade data from previous years, Libyan public money is flowing out faster than the relevant goods have historically come in.

The most plausible explanation is ongoing abuse of the system, on a large scale and at significant cost to Libyan public funds GW concludes.

GW’s report, Discredited, and its searchable database of US$2.5 billion of L/Cs can be downloaded from this page.

Categories: Trade Based Financial crimes News

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