Sana Sbouai, Khadija Sharife, Khalil Elhasse
Libya’s Central Bank in Tripoli failed to account for the delivery of US$4.8 billion worth of local dinar banknotes from a British printing company, according to a leaked financial review, raising questions about where the money went.
Meanwhile, a central bank controlled by the rival government in eastern Libya contracted a Russian state-owned company to print its own parallel currency at an exorbitant cost, leaving that administration deeply in debt because the money was not backed by gold or any other collateral.
These are findings in a pair of “confidential” reports reviewing activities of central banks on opposing sides of Libya’s conflict, which were produced by the global accounting firm Deloitte and obtained by OCCRP.
The U.N. commissioned the reports in 2018 at the behest of Fayez Al Sarraj, who was Libyan prime minister at the time. The leaked financial reviews state that Sarraj, who had come to office in 2015 under a United Nations-supported peace process, viewed them “as a means to restore integrity, transparency and confidence in the Libyan financial system.”
Sarraj also intended them “to create the necessary conditions for the unification of Libyan financial institutions,” the reports say.
Libya’s civil war has spawned competing administrations who split public institutions, including central banks, with each claiming legitimacy. The reviews, which cover the period from 2014 to 2020, expose possible violations of regulations by central banks on both sides of the conflict.
In 2012, the U.K.-based company De La Rue won a tender conducted by the Central Bank in Tripoli to print its currency, according to one of the two financial reviews.
That contract was amended twice in the following years, once without authorization from the bank’s board of directors, the review said. The amendments required De La Rue to increase its print run of Libyan dinars, adding up to the equivalent of hundreds of millions worth in U.S. dollars.
Documents provided by the Tripoli Central Bank showed a major discrepancy in the amount the institution should have received according to its contracts with De La Rue, and the amount accounted for in receipts it issued.
Deloitte found that 6.5 billion dinars (worth about $4.8 billion) were unaccounted for in the paperwork.
Patrick Bond, a political economist at the University of Johannesburg, said the financial review may indicate “Deloitte’s discovery of huge losses” of currency. He added that the finding –– if proven to be true –– could show “dubious practices” on the part of De La Rue, which has currency printing contracts with more than a dozen central banks in Africa.
De La Rue’s spokesperson, Stuart Donnelly of the public relations firm Brunswick Group, told OCCRP: “The response on behalf of the company is no comment.”
Andrew Feinstein, executive director of the London-based anti-corruption group Shadow World Investigations, said the report raises an important question: “Where did the printed cash go?”
Neither the Finance Ministry nor Central Bank in Tripoli responded to emailed requests for comment, and the phone numbers on their websites were out of service. The email address listed for the prime minister’s media contact did not work.
Deloitte noted that its findings were limited by the circumstances around its research.
“During the course of our Financial Review and based on the documentation that we were provided with by the (central banks) we were not in a position to make any conclusion or determination as to whether any fraud or misappropriation of assets may have taken place,” the report said.
The central bank controlled by the rival government in eastern Libya did not fare any better in its review.
The region is run by Khalifa Haftar, who commands a powerful militia called the Libyan National Army, in opposition to the government in Tripoli. Haftar’s administration also controls the former branch of Libya’s Central Bank in the eastern city of Bayda.
Between 2016 and 2020, the Bayda-based Central Bank contracted the Russian state-owned Joint Stock Company Goznak to print its own version of the Libyan dinar. Goznak billed over $121 million for the printing job and shipping expenses.
The printing contract appears to have netted a huge profit for Goznak, which charged the Bayda Central Bank about $6 per note, according to OCCRP calculations based on information in the financial review. Bank notes usually cost governments between 4 and 13 cents each.
Goznak, which was sanctioned by the U.K. and European Union in 2022, did not respond to an emailed request for comment in time for publication. A person who answered a phone call said a response could take weeks.
A further problem was that Haftar’s administration did not have access to collateral, such as gold reserves, which are controlled by the Tripoli Central Bank. Therefore, the currency issued by the Bayda Central Bank was not backed by any tangible assets, and was in violation of Libya’s Banking Act.
The Bayda Central Bank “had no means by which it could build up its currency backing in line with legal requirements,” Deloitte found.
Eastern Libya used 97 percent of the funds it printed to cover salaries for members of its government and armed forces in 2019 and the first half of 2020, the report said. During the same period, the unbacked currency in circulation accounted for 70 percent of eastern Libya’s “off balance sheet” debt, meaning debt that was not disclosed to authorities.
“If these two half-central banks can’t restrain themselves, and they decided to pay outsiders to print bushels of currency that have no ground of value, then they will end up like Argentina or any number of other worthless-currency countries,” said James S. Henry, a lecturer at Yale University and former chief economist for the global management consulting firm McKinsey & Company.
The former Bayda Central Bank governor –– who was in charge during the period of the financial reviews –– declined to comment, and there were no other contacts available for authorities in eastern Libya.
The Deloitte reports also found that due to oil blockades, billions of dollars in financial instruments such as letters of credit and treasury bonds, were used to float the regimes and even the currencies. Many of these lacked beneficiary names and bank account information.
Anas El Gomati, founder of the Sadeq Institute, a Libya-focused think tank, told OCCRP that the reports should have been made public.
“To keep vital financial information that implicates corrupt armed groups in the West and East –– but most importantly political factions vying for control and legitimacy –– hidden from the very citizens who have endured years of corruption and conflict is a crime,” he said.