Chip Poncy and his ex-government colleagues in K2 Integrity’s Washington office have been meeting Iraqi officials to discuss changes to the financial sector. Now they have been tasked with cleaning up Rafidain Bank, which has been at the center
of major corruption inquiries over the last year. A high profile assignment won by executives at K2 Integrity to reform Iraq’sscandal-hit Rafidain Bank will be undertaken by a team of former US Treasury Department officials who have been meeting Iraqi financial officials since the summer, Intelligence Online has learnt.
Chip Poncy, a former director at the Department’s office of Terrorist Financing and Financial Crimes (TFFC), now a partner in K2’s Washington office, met officials from the Iraqi Central Bank during a training event in Dubai on 30 May. A second meeting occured in late August in New York, attended by Ali Mohsen Al-Alaq, the current governor of the Iraqi Central Bank Poncy will be leading on the assignment with Sarah Runge, who was his assistant at the TFFC office between 2012 and 2013. Two other former Department of Treasury executives, including Poncy’s former Harvard college friend Juan Zarate and Danny Glaser, who heads K2’s Washington DC office, will also advise on the assignment, Intelligence Online understands.
An official Iraqi government statement said the company will be working to “enhance banking operations” at Rafidain in order to expand its cross-border correspondent banking relationships. K2 agreed an earlier contract to advise the Central Bank on US dollar transactions in early 2024, according to local reports citing official documents.
In-person input
In a statement to Intelligence Online, a spokesperson for K2 said its aim was to help Rafidain Bank “meet market expectations”; the company must demonstrate to potential US correspondent banking partners that its anti-laundering and anti-terrorist financing processes meet US standards.
The team will be working with Rafidain Bank’s existing Financial Crime Risk Management practice in Baghdad. According to a source close to the company, previous similar assignments have seen K2 employees flown to spend extended periods with banking compliance teams, observing existing processes before intervening with new control systems.
A Iraqi government press release on the contract said K2 would be working with three additional experts in the fields of “compliance, anti-money laundering and risk management”. They have yet to be identified but central bank officials had meetings at the New York offices of KPMG, Ernst & Young.
A Iraqi government press release on the contract said K2 would be working with three additional experts in the fields of “compliance, anti-money laundering and risk management”. They have yet to be identified but central bank officials had meetings at the New York offices of KPMG, Ernst & Young and Oliver Wyman during the same New York visit in August, according to local media reports.
US government pressure:
The Rafidain contract, ratified during an Iraqi cabinet meeting on 8 October, comes two weeks after current US Treasury Department Deputy Secretary Wally Adeyemo met Iraqi Prime Minister Mohammed Shia Al-Sudani on the sidelines of the United Nations General Assembly in New York, for an update on Iraq’s financial reform agenda.
The US department has been pressuring Al-Sudani to reform Rafidain, among other commercial banks, since August 2022, when details of an enormous corruption scandal emerged following the resignation of then finance minister Ali Allawi. In what has become known locally as the “theft of the century”, some US $2.5bn in funds were withdrawn, between September 2021 and August 2022, from the Iraqi General Commission of Taxes.
Cheques paid to five overseas companies were cashed at a Rafidain bank branch in Baghdad before being carried onto private airplanes. Trials for two of the accused have been slated for 21 November, according to local mediareports.
