Audit Bureau and Public Prosecutor suspend Commerce and Development bank cheque clearance on suspicion of fraud

By Sami Zaptia.

The Audit Bureau has asked the CBL to suspend Commerce and Development bank cheque clearance while investigating possible FX fraud (Photo: C & D bank).

The Audit Bureau has asked the CBL to suspend Commerce and Development bank cheque clearance while investigating possible FX fraud (Photo: C & D bank).

London, 21 July 2016:

The Tripoli-based Audit Bureau and the Public Prosecutor’s Office have ‘‘temporarily’’ suspended the Commerce and Development bank’s cheque clearance activity for suspicion of fraud.

Both the Audit Bureau and Public Prosecutor’s Office have issued formal announcements.

The Audit Bureau, within its oversight powers, issued instructions to the Central Bank of Libya, in its role as the ultimate Libyan banking body and the operator of the cheque clearing system, to freeze the cheque clearance of Commerce and Development.

The Audit Bureau and Public Prosecutor’s Office said that there is suspicion that there is a link between the crash in the black market exchange rate of the Libyan dinar and the very high volume of cheques cleared by the Commerce and Development bank at the time of the dinar’s crash.

As a result, the Audit Bureau has meanwhile advised against dealing in Commerce and Development cheques until it concludes its investigation.

The Public Prosecutor’s Office also confirmed that it was investigating the matter, adding that the ‘‘intelligence agency was asked to investigate’’ the allegations.

Libya Herald today contacted some foreign exchange dealers in Tripoli but none could or would admit to any linkage between the sudden crash in the dinar’s black market exchange rate and Commerce and Development bank.

All they would say is that Commerce and Development offered ‘‘the best cheque clearance system in Libya by a very wide margin’’ when compared to all the other Libyan banks – and especially compared to state-owned banks. Commerce and Development has become so efficient and reliable at cheque clearance that any of its cheques are ‘‘treated as if they were crossed/guaranteed’’ cheques, one foreign exchange dealer told me.

Another dealer said that it was simply the only means that the Libyan authorities could exert pressure on the black market foreign exchange dealers after the dinar crashed to over five dinars. They had worked out that most black market dealers used the Commerce and Development bank, simply because it was the fastest at clearing cheques, and therefore targeted them to halt the crash of the dinar’s exchange rate.

One other possible cause is the reactivation of foreign currency visa cards by Jumhouria bank, Libya’s largest bank, causing a run on dollars at the official 1.39 exchange rate.

Whatever the real causes of the sudden collapse of the dinar exchange rate, there is pressure on the Faiez Serraj-led Government of National Accord to do something.

It will be recalled that the black market Libyan dinar exchange rate against the dollar crashed to an all-time low two days ago. It broke the five-dinar ceiling against the dollar peaking at LD 5.30 against cash payments and LD 5.80 against Commerce and Development cheques. Even during the worst years of the Lockerbie embargo and sanctions under Qaddafi it had never reached the LD 5 mark against the US dollar.

Tripoli black market foreign exchange dealers put the crash to a loss of confidence in the politics of the country after they assessed that nothing positive had come out of the latest UN-brokered Tunis round of talks between all the contending Libyan parties.

Yesterday, the main black market foreign exchange market in the Medina’s Old Souk and the secondary market in Dahra were forcibly shut down by the RADA force..

The authorities have never commented in the past about the frequent closures of the market by RADA. They neither confirm nor deny whether RADA acts autonomously or on instructions from the government of the day. The dinar gained value today, quoted at LD 4.95/dollar by one dealer, but there was little activity in the market, he added.

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