Iraq: Update On The New Iraqi Commission For Public Integrity And Audit Board Laws (Finance)

Introduction

The Iraqi Parliament recently passed into law regulations (i) governing the Commission for Public Integrity (the CPI), titled the CPI Law; and (ii) the Audit Board titled the Audit Board Law. Previously, the operations of the CPI were governed by the Coalition Provisional Authority's Order No. 55, and the operations of the Audit Board was governed by law No. 6 (1990), both of which have now been explicitly repealed by the new legislation. The CPI Law and the Audit Board Law represent an overhaul of the legal framework relating to the agencies with responsibility for enforcing the law on bribery and corruption in Iraq¹. The new laws clearly define the scope of the CPI and the Audit Board's respective authority, and indirectly touch on the scope of authority given to the Inspector Generals in effect limiting the investigative powers of the Inspector Generals, in favor of the CPI in instances of inter-agency overlap.

Iraqi law considers bribery, embezzlement, abuse of public office, unjust gain, and the financing of any such activities, as forms of corruption. All such acts are criminal offences with specific penalties imposed under the Iraqi Penal Code (1969), the Unlawful Gain Law (1958), and the Anti-Money Laundering Law (2004).

Contrary to common belief, existing Iraqi laws on bribery and corruption are extensive. However, in practice, enforcement of such laws has been inconsistent and piecemeal. In addition, Iraqi agencies empowered to fight corruption have historically shown limited initiative in promulgating policy directives that address the dealings and behavior of public officials. The CPI Law and the Audit Board Law aim, in part, to address this current state of inertia by creating a legislative framework with a clear delineation of authority and more robust enforcement tools.

Commission for Public Integrity

The CPI Law includes several significant changes in the scope of the CPI authority:

• The CPI is declared an independent authority that reports directly to Parliament.
• The Head of the CPI, who was previously appointed and dismissed by the Prime Minister, is now considered to hold the rank of a minister, and is appointed by Parliament for a non-renewable five year term and can only be removed from office by a decision of Parliament. The new Head of the CPI will be selected in due course from a three-person pool to be prepared by Parliament's Legal and Integrity Commission. The same applies for the two deputy positions created under the CPI Law.
• The CPI is considered a de facto party to any corruption investigation with standing to appeal. There is no longer a need for the CPI to establish its standing either as a party to an investigation or for filing an appeal with respect to a court decision relating to a corruption case.
• The CPI is granted super-jurisdiction vis-à-vis other civil and military agencies with respect to investigations of alleged corruption.
• The CPI is given subpoena power over all governmental bodies and agencies with respect to documents, evidence and information of relevance to a corruption investigation.
• The CPI is given exclusive investigative powers over any corruption cases initiated by the Audit Board or Inspector Generals, thereby ending the jurisdictional disputes that plagued many previous investigations.
• The CPI has the authority and the mandate to regulate, receive, maintain and examine financial disclosures by the following public officials to ascertain whether unjust enrichment has occurred while such persons are or were in office:

The Audit Board

Under the Audit Board Law, the Audit Board is empowered to audit public funds and the public or private entities that use or receive such funds. Like the CPI, the Audit Board is now an independent body that reports directly to Parliament. The Head of the Audit Board is now considered to hold the rank of a minister, and appointed by Parliament for a non-renewable five year term and can only be removed from office by Parliament. The new Head of the Audit Board will be selected from a three person pool to be prepared by the Parliament's Legal and Integrity Commission. The Audit Board Law delegates to the Head of the Audit Board the powers of the Minister of Finance on all matters of relevance to the Audit Board's mandate, thus significantly adding to the Audit Board's autonomy and independence. The Audit Board is given subpoena power over any entity or project that uses public funds, even if such projects are considered by the relevant public authority to be confidential or classified. Any refusal to provide required documentation to the Audit Board is subject to the review of the Council of Ministers. The Audit Board has been given extensive discretion to employ the services of private sector audit companies, thereby increasing the Audit Board's efficiency and ability to investigate numerous cases on an on-going basis.

Summary

Implementation of the CPI Law and the Audit Board Law will greatly enhance the existing legal framework relating to the investigation and prosecution of corrupt practices within the Iraqi government. International companies doing business in Iraq who are required to comply with the U.S. Foreign Corrupt Practices Act (the FCPA) and the newly enacted U.K. Bribery Act (the Bribery Act) should also be aware of these developments in Iraqi anti-corruption practice. For International companies the CPI Law and Audit Board Law present an added layer of transparency and enforcement as corrupt acts are increasingly likely to be revealed and investigated by the Iraqi government, thus likely triggering further investigation by the U.S. Treasury Department and/or the U.K. Serious Fraud Office.

Foreign companies doing business in Iraq can no longer assume investigation of corrupt practices by their employees or local business associates will only be undertaken by relevant agencies in the United States and the United Kingdom. As a consequence of the implementation of the new CPI Law and Audit Board Law, we would suggest that FCPA and the Bribery Act compliance efforts in Iraq should also include educating employees, business associates and subcontractors of the heightened level of review of the practices of Iraqi governmental agencies and entities utilizing Iraqi public funds.

Footnote

1. The other significant agencies include the Inspector Generals within each governmental ministry and the courts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.