Violence in Iraq Is Creating Chaos in Bank System
By JAMES GLANZ
Published: July 29, 2006
BAGHDAD, Iraq, July 28 — The two armored vans left a branch of the Warka
Bank on Thursday around noon, loaded with 1.191 billion dinars, or nearly
$800,000. Almost immediately, on a busy street near the Baghdad zoo, the
drivers spotted an oncoming Iraqi Army convoy, led by a shiny new Humvee.
They followed standard procedure and pulled over.
But the convoy stopped, and an officer politely ordered the surprised
drivers and guards to lay down their guns while his men searched the vans
Within minutes all eight drivers and guards had been handcuffed and locked
in the back of one of the vans on a suffocating 120-degree day, the cash had
been stolen by the men in the convoy — whoever they were — and the Iraqi
banking system marked another day of its slow slide into oblivion.
The only thing atypical about Thursday’s robbery, which was described by
bank and Interior Ministry officials, is that most private banks try to
avoid using armored vans, because they draw too much attention, and instead
toss sacks of cash into ordinary cars for furtive dashes through the streets
However the cash goes out, it risks being lost in the wash of robbery,
kidnapping and intrigue that now plagues the system.
Praised by the United States as a success story as recently as a few months
ago, that system has quickly become a wild landscape of clandestine cash
runs, huge hauls by robbers dressed as police officers and soldiers,
kidnappings of bank executives with ransoms as high as $6 million, American
allegations of tie-ins with insurgent financiers, and legitimate customers
turned away when they go to pick up their savings and flee the country.
“It is a crisis,” said Wisam K. Jamil, managing director of Iraq’s oldest
private bank, the Bank of Baghdad, which lost $1.5 million in a literal case
of highway robbery by men wearing police uniforms last December.
Because of that robbery, the bank lost much of its insurance coverage. Even
more galling for Mr. Jamil, the insurance policy had a standard disclaimer
saying that losses due to acts of war or terrorism were not covered, and as
the Warka holdup on Thursday illustrated, no one can say if a theft in Iraq
is committed by insurgents, bandits or genuine members of the security
forces. So the insurance company has not paid Mr. Jamil’s claim.
The difficulty in moving cash has pushed Iraqi banks into business practices
seen in few other places.
On a recent day in the basement of the Iraqi Middle East Investment Bank,
Rahim al-Abadie, a bent, gnomelike man who has worked in banking for 54
years, shuffled into the cage next to his little desk and checked 100-pound
sacks of cash to be loaded in an unmarked car and sped to its destination,
which he declined to disclose. Just one of the bigger sacks held 1 billion
dinars (about $650,000) in bank notes, Mr. Abadie explained, chuckling
Hussein al-Uzri, president and chairman of the Trade Bank of Iraq, a
state-owned bank, said the risks of such deliveries had to be measured in
relative terms. “Anywhere else in the world, throwing a few million dollars
in the back of a Mazda and driving from the Central Bank is crazy,” he said.
“But many people will say that living in Baghdad is crazy.”
Until the early 1990’s, when Saddam Hussein allowed private banks to open
under tight restrictions, all of the country’s finances were handled by
The popularity of the private banks soared after the 2003 invasion, as
depositors fled the cumbersome and often distrusted state system in “a kind
of exodus,” said Nafie Alais Aboo, managing director of the privately owned
North Bank. But both have suffered major robberies, cash shortfalls and
other problems, banking and government officials say.
Such problems have helped ignite an old-fashioned run on some banks, and
several have had to turn depositors away, at least temporarily, telling them
to come back another day for their money.
“People are withdrawing or transferring enormous amounts of money from the
bank,” said Ahmed Younis Zeki, the assistant manager of the Iraqi Private
Bank, which he said lost 1 billion dinars in a brazen holdup at what
appeared to be a police checkpoint in central Baghdad on April 25.
Some bank executives say their problems have been compounded as well-to-do
Iraqis and the companies they control flee the mayhem engulfing so much of
the country. That flight has accelerated since sectarian tensions were
heightened by the February bombing of a golden-domed mosque in Samarra, one
of Shiite Islam’s holiest shrines.
“If we count from the Samarra bombing, it’s been worse by the day,” said
Mohammed F. al-Alossi, managing director of the Iraqi Middle East Investment
Bank, adding that 3 billion of roughly 50 billion dinars in deposits at his
bank had been withdrawn in the last two months alone.
The banks’ troubles have had a ripple effect. Iraqi companies, already
struggling in a devastated economy, cannot get enough cash to meet their
payrolls, said Hashim T. Atrikchi, acting manager of the Iraqi Federation of
Industries and chairman of the Arab Federation of Plastic Manufacturers.
“Hard currency is often not available in the banks,” he said. “It may take
two, three or even five days.”
The run of hard luck for private banks stretches at least back to May 2005,
when American and Iraqi troops raided the home of Saad al-Bunnia, chairman
of the Iraqi Bank Association and chairman of the bank that was robbed
Thursday. During the raid, the Americans seized $6 million in cash,
apparently on suspicion that the money was being used to finance the
The bank certified that it had asked Mr. Bunnia to keep the money in his
safe as a hedge against bank robberies, said Sheik Hathal Yonis Y. Aga, vice
chairman of the bank. But more than a year later, the money remains frozen,
“The problem is, these funds belong to our clients,” Mr. Aga said. “This has
affected some of our business transactions.”
A few months later, robbers stole $600,000 in cash being shuttled between
Warka’s main bank and one of its branches, Mr. Aga said. And in December,
men in police uniforms stopped and robbed a car carrying $1.5 million, or
roughly 2.3 billion dinars, belonging to the Bank of Baghdad on the highway
to the southern city of Hilla.
Remarkably at that stage of deteriorating security in Iraq, much of the
shipment was covered by Al Ameen Insurance Company, said its managing
director, Munem al-Khafaji. Even more surprisingly, the policy was
underwritten by European, Saudi and Kuwaiti reinsurance firms, Mr. Khafaji
But the foreign involvement came at a price. Like similar policies the world
over, this one covered burglary and damage but not acts of war or terrorism.
Mr. Khafaji said any payment was in limbo while an investigation rattled
back and forth between law enforcement agencies and the notoriously slow
“They toss this ball to each other,” Mr. Khafaji said, unable to suppress a
slight smile. “Very long time,” he added.
After the Bank of Baghdad theft, the foreign reinsurers refused to cover
robberies in Iraq anymore, Mr. Khafaji said. The bank’s managing director,
Mr. Jamil, said the impact on his business was devastating: while last year
he moved an average of 100 billion dinars a month around the city, by this
spring the number had dropped to 15 billion dinars because the risk of
robberies was so high.
That means more and more people who come looking for their money must be
asked to wait, Mr. Jamil said. “We use diplomacy to deal with the
situation,” he said quietly during an interview in his office.
Bank officials estimate that there has been an average of about one major
robbery a month this year. Some banks seem to be particularly unlucky: only
a week before Thursday’s holdup, robbers tried to steal a shipment of
$500,000 from the Warka Bank, though in that case the police foiled the
attempt, bank officials said.
But robbery is not the only type of crime the banks must cope with. In
February, gunmen dressed in Iraqi Army uniforms kidnapped Ghalib Kubba, the
chairman of the Basra International Bank, and his son Hassan, the bank’s
The ransom: $6 million, a colossal amount here that was undoubtedly chosen
because the kidnappers knew the Kubbas were bankers. The family, not the
bank, paid the ransom, Hassan Kubba said, but afterward his father and the
bank’s entire board of directors fled to Syria, where they now run the
business in absentia.
Despite all those problems, no one knows of a bank that has given up and
closed for good, and there are still a hardy few who express optimism that
this bedrock institution of a functioning democracy will survive and one day
flourish. Bankers, after all, rise and fall on their ability to project
confidence under the direst of conditions.
But it is not easy. As Mr. Abadie oversees the white sacks of cash shuttling
in and out of the basement of the Middle East Investment Bank, the managing
director, Mr. Alossi, glances again and again toward the right corner of his
desk, where a television cycles through images gathered by the bank’s
Nothing but the regular closing time would make his bank shut its doors, Mr.
“If the worst happens and everyone comes to withdraw his money,” he said,
“we are ready to pay, to the last depositor.”