The prime minister of Iraq Nuri al-Malaki has ordered an investigation into the Trade Bank of Iraq (TBI) for a number of financial discrepancies.

The bank’s president and chairman Hussein al-Uzri has fled the country under allegations of corruption, with sources claiming he has taken refuge in Lebanon.

French news agency AFP quoted the Iraqi cabinet secretary general Ali al-Alak as saying that the bank had distributed loans without properly arranging guarantees and has improperly insured credit facilities.

The Iraqi cabinet could not be immediately reached.

However, the allegations are being strongly denied by those close to al-Uzri and TBI.

Al-Uzri’s press team has released a statement which reads: “It is Mr al-Uzri’s belief that these allegations have been fabricated for no other reason than to further the political and financial ambitions of others. He intends to defend his reputation.”

I am convinced of Mr al-Uzri’s innocence. This is totally politically motivated.”

Sir Claude Hankes, advisor to the board of TBI, agrees to GTR: “I am convinced of Mr al-Uzri’s innocence. This is totally politically motivated.”

A committee has been put in place to investigate the allegations, but Sir Hankes claims that “I believe that none of them are qualified to conduct such an investigation.”

Al-Uzri has called for the Iraq government to appoint “a leading, international independent auditor to examine the allegations”, a process which al-Uzri claims he will willingly cooperate with.

Commenting on the allegations himself, al-Uzri says: “My immediate concern is with the well-being and reputation of TBI and its hard working and loyal employees. These allegations only insult them and will cause harm to the bank and the reputation of Iraq and its financial sector.”

International concerns

As al-Uzri implies, the news will come as a major setback for Iraq in the eyes of the international banking community.

At a May conference in London attended by GTR, al-Uzri and other representatives of TBI fielded questions from bankers and corporates about doing business with Iraq.

Delegates raised concerns about government interference in banking and business.

“The most important thing is; TBI must regain its independence if foreign correspondent banks are to feel comfortable doing business with it. Now, having removed [al-Uzri], it has become an extension of the prime minister’s office,” Sir Hankes says.

Al-Uzri has called for the Iraq government to appoint “a leading, international independent auditor to examine the allegations.”

Under al-Uzri’s leadership, the bank reported a significant profit increase in 2010 of 18% to US$361mn year-on-year.

About two weeks before the allegations were brought against TBI, al-Uzri was upbeat when he told GTR at the May conference in London: “We have almost 130 banks which we work with internationally and our credit lines are expanding. This is all going quite smoothly and our credibility and reputation is strong.”

“The bank is a beacon of success,” Sir Hankes adds.

To read al-Uzri’s full statement, click here.