‌MINISTRY OF EDUCATION AND TRAINING

PHENIKAA UNIVERSITY

MID-TERM ASSIGNMENT

INTERNATIONAL TRADE FRAUD

Course Ti International Payment

Lecturer: Đào Bích Ngọc

Class: N01

Group: 1

Credits: 3

Hanoi, June 2024

I. Introduction.................................................................................................................... 1
II. Literature Review......................................................................................................... 1
1. International Trade Fraud: Definition and Impacts.................................................... 1
2. Common types of International Trade Fraud[3].........................................................2
2.1. Non-payment and Non-delivery of Goods.........................................................2
2.2. Shell Companies and Forged Documents.......................................................... 2
2.3. Impersonation of Bank Representatives to Obtain Original Documents...........2
3. Existing Regulatory Organizations and Frameworks.................................................3
3.1. WTO Establishing Trade Rules......................................................................... 3
3.2. ICC Clarifying Responsibilities.........................................................................3
3.3. WCO Preventing Misdeclarations..................................................................... 3
4. Prevention and Mitigating Methods of International Trade Fraud.............................3
4.1. Due Diligence.................................................................................................... 3
4.2. Compliance and Training...................................................................................4
4.3. Culture of Transparency.....................................................................................4
III. Case study about UN Oil-for-Food Programme Scandal........................................ 4
1. Background................................................................................................................ 4
2. Case Description.........................................................................................................5
3. International Trade Fraud Behaviors..........................................................................5
3.1. Diversion of Goods within Iraqi Ministries....................................................... 5
3.2. Resale of Programme Goods Outside Iraq........................................................ 7
3.3. Substandard Goods............................................................................................ 7
3.4. Above-market Pricing of Goods........................................................................ 9
4. Investigation and Reinforcements............................................................................ 10
4.1. Government Accountability Office (GAO) Investigation............................... 10
4.2. Independent Inquiry Committee Investigation................................................ 11
4.3. Iraqi Governing Council Investigation............................................................ 12
5. Lessons..................................................................................................................... 13
IV. Conclusion.................................................................................................................. 13
CITATIONS......................................................................................................................14
I. Introduction
In the context of globalization for economic and social development, each country as a
player on the global arena faces many opportunities as well as challenges and difficulties.
On deciding to join the global economy, both developed and developing countries may
choose to facilitate foreign suppliers beside domestic ones by different methods like
abolishing tariff barriers and national protective measures as well as simplifying and
streamlining administrative procedures while ensuring accuracy.
However, due to factors like loopholes in the economic management legal system,
outdated physical infrastructure as well as underqualified workforces of officials, public
servants, and employees, opportunities have been created for commercial fraud activities
to flourish and increasingly expand in scale with more sophisticated and complex
methods.
Despite continuous warnings from domestic agencies, foreign affairs agencies, and trade
offices abroad, the number of global enterprises in general and Vietnamese businesses in
particular falling victim to fraud or becoming embroiled in disputes has been on the rise,
causing direct financial losses to businesses and negatively impacting business
confidence and economic relations between countries and their partners. For instance,
following the incident involving 100 containers of cashews, Vietnamese businesses have
become hesitant to engage in business with Italian partners or negotiate large contracts.[1]
For this reason, our group has decided to look at "International Trade Fraud" to delve into
basics of the topic and look into ways to combat the issue as well as famous case studies.
The structure of our assignment is organized as follows. In the first part (Introduction),
we give a brief overview of international trade fraud, followed by the definition, impacts,
categorization as well as ways to avoid and alleviate it in the second part (Literature
review). Then, we will investigate a relevant case study, and eventually summarize our
key findings in the final part (Conclusion).

II. Literature Review

1. International Trade Fraud: Definition and Impacts
In its widest sense, fraud is a term that has never been consistently and exhaustively been
defined. According to Law.com, fraud is intentional deception to secure unfair or
unlawful gain, or to deprive a victim of a legal right.[2] Therefore, international trade
fraud refers to the act of deceiving or manipulating someone for personal gain during a
trade transaction, therefore targets the exchange of goods and services, often between

1
businesses in different countries. While it is often mistaken for international commercial
fraud, the latter actually involves a wider range of business activities rather than solely
international trade, for example accounting fraud, insurance fraud, etc.
As mentioned above, international trade fraud may imply both direct and indirect
financial losses to businesses, therefore to their countries as a whole. Additionally, the
issue leads to a decrease in the confidence of victim businesses and credibility between
related parties.
2. Common types of International Trade Fraud[3]
2.1. Non-payment and Non-delivery of Goods
Businesses may be tricked into paying for goods that never arrive, a blatant form of
fraud. Alternatively, contractual disputes can arise when the actual execution of a
transaction deviates from the agreed-upon terms, leading to disagreements over payment
or delivery. Force majeure claims, where unforeseen events are used by trading partners
to avoid contractual obligations, can also be a tactic employed by fraudulent actors.
Examples of this type of fraud include Vietnamese exporters have faced pressure from
Algerian partners to lower agreed-upon prices or even refuse shipments upon arrival at
the port, citing reasons like falling commodity prices or finding cheaper alternatives.
2.2. Shell Companies and Forged Documents
Fraudsters create fictitious companies to masquerade as legitimate trading partners. These
shell companies are often bolstered by forged documents like invoices, bills of lading
(B/L), or other trade documents, allowing them to establish credibility and secure
contracts with unsuspecting businesses.
The ease with which limited liability companies can be formed in some countries,
including EU member states, has been exploited by fraudsters for this purpose. In
Mexico, instances of impersonation have been reported, with fraudsters posing as
representatives of brokerage firms, government officials, or financial institutions. This
manipulation is used to gain victims' trust and induce them to transfer deposits before
absconding with the funds.
2.3. Impersonation of Bank Representatives to Obtain Original Documents
Fraudsters may resort to impersonating bank officials or even create fake bank accounts
to gain access to original trade documents. Once they have these documents, they seize
the goods without ever making the agreed-upon payment.
Another tactic involves manipulating contract terms. Fraudsters may attempt to induce
their victims into agreeing to changes in contract terms or payment methods, such as

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requesting advance payment of all or part of the original bill of lading (B/L). These
modifications are designed to facilitate their fraudulent schemes.
A Vietnamese company exporting black pepper to Senegal in 2019 fell victim to this
tactic, being tricked into transferring original documents and never receiving payment
upon delivery.
3. Existing Regulatory Organizations and Frameworks
International organizations play a crucial role in combating trade fraud, safeguarding a
healthy business environment and promoting free trade. Notable organizations include the
World Trade Organization (WTO), The International Chamber of Commerce (ICC) and
The World Customs Organization's (WCO).
3.1. WTO Establishing Trade Rules
WTO sets the stage for fair trade by establishing agreements like the Customs Valuation
Agreement. This ensures countries value imported goods accurately, preventing
manipulation. Additionally, the General Agreement on Tariffs and Trade (GATT)
promotes transparency in trade practices and discourages practices that hinder it.
3.2. ICC Clarifying Responsibilities
ICC defines clear responsibilities for buyers and sellers through their Incoterms® 2020
guidelines. These guidelines clarify tasks, costs, and risks associated with international
goods delivery, minimizing potential disputes and fraudulent activities. For example,
Incoterm 2020 DDP helps prevent tax evasion by requiring sellers to cover import taxes,
leaving less room for manipulation.
3.3. WCO Preventing Misdeclarations
WCO’s Harmonized System (HS) plays a vital role in preventing fraud by providing a
standardized system for classifying goods in international trade. Each good receives a
unique HS code, making it difficult to misdeclare the nature of the product to avoid taxes
or import restrictions. This system helps prevent fraud like tax evasion and the import of
prohibited goods.
4. Prevention and Mitigating Methods of International Trade Fraud
4.1. Due Diligence
When vetting potential business partners, companies should have standardized checklists,
involving requesting and verifying business registration documents, tax compliance
certificates, audited financial statements, background check, etc. For high-risk
transactions, on-site visits to verify the physical presence and operations of potential
partners may be necessary.

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4.2. Compliance and Training
Compliance teams must stay up-to-date on the ever-changing international trade laws and
regulations. Comprehensive compliance manuals outlining procedures for various trade
scenarios, such as customs clearance and export licensing, should be readily available and
regularly consulted.
Developing a comprehensive training curriculum that covers various aspects of trade
fraud, from document verification to financial analysis, is also essential. Conducting
regular simulation exercises where staff can practice identifying and responding to
fraudulent scenarios enhances practical skills. Implementing a certification program for
trade compliance professionals within the organization can incentivize continuous
learning. Partnering with academic institutions or professional bodies to provide
advanced training and stay updated on the latest fraud prevention techniques is also
valuable.
4.3. Culture of Transparency
Blockchain-based supply chain management systems offer a valuable tool for enhancing
transparency as they can provide end-to-end visibility of goods movement, recording key
events like order placement, manufacturing completion, shipping, and customs clearance.
Integrating Internet of Things (IoT) devices, such as GPS trackers and environmental
sensors, adds a real-time layer, allowing companies to monitor the location and condition
of goods in transit. Additionally, implementing a supplier portal where all parties can
access and update relevant information in real-time fosters greater collaboration and
reduces the risk of fraud.

III. Case study about UN Oil-for-Food Programme Scandal

1. Background
The Oil-for-Food Programme (OIP) was initiated by the United Nations in 1995 under
UN Security Council Resolution 986. Its objective was to alleviate the prolonged
suffering of Iraqi civilians under comprehensive UN sanctions imposed after Iraq's
invasion of Kuwait in 1990, enabling Iraq to sell oil on the global market in exchange for
humanitarian goods such as food, medicine, and other necessities for Iraqi civilians,
while preventing the country from enhancing its military capabilities. The Iraqi
government could only purchase approved goods not under embargo, with stringent
restrictions on items potentially used for military purposes. Delays in approval processes
meant essentials like pencils and folic acid often took months to reach the Iraqi
population, many of whom relied solely on the programme's provisions.

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Managed through an escrow system overseen by BNP Paribas until 2001, revenues from
oil sales were designated for war reparations to Kuwait, coalition operations in Iraq, and
UN activities. Operational arrangements began in 1996, and the first food shipments
arrived in 1997.
Initially proposed during the administration of the U.S. President Bill Clinton in response
to concerns about the impact of sanctions on ordinary Iraqis following the Gulf War, the
programme ran until its effective termination in 2003 with the U.S. invasion of Iraq. It
was formally concluded in 2010. Despite its humanitarian goals, the programme was
marred by significant corruption and misuse of funds, including actions of international
trade fraud.
2. Case Description
One of the largest scandals in the history of international aid. The program, overseen by
the United Nations Security Council, quickly became plagued by allegations of
widespread corruption and trade fraud. The 1,000-page report by Paul Volcker, former
head of the US Federal Reserve, found "serious instances of illicit, unethical and corrupt
behavior within the United Nations".
The trade fraud within the Oil-for-Food Programme involved a complex web of illicit
activities. Key players included corrupt officials within the Iraqi government,
international companies, and middlemen including UN officials who facilitated the
fraudulent schemes. These schemes ranged from price manipulation and kickbacks to
falsification of documents and illegal surcharges on contracts. The accusations also
appeared in the U.S. and Norway.
Until 2001, funds for the Oil-for-Food Programme were handled by BNP Paribas, a bank
where Iraqi-born Nadhmi Auchi, reportedly worth around $1 billion according to Forbes,
held a significant stake. Auchi, ranked as the 13th wealthiest individual in Britain by The
Guardian, had previously been given a 15-month suspended sentence for his involvement
in the Elf scandal. Described as “the biggest fraud inquiry in Europe since the Second
World War” by the British newspaper, “Elf became a private bank for its executives who
spent £200 million on political favors, mistresses, jewelry, fine art, villas and
apartments”. In 2003, Elf merged with TotalFina to form Total S.A., a major
multinational oil company.
3. International Trade Fraud Behaviors
3.1. Diversion of Goods within Iraqi Ministries
Resolution 986 and the Iraq-UN Memorandum of Understanding stipulated that funds
held in escrow for purchasing goods were exclusively designated for meeting the

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humanitarian needs of the Iraqi population[4]. Despite this limitation, the Iraqi government
frequently attempted to utilize the Oil-for-Food Programme to procure goods on behalf of
Iraqi entities with minimal involvement in humanitarian relief efforts.
According to Iraqi officials, certain ministries were allocated funds beyond their specified
budgets to procure goods for entities ineligible to contract under the Programme. These
entities included the Ministry of Defense, the Ministry of Military Industrialization, the
General Security Directorate, and the Presidential Diwan. In some cases, the ultimate
recipient of the goods, rather than the purchasing ministry, conducted tender processes,
negotiated directly with suppliers, and reviewed technical specifications of the
commodities being procured. Alternatively, the purchasing ministry assumed these
contracting responsibilities. Directives to divert goods to these ministries came from the
Leading Committee, the Office of Vice President Ramadan, the Presidential Diwan, and
the Presidential Office.[5]
Officials from the Ministries of Agriculture, Electricity, and Transportation and
Communication have acknowledged being tasked with purchasing goods for other
government bodies on occasion. For instance, the Ministry of Agriculture frequently
acted as a proxy for the Ministry of Defense. Officials also highlighted that Belhasa
Motors and Al-Qasit, firms based in the United Arab Emirates, were the principal
suppliers respectively to the Ministry of Defense and intelligence services. Commonly
diverted items included trucks, particularly models suited for artillery towing, tires,
batteries, forklifts, and even date palm excavators, which were used for uprooting palm
trees and transporting them to Presidential Palaces.
Ministry of Agriculture officials expressed initial concerns about being caught diverting
goods but soon realized that the United Nations was unaware of these actions and thus
unlikely to take corrective measures. As highlighted in the Committee's previous
Programme Management Report, the United Nations' monitoring mechanism suffered
significant management failures that compromised its ability to effectively oversee
operations.
According to a Ministry of Transportation official, when inspectors inquired about goods
diverted to the Ministry of Defense, they were informed that the items had been
temporarily lent to another ministry and would be returned shortly. Similarly, Minister of
Transportation Al-Khalil mentioned that when United Nations inspectors requested to
inspect a vehicle transferred to another ministry, the purchasing ministry would delay
with excuses and then temporarily "borrow" the vehicle back for inspection purposes,
after which it would be returned.

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3.2. Resale of Programme Goods Outside Iraq
During the Programme, Iraq reportedly also sold goods acquired through the Programme
to other nations, generating additional illicit revenue for the Iraqi regime. According to
trade data from the United Nations Commodity Trade Statistics Database ("Comtrade"),
which compiles import/export information provided voluntarily by around 110 member
states, Iraq's total imports (excluding oil) amounted to approximately $286 million from
1996 to 2002.
The United Nations relies on the accuracy of data submitted by its members and does not
independently verify the information in Comtrade. Similarly, the Committee overseeing
the Programme has not authenticated this data. Moreover, the Committee has been unable
to ascertain whether the goods traded by Iraq were originally obtained through the
Programme. However, it is noteworthy that some of the items listed as sold by Iraq, such
as cotton yarn, are not known to be produced domestically within Iraq.[6]
Former Vice President Ramadan claimed that the Iraqi government did not officially
engage in the resale of Programme goods outside Iraq. However, he acknowledged the
possibility that certain individuals might have stolen or acquired Programme goods
illicitly, which were then sold on the black market or exported. Another Iraqi official
mentioned that the goods sold outside Iraq mainly consisted of locally produced Iraqi
goods purchased by the government, which were subsequently resold for profit.
Nonetheless, some goods procured under the Programme were also reportedly resold
outside Iraq.
3.3. Substandard Goods
During interviews, multiple former Iraqi officials indicated that the Iraqi government
frequently acquired goods of inferior quality through the Programme. These individuals
cited examples spanning various categories such as animal feed, vehicles, wheat,
medicine, generators, batteries, and chemicals. Instances were reported where spoilage
occurred or Iraq received expired goods. In July 1999, following a mission to Iraq, Mr.
Sevan, Executive Director of the OIP, informed the Security Council that “major
problems being faced by the Government of Iraq are regarding supplies and equipment
which on arrival are found to be defective or do not meet quality control standards.”
Despite Iraq's ongoing issues with substandard goods, former Vice President Ramadan
asserted that the Iraqi government did not adopt a policy of intentionally importing
low-quality goods.
Iraq's procurement of lower quality goods was significantly influenced by its official
policy of favoring specific suppliers and those from preferred countries. For instance,

7
former Minister Al-Khalil explained that the Ministry of Transportation sometimes had to
opt for Russian cars over German ones to comply with mandates prioritizing purchases
from certain countries. Similarly, other officials stated that Iraq persisted in buying
substandard goods from favored suppliers, despite previous issues with quality, to meet
political directives set by senior members of the Iraqi regime.
According to officials, the Ministry of Agriculture was compelled to purchase inferior
vehicles from particular countries, and these vehicles often did not cost significantly less
than those from reputable manufacturers. However, Iraq also sourced some goods from
well-established companies known for producing high-quality products, such as
Mercedes, Volvo, Siemens, and General Electric, as indicated by records of humanitarian
vendors.
Several factors contributed to Iraq's acceptance of lower quality goods. A Ministry of
Trade official noted that the standard practice was to select the lowest bidder as long as
the goods met minimum specifications, rather than seeking the highest quality available.
Moreover, Mr. Sevan highlighted in a briefing to the Security Council that Iraq
increasingly relied on less reliable brokers for procurement, which further reduced the
likelihood of compensation when substandard supplies and equipment were received.
Throughout the Programme, ongoing discussions at the United Nations and with Iraq
centered on commercial protection, particularly regarding Iraq's options when receiving
substandard goods. Felicity Johnston, Chief Customs Expert at OIP, explained that Iraq
regularly communicated its concerns about the quality of goods obtained under the
Programme to OIP and reported these to the Security Council. In interviews, Iraqi
officials pointed out that due to regulations, Iraq could not require suppliers to obtain
performance bonds, limiting its ability to penalize suppliers of substandard goods beyond
denying them future contracts. Iraq raised these concerns with the 661 Committee, but
consensus on effective protection measures could not be reached, leaving the issue
unresolved.
Additionally, Iraqi officials criticized Cotecna for stamping goods received (and thereby
processing payments) before Iraq could conduct quality inspections. Ms. Johnston
suggested that disputes between Iraq and suppliers should have been resolved through
standard commercial dispute practices, such as returning goods, seeking repayment to the
escrow account, or requesting replacement goods.
There is also limited anecdotal evidence suggesting that the Iraqi regime profited illicitly
by procuring substandard goods. Two former officials of an Iraqi state-owned enterprise
informed the Committee that certain companies intentionally supplied inferior goods to
increase their profits, potentially through illicit payments to the Iraqi regime. However,

8
the Programme Management Report noted insufficient evidence to confirm a widespread
Iraqi scheme to derive financial gains from acquiring substandard goods.
3.4. Above-market Pricing of Goods
In its Programme Management Report, the Committee observed that throughout the
Programme, the disparity between the prices that the Government of Iraq was expected to
pay for goods based on market data and the prices actually paid widened significantly
over time. Initially, this price difference was relatively small and attributed to the
uncertain and risky environment in Iraq. However, as the Programme progressed, the gap
expanded. As previously discussed, prices were inflated to include after-sales service and
inland transportation costs, effectively allowing suppliers to be reimbursed from the
escrow account, covering illicit payments to the Iraqi regime. Nevertheless, initial
analysis suggested that the magnitude of this price differential surpassed the estimated
amount of these illicit fees.
Recent analysis conducted by the Committee has further highlighted that the premiums
paid by Iraq to suppliers were even higher and more widespread than initially indicated.
In a recent review, the Committee compared the pricing of goods in over 1,600
humanitarian contracts to market indices and other data. This subset of contracts
represented about one-third of the total value of goods procured under the Programme.
Even after adjusting generously for transportation costs borne by suppliers, the prices
paid by Iraq for goods significantly exceeded adjusted market estimates, a trend that
persisted and worsened throughout the Programme.
These findings align with the analysis presented in a report by the United States Defense
Contract Audit Agency and Defense Contract Management Agency (DCAA Report)
released in September 2003. The DCAA Report examined 759 contracts already
approved and funded, identifying potential overpricing in approximately half of them,
totaling around $656 million in potential overpricing out of a total contract value of $3.1
billion. Notably, food commodity contracts were particularly highlighted, with nearly
nine out of ten contracts showing potential overpricing averaging twenty-two percent of
their contract value.[7]
While underscoring the significant overpricing of humanitarian goods under the
Programme, the Committee acknowledges the complexities involved in establishing
appropriate market benchmarks, especially given the challenges and uncertainties
suppliers faced when dealing with Iraq under sanctions. Moreover, prices were inflated to
accommodate illicit payments to the Iraqi regime, and profit margins were likely
increased to attract suppliers, accommodate intermediaries and Iraqi front companies, and
reward companies from countries supportive of Iraq. The wide disparity in prices paid for

9
some goods during specific phases further suggests preferential pricing for certain
suppliers. Ultimately, while the reasons behind the persistently high premiums above
market prices are not fully clear, this issue warrants continued investigation and scrutiny.
4. Investigation and Reinforcements
4.1. Government Accountability Office (GAO) Investigation
Following the 2003 invasion of Iraq and the subsequent Coalition victory over the Iraqi
Army, the US Government Accountability Office (GAO) was tasked with finalizing all
Oil-for-Food-related supply contracts made with the now-defunct regime and with
tracking down the personal fortunes of former regime members.[8]
During this effort, the GAO identified vulnerabilities in the programme that facilitated
kickbacks and other sources of wealth for Saddam Hussein. The GAO estimated that the
Saddam Hussein regime illicitly generated $10.1 billion in revenues, including $5.7
billion from oil smuggling and $4.4 billion from illicit surcharges on oil sales and
after-sales charges on suppliers. The extent of the fraud was found to be much greater
than previously estimated by the GAO.
A study from the U.S. Department of Defense, referenced by the GAO, analyzed 759
contracts administered through the Oil-for-Food Programme and found that nearly half
were overpriced by an average of 21 percent.[9] Unlike the 661 Committee, Security
Council members had the authority to initiate investigations into contracts and to block
any contracts they deemed objectionable. The British and Americans rejected hundreds of
Oil-for-Food contract requests, primarily due to concerns that the imported items could
be used for dual military and civilian purposes.
To quote the GAO report in its summary: Both the UN Secretary-General, through the
Office of the Iraqi Programme (OIP), and the Security Council, through its sanctions
committee for Iraq, were responsible for overseeing the Oil-for-Food Programme.
However, the Iraqi government directly negotiated contracts with purchasers of Iraqi oil
and suppliers of commodities, a factor that may have enabled Iraq to impose illegal
surcharges and commissions.
Joseph A. Christoff, director of international affairs and trade at the General Accounting
Office, testified at a House hearing that UN auditors refused to release internal audits of
the Oil-for-Food Programme. Benon Sevan, supported by Kofi Annan, sent letters to all
former Oil-for-Food contractors requesting them to consult with Sevan before releasing
any documents to the GAO or US congressional inquiry panels. Throughout its existence,
the programme faced criticism from both critics advocating for greater transparency and
from companies concerned about the disclosure of proprietary information.

10
The United Nations denied all requests from the GAO for access to confidential internal
audits of the Oil-for-Food Programme.
While investigating the complexity of the Oil-for-Food Programme for articles in The
Wall Street Journal, investigative journalist Claudia Rosett of the Foundation for the
Defense of Democracies and the Hudson Institute discovered that the UN treated details
such as the identities of Oil-for-Food contractors, the price, quantity, and quality of goods
involved in relief deals, and the identities of oil buyers and their exact quantities received
as confidential. Bank statements, interest payments, and transactions were also kept
secret. Rosett faced criticism from Denis Halliday and Benon Sevan, who disputed many
of her claims, including allegations that Oil-for-Food funds financed the approval of an
Olympic stadium and interpretations of responsibility based on UN resolutions.
The US House Committee on International Relations investigated the Oil-for-Food
Programme and found evidence that funds were provided by Sabah Yassen, the former
Iraqi ambassador to Jordan, to pay the families of Palestinian suicide bombers amounts
ranging from $15,000 to $25,000. Between September 2000 and the invasion of Iraq,
families of Palestinians killed or wounded in the conflict with Israel (including 117
responsible for suicide bombings in Israel) received over $35 million. Allegations suggest
that these funds originated from the UN Oil-for-Food Programme.[10]
4.2. Independent Inquiry Committee Investigation
After initially resisting calls for an investigation, UN Secretary-General Kofi Annan
announced on 19 March 2004 that a comprehensive independent inquiry would
commence. In an official statement, Annan remarked that "there is a strong possibility of
significant wrongdoing, but we must investigate thoroughly to identify those
responsible." He also emphasized that many of the allegations were "outrageous and
exaggerated," attributing most criticisms to issues outside the Programme's direct
authority.
In April 2004, the United Nations selected a panel to lead the Independent Inquiry
Committee, comprising Paul Volcker, former chairman of the United States Federal
Reserve System and director of the United Nations Association of the United States of
America; Mark Pieth of Switzerland, an expert on money laundering in the OECD; and
Richard Goldstone of South Africa, former Prosecutor of the ICTY and ICTR. A month
later, on 22 April 2004, the UN Security Council unanimously adopted a resolution
endorsing the Volcker inquiry into corruption within the Oil-for-Food Programme, urging
all 191 member states to cooperate fully.[11]

11
The final report, delivered by Paul Volcker to the Security Council on 7 September 2005,
provided a definitive assessment of the Programme's shortcomings and identified
systemic issues contributing to its exploitation.
An internal UN audit leaked on mineweb.com revealed significant discrepancies between
Cotecna reports and UN agency records regarding the value of aid shipments to northern
Iraq. The audit, despite highlighting management inadequacies and contractual breaches,
did not find major faults in Cotecna's inspections according to subsequent reports from
the Independent Inquiry Committee in October 2005. Benon Sevan, the Programme's
former chairman, was briefed on the audit findings in December 2002.[12]
Congressman Henry Hyde, upon learning of the leaked audit, questioned why the U.S.
Congress, a significant UN contributor, had to rely on media leaks for access to crucial
documents, including internal audits.
In its interim report spanning 219 pages, the Volcker Commission documented instances
where Benon Sevan allegedly used his authority to secure oil allocations from Iraq for a
Panamanian company called African Middle East Petroleum Co. Internal records from
Iraq's State Oil Marketing Organization and testimonies from former Iraqi officials
implicated Sevan in unethical conduct, including receiving substantial cash payments
annually without sufficient evidence to support his claims of their origin.
Volcker's subsequent reports continued to investigate allegations involving Cotecna,
which had paid consulting fees to Kojo Annan, Kofi Annan's son, until November 2003.
Future inquiries aimed to address these issues and determine further responsibilities
regarding Kojo Annan's involvement.
4.3. Iraqi Governing Council Investigation
KPMG, alongside Freshfields Bruckhaus Deringer, was tasked by the Iraqi Governing
Council to investigate the al Mada claims, with findings initially expected in May 2004.
However, KPMG ceased its work in June 2004 due to unpaid fees owed by the IGC.
The U.S. criticized KPMG's investigation, led by associates of Ahmed Chalabi, alleging
it undermined Paul Bremer's primary probe. Bremer's investigation, managed by Ehsan
Karim of Iraq's independent Board of Supreme Audit with Ernst & Young's assistance,
was to share information with the Volcker panel until Karim's assassination on July 1,
2004, when a bomb was magnetically attached to his car.
Claude Hankes-Drielsma, a British national and Chalabi's close associate, was appointed
by the IGC to coordinate its Oil-for-Food investigation. Testifying before the U.S.
Congress on April 21, 2004, Drielsma claimed that the KPMG probe would expose links
between nations supporting Saddam Hussein's regime for financial gain, at Iraq's

12
expense, and those opposing strict sanctions and regime change. He indicated Chalabi's
oversight of the IGC's investigation.
In late May 2004, coinciding with coalition forces raiding Chalabi's INC offices,
Drielsma reported that his computer was hacked, resulting in the deletion of all files
related to his investigation and a backup database. When asked about physical threats by
Claudia Rosett, Drielsma declined to comment but criticized the UN's refusal to disclose
internal Oil-for-Food audit information to the IGC.
5. Lessons
GAO, in a May 2006 report, highlighted several crucial lessons from the oil-for-food
program for future sanctions programs. It emphasized the need to assess whether such
programs grant excessive control to the sanctioned nation, evaluate the economic impact
on neighboring countries, establish clear authority and responsibility for management and
oversight, and ensure sufficient resources and independence for effective monitoring.

IV. Conclusion
The Oil-for-Food Programme stands as a stark example of how international aid
initiatives can be exploited, highlighting the complexities and challenges inherent in
global governance and international trade. The widespread fraud uncovered within the
program underscores the necessity for robust oversight mechanisms and transparent
operations. The involvement of numerous actors, including high-ranking officials,
multinational corporations, and various governments, illustrates how deeply entrenched
and multifaceted trade fraud can become when oversight is lax.
Moving forward, the lessons learned are crucial for designing more effective sanctions
programs and international trade regulations. It is imperative to establish clear authority
and responsibility for managing and monitoring such programs, ensuring that they are not
susceptible to manipulation by sanctioned entities.
International trade fraud remains a significant global issue, requiring continuous
vigilance and cooperation among nations. Strengthening legal frameworks, enhancing
transparency, and fostering international collaboration are essential steps toward
mitigating the risks of trade fraud. The Oil-for-Food Programme serves as a sobering
reminder of the potential consequences of inadequate oversight and the importance of
maintaining integrity in international trade practices. Through collective efforts and a
commitment to ethical standards, the global community can work towards more secure
and fair trade systems.

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[2] Legal Dictionary - Law.com. (n.d.). Law.com Legal Dictionary.
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[3] Lê Mạnh Hùng. (2022, July 14). Doanh nghiệp Việt Nam cần nhận biết các hiện tượng lừa
đảo, gian lận thương mại quốc tế phổ biến hiện nay? Thuvienphapluat.vn; ThuVienPhapLuat.vn.
https://thuvienphapluat.vn/phap-luat/ho-tro-phap-luat/doanh-nghiep-viet-nam-can-nhan-biet-cac-
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[4] S/RES/986, para. 8 (Apr. 14, 1995); Iraq-UN MOU, para. 5; First Interim Report, p.57
[5] Ministry of Transportation record, Mohammad Mehdi Saleh memorandum to Iraqi Ministries
(Dec. 10, 2002) (translated from Arabic); Taha Yassin Ramadan interview (Aug. 17, 2005)
[6] United Nations, “Commodity Trade Statistics Database,” http://unstats.un.org/unsd/comtrade
[7] United States Joint Defense Contract Audit Agency and Defense Management Agency OFF
Pricing Evaluation Team, “Report of the Pricing Evaluation of Contracts Awarded under the Iraq
Oil for Food Program,” p. 3-4, 11 (Sept. 12, 2003); “Programme Management Report,” vol. II, p.
183-84.
[8] Christoff, J. (2004). UNITED NATIONS Observations on the Oil for Food Program
Statement of. https://www.gao.gov/assets/gao-04-651t.pdf
[9] Wayback Machine. (2023). Archive.org.
https://web.archive.org/web/20050416114012/http://www.gao.gov/highlights/d04579thigh.pdf
[10] Saddam’s Suicide Bomb Funds - CBS News. (2004, November 17).
https://www.cbsnews.com/news/saddams-suicide-bomb-funds/
[11] Hoge, W. (2004, April 22). Corruption Allegations at U.N. Put Annan on the Defensive. The
New York Times.
https://www.nytimes.com/2004/04/22/international/middleeast/corruption-allegations-at-un-put-a
nnan-on-the.html
[12] U.N. auditors fault oil-for-food monitor. The Washington Times.
https://www.washingtontimes.com/news/2004/may/20/20040520-121412-9548r/

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