Iraq’s oil revenue was placed in a U.N.-controlled escrow  account. Estimated Revenue Obtained Illegally by the Former Iraqi Regime from the Oil for Food Program Exceeds $10 Billion

We estimate that, from 1997 through 2002, the former Iraqi regime  acquired $10.1 billion in illegal revenues related to the Oil for Food  Program—$5.7 billion through oil smuggling and $4.4 billion through  surcharges against oil sales and illicit commissions from commodity  suppliers. This estimate is higher than the $6.6 billion we reported in May  2002. We updated this estimate to include (1) oil revenue and contract  amounts for 2002, (2) updated letters of credit from prior years, and (3)  newer estimates of illicit commissions from commodity suppliers. U.S. Efforts to Recover Iraqi Assets Involve Many Agencies and Use Recently Developed Domestic and International Authorities

The United States has tapped the services of several U.S. agencies and  used recently developed U.S. and international authorities in its efforts to  recover Iraqi assets worldwide. To lead the asset recovery efforts, the United States created an  interagency coordinating body headed by the Department of the Treasury. On May 22, 2003, the U.N. Security Council adopted  Resolution 1483, which (1) noted the establishment of the DFI, a special  account in the name of the Central Bank of Iraq; and (2) required member  states to freeze and immediately transfer to the DFI all assets of the  former Iraqi government and of Saddam Hussein, senior officials of his  regime and their family members. U.S. Efforts to Recover the Former Iraqi Regime’s Assets Have Had Varying Results

In 2003, the U.S. government quickly vested Iraq’s assets held in the United  States and transferred them to Iraq. The United States Transferred Nearly $1.9 Billion in Vested Assets to Iraq

In 2003, the United States vested about $1.9 billion of the former regime’s  assets in the U.S. Treasury. The United States Seized More Than $900 Million in Iraq

CPA informed us in March 2004 that the U.S. military, in coordination with  U.S. law enforcement agencies had seized about $926 million of the  regime’s assets in Iraq. Treasury officials reported that, as of March 2004, more than  10 countries and the Bank for International Settlements have transferred  $751 million to the DFI. To encourage other countries to transfer the funds to Iraq, the Secretary of  the Treasury requested that the international community identify and  freeze all assets of the former regime. U.S. government  officials have cited estimates ranging from $10 billion to $40 billion in  illicit earnings. Challenges to Transferring Frozen Assets and Locating the Hidden Assets

The U.S. government has faced key challenges to recovering the assets of  the former Iraqi regime. First, recovering the former regime’s assets was not initially a high priority  in the overall U.S. effort in Iraq. Second, U.S. expectations for the quick transfer of funds under U.N.  Security Council Resolution 1483 may have been overly optimistic given  the lack of legal capabilities of some countries to do so. U.S. officials stated that many countries needed to adopt additional  legislation to implement the U.N. requirements and transfer the funds to  the DFI. Third, the impending transfer of sovereignty to an interim Iraqi  government on June 30, 2004, may further complicate U.S. efforts to locate  and recover assets of the former regime. It is uncertain whether the new  government will allow the United States to continue its hunt for the former  regime’s assets. Identify, freeze, and transfer assets to the Development Fund for Iraq. ?
Why GAO Did This Study

Rebuilding Iraq is a U.S. national security priority. Billions of dollars are needed for Iraq's reconstruction. The U.S. government and the international community have undertaken important efforts to recover the assets of the former regime and return them to the Iraqi people. In this testimony, GAO will present its preliminary observations on the recovery effort. Specifically, GAO (1) updates its estimate of the revenues diverted from the Oil for Food Program, (2) describes the U.S. government agencies working on the asset recovery effort, (3) discusses the results of U.S. efforts, and (4) highlights challenges that the United States faces in recovering Iraqi assets.

What GAO Found

GAO estimates that from 1997 through 2002, the former Iraqi regime acquired $10.1 billion in illegal revenues related to the Oil for Food program--$5.7 billion in oil smuggled out of Iraq and $4.4 billion in illicit surcharges on oil sales and after-sales charges on suppliers. This estimate is higher than our May 2002 estimate of $6.6 billion because it includes 2002 data from oil revenues and contracts under the Oil for Food Program and newer estimates of illicit commissions from commodity suppliers. The United States has tapped the services of a variety of U.S. agencies and recently developed domestic and international tools in its efforts to recover Iraqi assets worldwide. Led by the Department of the Treasury, about 20 government entities have combined efforts to identify, freeze, and transfer the former regime's assets to Iraq. The United States also used the International Emergency Economic Powers Act, as amended by provisions in the USA PATRIOT Act of 2001, to confiscate the property of the former Iraqi regime under U.S. jurisdiction and vest the assets in the U.S. Treasury. Finally, U.N. Security Council Resolution 1483 required all U.N. members to freeze without delay and immediately transfer assets of the former Iraqi regime to the new Development Fund for Iraq (DFI). U.S. efforts to recover Iraqi assets have had varying results. In March 2003, the U.S. government quickly took control of Iraq's assets in the United States. From May to September 2003, the United States transferred $1.7 billion to Iraq to help pay for the salaries of Iraqi civil servants, ministry operations, and pensions. Within Iraq, U.S. military and coalition forces seized about $926 million of the regime's assets. Other countries froze about $3.7 billion of Iraqi regime assets in compliance with U.N. Security Council resolutions. As of March 2004, Treasury reported that more than 10 countries and the Bank for International Settlements had transferred approximately $751 million to the DFI. Little progress has been made in identifying and freezing additional Iraqi assets that remain hidden. While the amount of hidden assets accumulated by the former Iraqi regime is unknown, estimates range from $10 to $40 billion in illicit earnings. The United States faces key challenges in recovering Iraq's assets. First, recovering the former regime's assets was not initially a high priority in the overall U.S. effort in Iraq. Second, U.S. officials stated that many countries needed to adopt additional legislation to implement the U.N. requirements and transfer the funds to the DFI. U.S. expectations for the quick transfer of funds may have been overly optimistic given the legal capabilities of some countries. Third, the impending transfer of sovereignty to an interim Iraqi government on June 30, 2004, may further complicate U.S. efforts to locate and recover assets of the former regime. It is uncertain whether the new government will allow the United States to continue its hunt for the former regime's assets.