A report made public on Thursday reveals that more than 100 million US dollars of Liberian banknotes that had reportedly gone missing are in fact accounted for. However, the independent report commissioned by the US embassy in Monrovia provides a damning assessment of procedures within the country’s central bank as well as action taken by the Liberian government.

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The 68-page report produced by business intelligence firm Kroll Associates Inc. goes into considerable detail to uncover the fate of the Liberian banknotes.

Reports about the disappearance of 138 million US dollars* had sparked demonstrations in Liberia last year with hundreds of protesters taking to the streets and an online campaign using the hashtag #BringBackOurMoney.

It also risked marring the start of George Weah’s presidency – the scandal stretched from the end of former President Ellen Johnson Sirleaf’s final term in office to Weah’s installation in the Executive Mansion.

Kroll’s report, entitled “Project Fabre”, provides a forensic analysis of the approval for printing additional banknotes, the awarding of the contract to a Swedish firm called Crane AB, the shipping of the banknotes and the movement of the funds to and from the country’s central bank vaults.

Although the investigation dismissed the suggestion that all of the new banknotes are missing, it does reveal significant mismanagement and potential corruption are likely to have had a devastating impact on Liberia’s economy.

Central bank ordered banknotes without approval

The banknotes were requested in two separate orders by the central bank, according to Kroll’s report. And although the first order was approved by the country’s parliament, the actual order had been placed by the central bank 11 days before it received the green light from the legislature.

Parliamentary approval was not sought for the second order of 10 billion Liberian dollars (89 million US dollars) by the central bank, and it placed the order with the Swedish banknote printers four weeks before a letter from a parliamentary clerk and secretary of the senate requesting that old banknotes be replaced with new ones.

Tendering for the banknotes was also circumvented by the central bank with Kroll’s report noting that “it appears that a competitive procurement process did not take place”.

Extra banknotes

More banknotes were printed than were ordered with an additional 4.5 million US dollars extra being delivered to Liberia, Kroll said.

Some fluctuation in the quantity of banknotes had been expected in the original contract. But, according to the report, “the actual overall variance in the quantity of banknotes shipped was 5.11 percent”, far greater than the 1.5 percent outlined in the first order.

There were further differences in the number of banknotes said to have been packed by the banknote printers and the shipping lists with an additional 17.3 million US dollars arriving by air or sea. It is not clear from Kroll’s investigation whether something was amiss or the discrepancy is just down to the central bank’s “inadequate” records.

There were also considerable differences in the weight of the consignments containing the new banknotes, Kroll reported. Crane AB had shipped 5,675 kilograms of banknotes, however a bill for air cargo from Emirates indicated a consignment of 5,826 kilograms. Kroll said no explanation had been made by the central bank, but the accuracy of the customs documentation was in question.

Increasing the money supply

The banknotes had been requested by the central bank to be “infused” into the Liberian economy. But it was not clear if the new banknotes were intended to replace banknotes or in addition to existing legal tender, according to Kroll.

“Initially, old banknotes gradually disappeared from circulation and we saw more new banknotes in circulation,” said RFI's Monrovia-based correspondent Darlington Porkpa. “But in recent months, we noticed the reintroduction of old banknotes on the market.”

The Kroll investigation determined that all new banknotes provided by the first order had been injected into the Liberian economy by December 2018, even though old banknotes in circulation were not removed from the money supply.

It was the same for the second order of new banknotes with some 90 percent being injected into the economy and a significant portion of the old banknotes being left in circulation.

It is also not clear who received the new banknotes – commercial banks, government ministries, etc. “There is a risk that significant funds were (and remain) unaccounted for,” said Paul Nash, the apparent author of the report by Kroll.

Nash, an expert in fraud and corruption, also investigates a further “mop-up” procedure instigated by Weah’s administration in July 2018. They intended to buy up Liberian currency with 25 million US dollars in an operation that would run somewhat contrary to the central bank’s action of flooding the economy with new Liberian dollars.

Kroll said some 15 million US dollars of Liberian currency were purchased, although it said it was not told how this was “structured or implemented”.

Alongside the purchase of Liberian dollars, 5 million US dollars was put into circulation and the remaining 5 million dollars had not been withdrawn from Liberia’s account at the Federal Reserve Bank of New York, according to the investigation.

Despite being intended to help strengthen the Liberian dollar, some 7.8 million US dollars of Liberian banknotes that had been purchased in this “mop-up” were put back into circulation six months later, according to Kroll.

The operation involved teams from the central bank buying up banknotes from local businesses and foreign exchange bureaus, which created an “enhanced level of risk” that funds could be unaccounted for.

The vaults

Kroll conducted a physical check of banknotes within Liberia’s central bank vaults. The contents of the four vaults are managed by handwritten forms “without checks and balances to independently verify accurate data entry”.

Movements of banknotes in and out of the vaults are “susceptible to error and/or intentional falsification”, while Kroll said some 189,000 US dollars were “unreconciled” or not accounted for.

Kroll concluded that the increase in banknotes in circulation could have contributed to inflation in Liberia. It estimated inflation at the end of January 2019 of 25 percent.

“The increase of banknotes in circulation may be a factor in the rapid depreciation of the LRD [Liberian dollar] exchange rate,” the report said.

The Liberian dollar weakened considerably over the course of last year. One US dollar was worth 125 Liberian dollars at the start of 2018 compared to 157 Liberian dollars by the end of December, according to data from XE.com.

RFI contacted Eugene Nagbe, Liberia’s information minister, for a reaction to Kroll’s report. He was unavailable for comment.

*This article uses an exchange rate of 1 US dollar = 112 Liberian dollars, a blended three-year average cited by Kroll in the report. RFI believes this figure provides a more accurate reflection of the cost as expressed in US dollars given the considerable weakening of the Liberian dollar.

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