A joint Four Corners/Fairfax Media investigation has revealed a company owned by the Reserve Bank of Australia (RBA) made illegal attempts to strike a business deal with brutal Iraqi dictator Saddam Hussein.

Secret files show officials from the RBA's Note Printing Australia (NPA) went to Iraq at the height of UN sanctions to discuss the sale of plastic banknotes to the Iraqi government.

They met with Saddam's brother-in-law, Arshad Yassin, during the trip in 1998.

One of the documents said: "Arshad Yassin [is] extremely influential [and] willing to open all the doors for us. Arshad Yassin is critical as all decision on [the] project will be taken by Saddam Hussein."

The operation was called Delta Project, and the aim was to win a contract that would allow NPA to turn Iraq's paper currency into polymer banknotes.

Key points: NPA tried to strike deal with Saddam Hussein in 1998, at height of UN sanctions

NPA tried to strike deal with Saddam Hussein in 1998, at height of UN sanctions Deal to turn Iraq's paper currency to plastic, worth around $US65 million

Deal to turn Iraq's paper currency to plastic, worth around $US65 million NPA officials travelled to Iraq and met with Saddam's brother-in-law

NPA officials travelled to Iraq and met with Saddam's brother-in-law Deal was cancelled after Australian diplomats became aware

Deal was cancelled after Australian diplomats became aware Legal expert says deal was violation of international law

Legal expert says deal was violation of international law ASIC reviewed matter, no further action taken

"Indications from Arshad Yassin's office are that Saddam Hussein's office has already allocated $US65 million for the total project," RBA officials reported in the document.

"He has confirmed that Saddam Hussein has seen the polymer notes samples and is keen to adopt our product."

The deal was called off six months later after Australian diplomats uncovered the NPA's dealings with the Saddam regime.

The diplomats warned the company may have breached Australia's obligations under international law.

Associate Professor David Chaikin from the University of Sydney says there was a violation of international law and alarm bells should have been sounded "to the highest levels of the bank".

"What was happening is not only in violation of law, but could potentially destroy and undermine the reputation of Note Printing Australia and its owner, the Reserve Bank," he told Four Corners.

In a statement issued today, the RBA described the 1998 trip to Iraq as "ill-advised".

"No banknotes were ultimately supplied to Iraq. On the records available to the Bank, the project went into abeyance after concerns were raised by DFAT with the then CEO of NPA," the statement said.

"The Governor has always answered questions in Parliamentary proceedings fully and truthfully. There have been lengthy hearings on these matters at which the relevant committees have been able to thoroughly examine the issues."

Corruption concerns raised on previous occasions

This is not the first time the RBA has come under scrutiny.

The Australian Federal Police (AFP) has charged NPA, its sister firm Securency, and several of its employees with allegedly paying bribes to public officials in Indonesia, Malaysia and Vietnam to secure banknote contracts (*see editor's note below).

It was a practice that alarmed whistleblower Brian Hood, who started working as NPA's company secretary in 2004.

"They [agents] were being paid millions of Australian dollars and that didn't seem appropriate given the sort of role that they were playing. It seemed unduly generous, and that grabbed my attention right from the start," he said.

Mr Hood raised his concerns with the NPA board in 2006, but the payments continued.

He said he then went to the RBA's then-deputy governor Ric Battelino in 2007.

"[Mr Battelino] did indicate that my briefing paper perhaps would be shown to the governor," he said.

"That was the first time the governor was mentioned and I thought well that's encouraging, it's actually literally got to the top."

Mr Hood said he was confused when RBA governor Glenn Stevens testified at a parliamentary committee that his board did not know about corrupt practices until they were revealed in a Fairfax investigation in 2009.

"I saw that evidence being put to economics committees and I was pretty bewildered. I didn't know what to make of that. It was quite confusing," he said.

Mr Hood's claims are supported by a second whistleblower, James Shelton, who worked at Securency.

Mr Shelton said the board members and directors of NPA and Securency, who were aware of corruption-prone business practices, have not been held to account.

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"It makes me disappointed again in some of the authorities that are entrusted with enforcing the laws of this country, and that someone can get away with it so blatantly," he said.

The AFP handed its evidence to the Australian Securities and Investments Commission (ASIC).

In a statement, ASIC said it had reviewed the material and decided not to take the matter further.

The RBA sold its 50 per cent share in Securency earlier this year.

Coalition, Greens react to revelations

A spokesman for Federal Treasurer Joe Hockey released a statement this morning which read: "Any improper behaviour on the part of any company or individuals is to be condemned. Proceedings are underway in relation to RBA note printing subsidiaries and they should be allowed to take their course."

Greens deputy leader Adam Bandt went further in calling for an inquiry into the affair.

"Most Australians would be shocked to know their central bank was using their money to line up dirty deals with Saddam Hussein," Mr Bandt said in a statement.

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"The claim that RBA officials misled Parliament is disturbing. When Parliament resumes, the Greens will move to have RBA officials appear before a parliamentary committee to answer these serious allegations."

He questioned ASIC's willingness to pursue a case against anti-coal activist Jonathan Moylan over a fake press release that caused a $300 million drop in a major coal company's share price when it had failed to act over the claims against the RBA.



"Also appalling is the utter failure of ASIC, our corporate regulator, even to investigate sustained claims of wrongdoing within the corporate activities of the Reserve Bank," Mr Bandt said.

"ASIC throws the book at a lone global warming activist who sends out a press release, yet turns a blind eye to repeated claims of sustained corporate corruption in the Reserve Bank.

"The Greens will ask ASIC to explain to Parliament why it has failed to investigate serious and repeated claims of illegality within the RBA's corporate activities."

* Editor's note: In 2011 Securency and Note Printing Australia were charged by the federal police with bribery offences relating to the alleged payments to overseas officials. Court orders prevent recent developments regarding the charges against the companies being reported.