Banknotes described as counterfeit are being fed into Libya's legitimate economy by letters of credit (L/Cs) according to the Reuters news agency.

Citing sources familiar with the matter, it says unofficial Libyan banknotes - some printed in Russia and some in Libya - have been exchanged for US dollars and then transferred via shell companies to overseas bank accounts.

How it works

The Libyan dinar denominated banknotes described as counterfeit by the Central Bank of Libya (CBL) in the Western Libyan capital of Tripoli may be changed into hard currency on the black market or through local banks, according to Reuters.

It says the dinars may also be converted to hard currency via deposits in banks in Eastern Libya by shell companies that use import L/Cs to send US dollars from the central bank to overseas companies.

Ghost transactions

But in these transactions, the so-called exporter is in reality a shell company controlled by the same individuals behind the banknote-printing operation.

Documentation is fabricated to create the illusion of a legitimate trade, but no goods are shipped and the US dollars are retained by the criminal network.

Divided country

Libya was effectively split into Eastern and Western regions due to political, military, and social conflicts, particularly following the 2011 uprising that led to the overthrow of Muammar Qaddafi.

The division resulted in separate administrations and ongoing conflict between the two regions, and for a decade Libya had two central banks, one in Tripoli and one in Benghazi, the capital of Eastern Libya.

As of August 2023, Libya no longer has two central banks. The CBL has been reunited into a single sovereign institution but, overall, Libya's division remains fluid and subject to change based on ongoing political negotiations and military developments.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.