The chief executive officer of BNP Paribas-North America has conceded to a US Congress hearing that the bank made "avoidable errors" in its role as the banker for the UN's oil-for-food programme (OFP) for Iraq.

The House International Relations Sub-Committee on oversight and investigations is particularly concerned about the final recipients of letter of credit (L/C) proceeds, who may not have been authorised to receive the funds.

Lax monitoring

Chair of the Congressional subcommittee, Republican congressman Dana Rohrabacher,says the bank had been lax in monitoring the recipients of the billions of dollars in transfers it processed under the seven-year programme that ended in 2003.

"It makes me wonder if the bank cared at all about the risk it placed on its investors in running the oil-for-food program," he told the hearing.

No corruption

But BNP's chief executive officer for North America, Everett Schenk, insists that the bank that ran the scheme based entirely on L/Cs was not party to fraud in the programme.

Schenk acknowledged the bank had committed "avoidable errors" in handling some of the OFP accounts, but said an extensive internal probe had uncovered no outright fraud related to questionable transfers.

"The bank has seen no indication that any assignment of proceeds or payment to any so-called 'third party' is causally linked to any corruption that may have occurred in connection with the oil-for-food programme," he said.

Earlier questions

The hearing, which began 28 April, has so far focused on assignment of L/C proceeds to unauthorised third parties.

Three instances of L/Cs reassigned in the OFP were revealed last November at a earlier Congressional subcommittee hearing. Members questioned Schenk on the reassignments, but several felt he had not provided sufficient explanation.

No explanation

In all three cases, the L/C proceeds apparently destined for the UN-approved Saudi relief suppliers Al Riyadh International Flowers were reassigned to a Malaysia-based firm, East Star Trading Company. The reasons for this switch have yet to be disclosed.

Congressional investigators are now reportedly looking at many more cases of L/Cs reassigned by BNP under the OFP.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.