* Somalia Central Bank used for private payments-UN monitors
* Governor of Central Bank denies U.N. claims
By Michelle Nichols
UNITED NATIONS, July 18 (Reuters) - The governor of the Central Bank of Somalia said on Thursday he had asked the United Nations for help in conducting an independent audit of the nascent institution after U.N. monitors described it as a "slush fund" for private purposes.
U.N. experts, who monitor Security Council sanctions on Somalia and Eritrea, reported that money at the Central Bank of Somalia was not used to run government institutions in the war-torn Horn of Africa country and that an average 80 percent of withdrawals were made for private purposes.
Central Bank Governor Abdusalam Omer denied allegations by the U.N. experts that linked him to irregularities regarding millions of dollars withdrawn from the bank, saying the charges were malicious and baseless.
In a letter to the U.N. special envoy to Somalia, Nicholas Kay, Omer said the allegations by the U.N. experts "undermine the ongoing institution building efforts and leads to the loss of public confidence in the capability and integrity of the bank."
"As a public servant and the Governor of the Bank, it is my obligation to understand and expose any misconduct associated with the handling of public funds trusted to the Central Bank of Somalia," Omer wrote in the letter, obtained by Reuters.
"It is to this end that I am writing to you to ask for assistance in sponsoring an independent audit of the Central Bank of Somalia," said Omer, 59, a dual Somali-U.S. national who left Somalia at 16 and returned in January to run the bank in a country with a shattered economy and broken financial system.
The U.N. Security Council discussed the experts' report behind closed doors on Thursday and Deputy U.S. Ambassador to the United Nations, Jeffrey DeLaurentis, said the 15-members were "deeply troubled by some of the monitoring group's findings."
"We also discussed the significant progress the Somalia government has made as well as the challenges it still faces, particularly in the areas of security sector reform, management of public finances and strict compliance with sanctions measures," he told reporters.
The United States is president of the U.N. Security Council for July.
The overthrow of a dictator in 1991 plunged Somalia into two decades of violent turmoil, first at the hands of clan warlords and then Islamist militants, who have steadily lost ground since 2011 under pressure from an African Union military offensive.
Somalia was virtually lawless and unable to assert authority until a Western-leaning government was elected last year.
$12 MILLION CANNOT BE TRACED
Omer said Transparency International, a global non-governmental body which studies corruption around the world, should be involved in an audit and a major objective should be to review PricewaterhouseCoopers funds and government accounts related to the Central Bank of Somalia.
The U.N. experts report had said that a fiduciary agency managed by PricewaterhouseCoopers "could not ensure accountability of funds once they reached the Somali government" and that of $16.9 million transferred by PWC to the Central Bank, $12 million could not be accounted be traced.
Pricewaterhouse Coopers has not responded to requests for comment on the U.N. report.
Omer also asked that an audit investigate his involvement in the transfer of the $16.9 million after the U.N. experts accused him of being "key to the irregularities." The audit should review the structure and operations of the Central Bank.
He said the Central Bank of Somalia could not afford any setbacks "when we are diligently building the capacity of (the) bank to promote financial stability leading to the much-needed economic recovery of Somalia."
The U.N. experts report also accused Eritrea of undermining stability in Somalia by paying political agents and a warlord linked to Islamist militants to influence the Mogadishu government.
"We encourage the Eritrean government to play a productive role in the region," said Deputy U.S. Ambassador DeLaurentis.
The report said "Eritrean agent of influence Abdi Nur Siad 'Abdi Wal'" provided security for former ARS-Asmara (a Somali Islamist network in Eritrea) leader Zakaria Mohamed Haji Abdi.
Zakaria described the reference to him in the U.N. experts report as "tantamount to character assassination."
"I have no extremist links; I do not, never have and never will have dealings with hit men or goons and I am not an agent of any state. I am a law abiding Somali citizen," he said in a statement. "During my time in Somalia, I live there peacefully, without security services of any kind." (Additional reporting by Edmund Blair. Editing by Christopher Wilson)