Baghdad: Iraq has taken measures to tackle fraud, money laundering, and illicit use of US currency by banning eight local commercial banks from engaging in US dollar transactions. The move comes shortly after a visit by a top US Treasury official, as part of a broader effort to crack down on currency smuggling to neighboring Iran.
These banks are now prohibited from participating in the Iraqi central bank’s daily dollar auction, which serves as a vital source of hard currency for the import-dependent nation. Iraq, with over $100 billion in reserves held in the US, heavily relies on maintaining good relations with Washington to ensure access to oil revenues and financial stability.
A document from the central bank, verified by an official, listed the banks affected by the ban. They include Ahsur International Bank for Investment, Investment Bank of Iraq, Union Bank of Iraq, Kurdistan International Islamic Bank for Investment and Development, Al Huda Bank, Al Janoob Islamic Bank for Investment and finance, Arabia Islamic Bank, and Hammurabi Commercial Bank.
Representatives from the private bank association, which represents the affected banks, as well as Ashur and Hammurabi, have yet to provide comments. Reuters is in the process of contacting the remaining banks for statements.
In a statement, a Treasury spokesman praised the efforts of the Central Bank of Iraq in safeguarding the country’s financial system against abuse, leading to legitimate Iraqi banks establishing international connectivity through correspondent banking relationships.
This ban follows a similar action taken in July 2023 when Iraq prohibited 14 banks from conducting dollar transactions, in response to a request from the United States. Banks banned from dollar transactions are still permitted to operate and engage in transactions using other currencies, according to the central bank.
During a recent visit to Baghdad, Brian Nelson, the top sanctions official at the US Treasury Department, discussed with Iraqi officials measures to protect both the Iraqi and international financial systems from criminal, corrupt, and terrorist activities. The visit also saw the US Treasury Department taking action against Al-Huda Bank for its involvement in diverting billions of US dollars to Iranian-backed groups.
Washington expects Iraq to do more in countering Iran-backed armed groups operating within its borders, particularly after the killing of three US soldiers, which has been attributed to hardline Iraqi factions.
Although the current Iraqi government has received support from powerful Iran-backed parties and armed groups, which have interests in Iraq’s informal economy, including the financial sector, cooperation with Prime Minister Mohammed Shia al-Sudani in implementing economic and financial reforms is being praised by Western officials. These reforms aim to restrict Iran and its allies’ access to US dollars and align the Iraqi economy with international standards.
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