Strict US measures to prevent money laundering and the transfer of dollars from Iraq to Iran

Strict US measures to prevent money laundering and the transfer of dollars from Iraq to Iran


Strict US measures to prevent money laundering and the transfer of dollars from Iraq to IranUS and Iraqi officials revealed that the decline in the value of the Iraqi dinar and the rise in the prices of foodstuffs and imported goods in the country is due to the remarkable change in the policy adopted by the US Treasury and the Federal Reserve in New York to curb money laundering and the illegal appropriation of dollars by Iraqi commercial banks for the benefit of Iran and other countries subject to sanctions in the Middle East.

And the American Wall Street Journal reported that the Federal Reserve began last November to impose stricter controls on the transactions of Iraqi commercial banks, which had been operating under less strict rules since the US invasion in 2003.

US and Iraqi officials said it was time to bring the Iraqi banking system into compliance with international money transfer practices.

Since the new measures went into effect, 80 percent or more of daily dollar transfers to Iraq, which previously totaled more than $250 million a day, have been blocked due to insufficient information about money destinations or other errors, according to official Iraqi data.

With dollars scarce, the Iraqi currency has fallen by as much as 10 percent against the dollar, leading to a sharp rise in the prices of imported goods, including staples such as eggs, flour and cooking oil.

The newspaper quoted the Chairman of the Board of Directors of the “Islamic South Bank” Mahmoud Dagher, a former official in the Central Bank of Iraq, that “for 20 years, we have followed the same system,” but the shock policy pursued by the US Federal Reserve caused a crisis within the Iraqi economy.

However, US officials stress that the strict rules for electronic transfers of dollars by Iraqi private banks were not surprising to officials in Baghdad. Rather, it has been implemented jointly since last November, after two years of discussions and planning between the Iraqi Central Bank, the US Treasury and the Federal Reserve Board.

They added that the rise in the dollar exchange rate was not due to the new measures. And the scrutiny of dollar transactions led to a rush towards the green currency in Iraq in light of a torrent of criticism of the new regime.

Iraqi Prime Minister Mohammed al-Sudani, who took office as the currency began to decline, said the Fed’s action “harms the poor and threatens the Iraqi government’s 2023 budget.”

Iraqi officials linked to Iran drew harsher criticism. “Everyone knows how the Americans use currency as a weapon to starve people,” Hadi al-Amiri, the leader of the “Popular Mobilization” militia, told the French ambassador in Baghdad, Eric Chevalier.

US officials said the new system “aims to limit the use of the Iraqi banking system to smuggle dollars to Tehran, Damascus and money laundering havens throughout the Middle East.”

The Wall Street Journal quoted a US official as saying that the measures would limit “the ability of malicious actors to use the Iraqi banking system.” The Treasury and the Central Bank of Iraq declined to comment.

The Central Bank of Iraq described the new electronic platform, in a statement issued on December 15, as asking for “full details of customers who want to transfer money.”

And the Central Bank of Iraq prevented four banks, namely the “Islamic Asia Bank”, the “Iraqi Middle East Bank”, the “Al-Ansari Islamic Bank” and the “Al-Quboud Islamic Bank”, from conducting any transactions in dollars.

US officials have been pressing Iraq for years to strengthen its banking controls. And in 2015, the Federal Reserve and the Treasury Department temporarily halted the flow of billions of dollars into the Central Bank of Iraq over fears that the currency would eventually reach Iranian banks and possibly divert to Islamic State militants.

Some Iraqi officials supported tightening supervision of private banks. Representative Hadi al-Salami, a member of the Anti-Corruption Commission in Parliament, said that Iraqi political parties and militias control most of the banks, and use them to smuggle dollars to neighboring countries.

It can be seen the impact of the controls on the transactions of Iraqi banks in dollars. On October 17, daily transfers amounted to $224.4 million. According to the data, on January 17, it reached only $ 22.9 million, a decrease of nearly 90 percent. The official exchange rate is 1,470 dinars to one dollar. But in banks and exchange offices, the dollar is sold at 1,620 Iraqi dinars, an increase of up to 10 percent from the price last November.