The Iraqi government in the face of money laundering and terrorist financing.. Who will prevail?
The Iraqi government in the face of money laundering and terrorist financing.. Who will prevail?
2-17-2023
Baghdad – Iraq’s recent moves on the economic level have increased the percentage of optimism that it can succeed in combating money laundering and terrorist financing, or reduce them to lower levels than it was after they escalated greatly after 2003, especially with their association with “political corruption” through sector reforms. banker.
During the past days, Iraqi Foreign Minister Fuad Hussein headed a high-ranking economic and banking delegation on an official visit to Washington, during which he discussed a number of files that were described as “important”, including those related to the development and reform of monetary policy, and facing current challenges at the monetary and banking levels. What these measures reflect in terms of reforming the banking system by combating corruption and money laundering.
The United States also welcomed these moves on the sidelines of a meeting between Brian Nelson, Assistant Secretary of the US Treasury, and the Governor of the Central Bank of Iraq, Ali Al-Alaq, in Istanbul earlier this month.
The US official acknowledged Iraq’s “steadfast” dedication to improving compliance standards to combat money laundering and terrorist financing, and offered continued cooperation in modernizing the banking sector.
Regarding his meeting with Al-Alaq, Nelson said in press statements that he came to discuss reforms in the banking sector, and ways to fulfill the mutual commitment to combating money laundering, and confronting the financing of terrorism.
Joining Egmont
Among those positive steps is Iraq’s recent accession to the membership of the “Egmont” group of financial investigation units, to enhance efforts to combat corruption and money laundering.
The group includes 167 countries, and works to facilitate the exchange of information on criminal records, money laundering and terrorist financing at the international level, by providing the office with a secure communications network with countries of the world, which contributes to following up the movement of funds internationally and strengthening financial investigation procedures, leading to the recovery of funds and assets.
Iraq’s recent moves came after its local currency reached the brink of collapse, reaching its lowest record level against the dollar in 18 years, and its decline to about 1,700 dinars against one dollar in informal market exchanges early this month, due to the US sanctions imposed on it, which prompted the prime minister’s government. Minister Muhammad Shayaa al-Sudani took an urgent decision to raise the value of the dinar to 1,300 against the dollar and approve it in the financial budget for the current year 2023.
Governmental optimism
And his optimism that Iraq will join that group, Mazhar Muhammad Salih, the economic advisor to the Iraqi Prime Minister, acknowledges that the country is in dire need to join the membership of “Egmont”.
He explained that it is “an international network that works to enhance communication and interaction between the financial investigation units in the world, which are represented at the national level by the Anti-Money Laundering and Terrorist Financing Office.”
The Governor of the Central Bank of Iraq heads the Supreme Committee for Combating Money Laundering and Terrorist Funds, which issues regulatory regulations and related instructions, based on the Anti-Money Laundering and Terrorist Financing Law adopted by Iraq in 2015.
According to Saleh’s interview with Al-Jazeera Net, the strengthening of cooperation ties between Baghdad and international compliance institutions requires that Iraq be an active member of the “Egmont” to create better international cooperation for the benefit of the country and the world in combating money laundering and related activities.
Iraq is an active member of the Financial Action Organization for the Middle East and North Africa region since 2004, which qualifies it – according to Saleh – to join the international group “Egmont”, which is relevant and effective in combating money laundering.
Before 2003, Iraq did not know much about money laundering operations, which began to intensify after the American occupation, and reached very high levels, especially with its association with “illegal” activities that contributed to smuggling money outside the borders to be laundered and returned again in a “legitimate form” such as real estate. Or other in-kind holdings such as gold.
On the ground, Iraq’s first steps to reduce this phenomenon came through the establishment of the Anti-Money Laundering Office in April 2007, whose tasks are summarized in collecting and analyzing information related to financial transactions, and creating channels of cooperation and interaction with the relevant local and international authorities to combat it.
Iraq’s losses
Money laundering operations devoured a lot of Iraq’s financial revenues throughout the post-2003 years, but the scandal known as the “theft of the century”, which illegally wasted $2.5 billion from a bank account of the Iraqi government and was laundered through private banks, is considered a major case. Corruption through money laundering in the country.
According to previous annual reports, international and local remittances were considered one of the most used tools for money laundering for the years 2019, 2020 and 2021. These figures appear to be somewhat identical with what a member of the Parliamentary Integrity Committee in the Iraqi Parliament, Representative Hadi al-Salami, spoke about Iraq’s losses from money laundering operations.
And the Iraqi representative refers to one of those cases, which is that in 2020 only the Central Bank sold 40 billion US dollars in the currency auction, which is supposed to be matched by the same value of imports at 40 billion dollars, but its value amounted to only 14 billion dollars, and this means that the value of Corruption operations were estimated at $23 billion in the aforementioned year.
In 2021, the volume of the currency sold at the auction amounted to 30 billion US dollars, while the value of imports amounted to only 13 billion dollars, and the difference between them – according to Al-Salami – represents what Iraq loses in terms of money laundering and terrorist financing.
Speaking to Al-Jazeera Net, Representative Al-Salami calls on the Iraqi government and the Central Bank to abide by the terms and laws of the international community regarding preventing the smuggling of currency to prevent its collision in ways that he considers “inappropriate” in order to achieve the interests of the people.
Regarding the most prominent mechanisms that must be taken to amputate or limit money laundering operations, the member of Parliamentary Integrity stresses the need for a monetary policy for the Central Bank, and a financial policy for the Ministry of Finance, calling on the Central Bank to withdraw the licenses of banks involved in currency smuggling or money laundering through speculation. The same applies to some offices and companies.
Representative Hadi Al-Salami calls on the Iraqi government and the central bank to abide by international laws to prevent currency smuggling (Al-Jazeera)
modest steps
and on the possibility that the recent steps of the Iraqi government and the central bank to combat money laundering and terrorist financing operations will pave the way for more dollar flows into the country, says economist Dr. Kovind Sherwani These steps are “modest”, and they are still in their infancy, and may not rise to the level of ambition required to achieve the expected results.
Sherwani infers his opinion from the continuation of the smuggling of hard currency, with a scarcity of it in the market, and this is what reinforced the unprecedented rise in its prices against the local currency.
And the economist indicates – in his speech to Al-Jazeera Net – that most of the money laundering and smuggling operations do not take place through transfers, which decreased by 70%, but rather take place in cash.
Regarding the impact of this on the stability of the local currency against the US dollar, Sherwani warns that the continuation of money laundering and smuggling abroad will increase the decline of the Iraqi dinar against the dollar, with its impact on the existing quantities of hard currency in the parallel markets with the continued demand for it.
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