Iraq Bans Eight Local Banks from U.S. Dollar Transactions
In a move to combat fraud and money laundering, Iraq has barred eight local commercial banks from engaging in U.S. dollar transactions, including access to the Iraqi central bank's daily dollar auction. This decision comes shortly after a visit by a senior U.S. Treasury official, reflecting efforts to curb currency smuggling to neighbouring Iran.
These banks, including 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, are vital players in Iraq's financial landscape.
The ban is part of a broader U.S. crackdown on dollar smuggling to Iran, with Washington exerting pressure on Iraq to disrupt the flow of funds that could support activities contrary to U.S. interests. The U.S. Treasury Department identified Al-Huda Bank as being involved in diverting U.S dollars to Iranian-backed groups, emphasising the ongoing efforts to limit Iran's access to international financial networks. The move follows last July's ban on 14 Iraqi banks from conducting U.S. dollar transactions and aligns with U.S. sanctions aimed at curbing Iran's access to dollars through Iraqi banks.
While Iraq, holding over $100 billion in reserves in the U.S., heavily depends on Washington's goodwill for access to oil revenues, the current government faces challenges in balancing relations with both the U.S. and Iran. The recent meeting between top U.S. Treasury official Brian Nelson and Iraqi officials in Baghdad highlighted expectations for Iraq to play a more active role in countering Iran-backed armed groups operating within its borders. Despite these challenges, Western officials have acknowledged Iraq's progress in implementing economic and financial reforms to align with international standards.