In a move aimed at curbing fraud, money laundering, and other illicit uses of the US currency, Iraq has announced the prohibition of 8 local commercial banks from conducting transactions in dollars.
This decision comes just days after a senior official from the US Department of the Treasury visited Baghdad.
Under the directive, the eight banks will be barred from participating in the daily dollar auction organized by the Central Bank of Iraq.
The auction is the primary source of hard currency in a nation heavily reliant on imports.
Iraq has become a pivotal point in the US campaign to curb the smuggling of dollars to Iran.
With over $100 billion in reserves in the United States, Iraq, a rare ally of both the United States and Iran, depends heavily on Washington’s goodwill to ensure the unhindered access to its oil revenues and financial resources.
The Central Bank of Iraq issued a document verifying the names of the banned banks, which include Ashur International Investment Bank, Iraqi Investment Bank, Iraqi Union Bank, Kurdistan Islamic International Investment and Development Bank, Al-Huda Bank, Islamic South Investment and Finance Bank, Arab Islamic Bank, and Hammurabi Commercial Bank.
As of now, the head of the Iraqi Private Banks League, representing the affected banks, and Ashur International Investment Bank have not responded to requests for comment, while Reuters is in contact with other banks.
A spokesperson for the US Department of the Treasury praised the ongoing efforts of the Central Bank of Iraq in safeguarding the Iraqi financial system against misuse.
In July of last year, Iraq banned 14 banks from conducting dollar transactions as part of a broader campaign to prevent the smuggling of dollars to Iran through the Iraqi banking system, a move reportedly made at the request of Washington.
The Central Bank allows the banned banks to continue their operations and conduct transactions in other currencies.
Brian Nelson, Deputy Assistant Secretary for Terrorist Financing and Financial Crimes at the US Department of the Treasury, met with senior Iraqi officials in Baghdad last week to discuss ways to protect both the Iraqi and international financial systems from criminal, corrupt, and terrorist entities.
During the visit, the US Treasury Department took action against Al-Huda Bank, stating that it had been involved in transferring billions of dollars to Iran-backed groups.
A senior official at the Treasury Department told Reuters that Washington expects Iraq to make a greater effort in helping counter Iran-backed armed groups operating out of Iraq, following the killing of three American soldiers last week. Washington has held Iraqi militias responsible for the attack.
Western officials have applauded cooperation with Iraqi Prime Minister Mohammed Shia Al-Sudani in implementing economic and financial reforms aimed at reducing Iran and its allies’ access to dollars and aligning the Iraqi economy with international standards.
