In a move, Iraq has taken a bold stance by prohibiting eight local banks from engaging in U.S. dollar transactions, a decision attributed to the nation’s commitment to curb fraud, money laundering, and illicit use of U.S. currency.
This comes in the wake of a visit by a senior U.S. Treasury official, Brian Nelson, who commended the Central Bank of Iraq’s efforts to safeguard its financial system.
The banned banks, including Kurdistan International Islamic Bank and Investment Bank of Iraq, are now excluded from the daily dollar auction conducted by the Iraqi central bank, a crucial source of hard currency for the import-dependent nation.
READ ALSO: US Job Surge Puts Pressure On AUD/USD; RBA Decision Looms
The move aligns with the ongoing American campaign against the smuggling of money into Iran through Iraqi channels.
A Treasury spokesman stated, “We commend the continued steps taken by the Central Bank of Iraq to protect the Iraqi financial system from abuse.” The prohibited banks, with over $100 billion in reserves in the U.S., play a pivotal role in Iraq’s unique alliance with both the United States and Iran.
Interestingly, the decision follows a similar move in July 2023 when 14 banks were barred from dollar transactions, a part of a broader effort to prevent dollars from being funneled into Iran through the Iraqi financial system, in response to a request from Washington.
Despite tensions and concerns over Iran-backed armed organizations, collaboration between Iraqi Prime Minister Mohammed Shia al-Sudani and Western authorities has garnered praise for implementing reforms to align Iraq’s economy with global norms.
The recent sanctions against Al-Huda Bank underscore the commitment to thwart financial channels supporting Iran.
The ongoing dialogue between U.S. officials and Iraqi authorities, as evidenced by Brian Nelson’s visit, highlights the joint effort to combat terrorism, criminal activities, and corruption in the financial sector.
As Iraq navigates this complex terrain, the decision to restrict dollar transactions serves as a crucial step towards financial integrity and international alignment.