Today, we will discuss Five Iraqi banks that will be banned from US dollar transactions. Let’s start.
Two sources who have intimate knowledge of the issue told Reuters this Sunday that the central bank will prohibit five other local banks from participating in US dollar transactions. This action follows discussions with US Treasury officials to stop the smuggling of dollars, money laundering, and other crimes.
The decision follows discussions held in Dubai this week between representatives from the Central Bank of Iraq—which earlier this year had to ban the operations of eight banks that process US dollar transactions—and US Treasury and Federal Reserve officials, one of the sources said.
A rare all-time ally of Iran and the United States and Iran with more than $100 billion of reserves in the US, Iraq relies heavily on Washington’s goodwill to ensure that access to oil revenue and financial resources is not hindered.
The second-largest producer of OPEC could come under attack following US President Donald Trump’s declaration this month that he would reinstate the “maximum pressure” policy towards Iran.
Iran considers its neighbor and ally Iraq a potential economic “lung.” Through the strong Shi’ite militias and political groups they support, Iran wields considerable political, financial, and military influence in the region. It also obtains Iraq’s hard currency via exports and evades US sanctions through its banking system.
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Reuters reported in December that an elaborate fuel oil trafficking network, which generates around $1 billion per every year for Iran as well as its proxy companies, was flourishing in Iraq after the election of Iraq’s Prime Secretary Mohammed Shia al-Sudani took office in 2022.
Banks that are not allowed to conduct transactions in dollars can continue to function and can make transactions in other currencies, according to the central bank.
The move does limit the bank’s ability to conduct transactions in dollars, which will hamper the majority of transactions conducted from outside Iraq.
This current Iraqi government was elected with the backing of Iran-backed and powerful political parties and groups that have the desire to control Iraq’s informal economy, such as the financial sector, which was long viewed as a significant source of money laundering.
Western officials had praised Prime Minister Sudani’s cooperation in implementing changes in the economy and Finance that aimed to impede Iran and its partners’ ability to obtain US dollars. Still, pressure is expected to mount upon Trump’s administration.
The five banks include Al-Mashreq Al-Arabi Islamic Bank, United Bank for Investment, Al Sanam Islamic Bank, Misk Islamic Bank, and Amin Iraq For Islamic Investment and Finance.
The Central Bank of Iraq did not respond immediately when asked for information.
The Treasury also didn’t immediately reply to requests for clarification.
The transaction included three payment service companies: Amawl, AL-Saqi, and Aqsa.
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