US Seeks to Prevent Dollar Smuggling to Iran; Iraq Bans Eight Banks from Dollar Transactions

Iraq has banned eight of its banks from engaging in US dollar transactions. According to Reuters, this decision came after a recent visit by a senior US Treasury official to Iraq, aimed at reducing fraud, money laundering, and other illegal activities involving the US dollar. Iraqi banks have been prohibited from accessing the dollar auction conducted daily by the Central Bank of Iraq. The dollar is the primary currency source in this import-dependent country. The US is trying to prevent dollar smuggling to Iran. Iraq, which is an ally of both the United States and Iran, holds over $100 billion in foreign reserves in the US and needs to secure favorable US approval to access these resources. Some of the banned banks listed in a document from the Central Bank of Iraq include: Kurdistan International Islamic Bank for Investment and Development, Ashur International Bank, Islamic South Bank, Al-Huda Bank, Iraq Investment Bank, Iraq Union Bank, Arab Islamic Bank, and Hammurabi Commercial Bank. A spokesperson for the US Treasury stated that Washington appreciates the ongoing efforts of the Central Bank of Iraq to protect the Iraqi financial system from abuses. The visit of Brian Nelson, the US Treasury's Deputy Secretary for Terrorism and Financial Intelligence, to Iraq occurred while Washington seeks to counter the Iranian government's attempts to circumvent sanctions in Iraq and align the Iraqi financial sector with international standards. According to US officials, during his visit to Iraq last week on Sunday and Monday, Brian Nelson met and discussed with senior officials, including Iraqi Prime Minister Mohammed Shia' al-Sudani. The US Treasury spokesperson also mentioned that Washington will continue to be a partner to Iraq in protecting its financial sector from the abuses of the Iranian government or other malign actors. Earlier, the Associated Press reported, citing the chairman of the Mosul Bank and the first deputy of the Union of Private Banks in Iraq, that currency is being smuggled from Iraq through land borders protected by armed Iraqi groups. He stated that these armed groups take a portion of the smuggled dollars as their share. According to his estimates, 80% of the dollars sold through the auction have reached Iraq's neighboring countries. A member of an Iranian-backed militia, who wished to remain anonymous, also stated that most Iraqi banks are indirectly controlled by politicians and political parties that have also benefited from the dollar auction. Iraqi officials' insistence on implementing 'barter' with Iran is not contrary to US sanctions. The US has limited dollar supply in Iraq to combat dollar smuggling to Iran.