Wall Street Journal: Iraqi Banks Have Transferred Billions to Iran in Violation of US Sanctions

The Wall Street Journal reported on Sunday that Iraqi banks have violated international sanctions against the Islamic Republic by misusing a financial system designed by the US, transferring billions of dollars to Iran. According to the report, this system, managed by the New York branch of the US Federal Reserve, lacked sufficient controls to prevent money laundering and facilitated fraudulent transactions to finance the Iranian government and its affiliated militias. The report states that Ali Gholam, an influential Iraqi businessman, was at the center of this scheme, with three banks owned by him in Baghdad transferring tens of billions of dollars abroad under the pretext of importing goods such as car parts and furniture. However, US officials believe that a significant portion of these international transactions was allocated to the Islamic Revolutionary Guard Corps (IRGC) and its affiliated militias. These transactions were conducted through shell companies and fake invoices to circumvent international sanctions against the Iranian government. According to US audits, about 80% of the $250 million in daily remittances from Iraqi banks were untraceable, raising concerns about potential money laundering. The Wall Street Journal reported that in 2022, the US Treasury and the Federal Reserve declared dozens of Iraqi banks, including those owned by Ali Gholam, illegal as part of efforts to combat circumvention of international sanctions against Iran. Although Ali Gholam has denied allegations of money laundering and circumventing sanctions for the Iranian government, audits indicate numerous suspicious transactions from his banks and the transfer of large sums to obscure companies in the United Arab Emirates with little commercial activity. According to the Wall Street Journal, US officials were reluctant to impose strict controls on Iraqi banks due to concerns about the fragility of Iraq's economy after the war with ISIS. The financial system mentioned in the Wall Street Journal was established in 2003 following the overthrow of Saddam Hussein to manage the country's oil revenues held at the New York branch of the US Federal Reserve. The system aimed to facilitate international trade for Iraq, which was attempting to rebuild its economy after years of war and sanctions. However, this system lacked key safeguards typical in international banks, such as disclosure of details about remittance recipients, which made it possible to conduct illegal transactions under a seemingly legal framework. For the Islamic Republic of Iran, which is under extensive sanctions due to its illegal nuclear activities and support for terrorism, access to US dollars is of great importance. According to the Wall Street Journal, the funds transferred by Iraqi banks have been used for military purposes such as purchasing drone and missile parts and financing terrorist groups like Hezbollah in Lebanon and Hamas. The US has sanctioned several individuals and companies for 'aiding the Houthis, Hezbollah, and the IRGC' and has imposed new sanctions against the financial network linked to the IRGC. The US Treasury Department has warned about the financial activities of terrorist organizations supported by the Iranian government.