Iraq’s central bank will exclude five more domestic banks from conducting transactions in dollars after the banks sat with US Treasury officials to attempt to stem money laundering, dollar smuggling, and other forms of financial abuse, sources reported on Sunday.
The action follows meetings last week in Dubai between representatives of the US Treasury and Federal Reserve and officials from the CBI. The move is an extension of last year’s ban on eight Iraqi banks from US dollar transactions.
A US ally and an ally of Iran, Iraq possesses over $100 billion in American reserves and relies on Washington’s assistance to maintain access to the financial system and its oil revenues intact. However, heightened tensions can place Iraq in a tricky position, especially following US President Donald Trump last week announcing his plans to introduce his “maximum pressure” strategy against Iran for a second time.
Iran has long viewed Iraq as an essential economic partner, leveraging its influence through powerful Shi’ite militias and political factions. The country also benefits from Iraq’s banking system to secure hard currency and bypass US sanctions. In December, Reuters reported that a sophisticated fuel oil smuggling operation, allegedly generating over $1 billion annually for Iran and its affiliates, had expanded under Iraqi Prime Minister Mohammed Shia al-Sudani’s tenure since 2022.
While the newly banned banks 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 continue to operate and are free to deal in other currencies, being kept out of US dollar transactions greatly disables them from doing international business.
At the same time, three payment service providers Amawl, AL-Saqi Payment, and Aqsa Payment were banned. The US Treasury and Iraqi central bank have not announced the action officially.
