Financial Crime World

Iraq Tightens Financial Screws: Due Diligence Now Crucial for Institutions Amid Anti-Money Laundering and Counter-Terrorism Efforts

Strengthened Financial Regulations to Combat Money Laundering and Terrorist Financing

Baghdad - The Iraqi government has strengthened its financial regulations to combat money laundering and terrorist financing, requiring institutions to conduct thorough due diligence on clients and transactions. These measures aim to prevent illegal activities and ensure compliance with international standards.

Foundation of AML and CTF Efforts

The Anti-Money Laundering and Countering Terrorist Financing Law No. 39 of 2015 serves as the foundation for Iraq’s AML and CTF efforts. Key requirements include:

  • Customer due diligence
  • Know Your Customer (KYC) rules
  • Suspicious transaction reporting
  • Record-keeping
  • Internal controls
  • Policies
  • Training
  • Supervision

Key Requirements for Financial Institutions and DNFBPs

Financial institutions and non-financial businesses, professions, and designated non-financial businesses and professions (DNFBPs) are required to conduct customer due diligence when:

  • Establishing business connections
  • Completing transactions exceeding a specific level
  • Verifying clients’ identities and the purpose and nature of the transaction

KYC Rules for Covered Entities

Covered entities must verify the identification of non-account holders conducting transactions worth at least five million Iraqi dinars (approximately $4,250). Beneficial owners must be recognized when creating an account and transacting more than 10 million Iraqi dinars (roughly $8,500).

Reporting Suspicious Transactions

Entities subject to AML regulations are required to notify suspicious transactions to Iraq’s financial intelligence unit (FIU) and wait for instruction before proceeding with the transaction. Suspicious transaction reports (STRs) must be completed for any transactions involving funds derived from illegal activities or money laundering.

Record-Keeping and Internal Controls

Financial institutions and DNFBPs must maintain accurate records of their transactions and client interactions, which must be preserved for at least five years. Internal controls and policies are essential to achieve compliance with AML rules, including:

  • Identifying, reporting, and managing money laundering and terrorism financing threats
  • Detecting and reporting suspicious activity

Training and Education

Financial institutions and DNFBPs are expected to conduct AML training for their personnel to ensure they are aware of the dangers of money laundering and terrorism financing, as well as how to detect and report suspicious activity.

Office of Combating Money Laundering and Terrorist Financing

The Office of Combating Money Laundering and Terrorist Financing (Money Laundering Reporting Office) was established in 2007 within the Central Bank of Iraq. The office is responsible for:

  • Receiving, analyzing, and communicating reports or information concerning suspected money laundering and terrorist financing operations

Compliance Program Requirements

Financial institutions in Iraq must have a compliance program in place to achieve the country’s AML/CFT goals, including:

  • Information exchange with government authorities
  • Participation in international organizations
  • Creating a database for AML/CFT analysis
  • Organizing training sessions for staff

Consequences of Non-Compliance

Failure to comply with these requirements can result in severe penalties, making it essential for financial institutions and enterprises to take precautions to ensure compliance. Sanction Scanner solutions can help firms ensure they are in compliance with Iraq’s anti-money laundering legislation.