Iraqi Cabinet Issues New Regulation to Boost Financial Sector Efficiency and Transparency

Strengthening the Financial Sector: A Significant Regulatory Update

Baghdad, Iraq - In a bid to enhance the efficiency, security, and transparency of the financial sector, the Iraqi Cabinet has issued a new regulation governing electronic payment services. The updated regulation was published in the Official Gazette on April 29, 2024, and aims to promote a comprehensive legal framework for safeguarding consumers and fostering financial system stability.

Defining Electronic Payment Services

The regulation defines electronic payment services as encompassing various activities related to the execution and management of legal and non-prohibited financial transactions through electronic means. This includes fund transfers, different forms of electronic money payments, and other financial transactions facilitated by specifically tailored systems and technological infrastructures.

Licensing and Regulation

Entities seeking to offer electronic payment services must obtain a license from the Central Bank of Iraq and adhere to its standards and regulations. The licenses are valid for ten years and can be renewed upon request and approval. The Central Bank has exclusive authority over the regulation, registration, and licensing of third-party-operated electronic payment systems, as well as the supervision and monitoring of their compliance with legal frameworks and regulatory standards.

Record-Keeping Requirements

The regulation requires both service providers and the Central Bank to maintain records of all electronic payment transactions and related data for a minimum of five years. These records must be made available for inspection and audit when necessary, with certified copies provided to relevant parties. Service providers are also mandated to furnish financial guarantees or easily liquidatable assets for the settlement of financial transactions, as stipulated by the Central Bank.

Penalties for Non-Compliance

In the event of non-compliance, the regulation outlines penalties such as warnings, financial penalties, suspension, or revocation of licenses. The Central Bank is empowered to issue instructions, directives, and guidelines for the implementation and enforcement of the regulation, with service providers obligated to adjust their operations to comply within six months from its enforcement date.

Expected Impact

The new regulation is expected to have a positive impact on Iraq’s financial sector, establishing a comprehensive legal framework aimed at safeguarding consumers and fostering financial system stability. The Central Bank has emphasized its commitment to ensuring that the updated regulations are enforced effectively, thereby promoting trust in the financial system and encouraging economic growth.

Guidance and Support

For further guidance and information on this topic, stakeholders can reach out to Al Tamimi & Company’s Iraq office, which has extensive experience navigating the complexities of Iraq’s financial regulations. Our experts are well-equipped to provide valuable insights and support to help clients successfully navigate the new regulatory landscape.