Financial Crime World

CBI Cracks Down on Unlicensed Financial Entities

The Central Bank of Iraq (CBI) has introduced new regulations aimed at curbing unlicensed financial activities in the country, protecting Iraqi citizens and businesses from fraudulent entities operating without a banking license or permit.

Licensing Requirements

According to Article 4, establishing a bank in Iraq, including as a majority or wholly-owned subsidiary of a foreign bank or bank holding company, requires prior issuance of a banking license by the CBI. Similarly, opening a branch or representative office of a foreign bank in Iraq necessitates a permit from the CBI.

  • Licenses and permits are non-transferable and must be issued in writing for an indefinite period.
  • Applicants must meet strict criteria, including:
    • Minimum capital requirements
    • Comprehensive supervision by a supervisory authority in their home country

Treatment of Foreign-Owned Banks

Subsidiaries and branches of foreign-owned banks operating in Iraq will be treated similarly to domestic banks under Iraqi law. However, the CBI has placed a limit on the number of licenses for banks controlled by foreign persons, capping it at six through December 31, 2008.

  • Foreign individuals can own up to 50% of an existing or new domestic bank without counting towards this limitation.
  • Foreigners can only own banks or shares in banks if they are subject to consolidated supervision by a supervisory authority in their home country.

License Application Requirements

The CBI has outlined strict requirements for license applications, including:

  • Detailed financial statements
  • Business plans
  • Auditor certifications

The regulator will conduct regular inspections and examinations of licensed entities to ensure compliance with the law.

Commitment to Stability and Security

In a statement, the CBI emphasized its commitment to maintaining a stable and secure banking sector in Iraq. “We are taking a firm stance against unlicensed financial entities to protect our citizens and businesses from fraudulent activities,” said a spokesperson for the central bank.