Iraq Cracks Down on Currency Black Market as SWIFT Transactions Soar

Iraq’s Central Bank Sees Surge in Overseas Dollar Transactions

Iraq’s Central Bank has announced a significant increase in overseas dollar transactions through the official global SWIFT system. Deputy Governor Ammar Khalaf attributed this surge to increased foreign trade and the adoption of international financial messaging standards.

Why the Increase?

The country’s banking sector adopted the SWIFT system at the end of 2022 as part of reforms aimed at tackling money laundering and ensuring compliance with international sanctions. Despite having over $100 billion in foreign currency reserves, Iraq has seen a rise in demand for foreign currencies due to tax evasion, black market activities, and dollar smuggling to countries and entities facing US sanctions, mainly neighboring Iran.

Electronic Platform Sees Transactions Jump

The Central Bank’s electronic platform, which ensures SWIFT compliance, has seen transactions jump from $50 million per day at the beginning of 2023 to around $200 million. Iraqi banks must now make transfers through this electronic system to access dollar reserves held in the United States, with the US Federal Reserve examining requests and blocking suspicious transactions.

Black Market Remains Thriving

Despite efforts to crack down on the black market, it remains a thriving illegal trade. The unofficial exchange rate trades at 1,470 dinars per dollar compared to the official rate of 1,320 dinars. To combat this issue, the government has taken steps to encourage importers to use official channels to obtain dollars.

Banned Banks and Talks with the American Treasury

The Central Bank has banned over 20 Iraqi banks from conducting dollar transactions due to non-compliance with US regulations regarding sanctions and money laundering. These banned banks are restricted from dealing in dollars but can operate local transactions. The Central Bank is working to lift the ban through talks with the American Treasury.

Government Efforts to Reduce Reliance on Black Market

Prime Minister Mohamed Shia al-Sudani has acknowledged that sanctions preventing dollar transfers to Iranian banks have driven Iraqi traders to the black market. The government hopes to reduce reliance on unofficial channels and increase transparency in foreign currency transactions.

Conclusion

The surge in SWIFT transactions is a positive step towards increasing transparency and reducing money laundering in Iraq’s banking sector. However, more needs to be done to combat the thriving black market and ensure that all banks comply with international regulations.