IRAQ’S ANTI-MONEY LAUNDERING EFFORTS PAY OFF, SAYS CENTRAL BANK GOVERNOR
Over the past seven years, Iraq’s financial system has made significant strides in combating money laundering and corruption. According to Iraq’s current central bank governor, Ali Mohsen Ismail Al-Alaq, cleaning up corruption has been his top priority since he took office in 2014.
A History of Corruption
Iraq had previously faced major problems with an estimated $800 million in US currency illegally flowing out of the country every week. The central bank was even dismissed after corruption became institutionalized within the government and political system.
Recent Progress
However, Iraq has made significant progress in recent years. In 2014, a law criminalizing money laundering and terrorism financing was passed, creating an anti-money-laundering council and establishing an office for combating money laundering and terror finance. These efforts have established the infrastructure needed to support the country’s anti-money-laundering and counter-terrorism-financing efforts.
International Recognition
As a result of these improvements, Iraq was recently taken off the Financial Action Task Force (FATF) list of countries failing to tackle money laundering. Money-laundering convictions in Iraq also rose dramatically, according to a 2017 US State Department report.
Expert Opinions
Experts say that while there is still work to be done, particularly in terms of implementing and understanding regulations, Iraq’s progress has earned it respect from international organizations and opened up opportunities for global financial institutions to come in.
- “The government did a good job of getting people to focus on what they needed to do under the FATF plan,” said John Sullivan, a former US Treasury Department attaché to Iraq. “They really have made progress against money laundering.”
- However, corruption remains a significant issue in Iraq, with the country ranking 168th out of 180 on Transparency International’s Corruption Perceptions Index.
Future Challenges
The next round of evaluations from FATF will focus on Iraq’s anti-money-laundering effectiveness, rather than simply passing laws and establishing controls. Iraqi banks are getting better at learning the letter of the law, but the country needs a lot of human development in the anti-money-laundering area.
Conclusion
Improvement in this area could also bring renewed foreign investor interest, observers say. Developing correspondent banking relationships across the globe will depend on strengthening the country’s defenses against corruption. The central bank has withdrawn licenses from exchange houses caught moving money illicitly and is submitting cases of money laundering to the courts.
“We see a long list” of correspondent relationships for domestic Iraqi banks now, but “it’s totally different than before,” said Al-Alaq. “Banks outside the country are starting to do business with them.”