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Iraq Tightens Grip on Banking Regulations to Combat Money Laundering and Terrorism Financing

In a bid to combat money laundering and terrorism financing, Iraq has enacted a range of anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. The country’s lawmakers have introduced the Anti-Money Laundering and Countering Terrorist Financing Law No. 39 of 2015, which provides a comprehensive framework for preventing, detecting, and punishing money laundering and terrorist financing.

Key Requirements

According to experts, the law is designed to ensure that financial institutions and non-financial businesses, professions, and designated non-financial businesses and professions (DNFBPs) adhere to strict AML regulations. The key requirements of Iraq’s AML regulations include:

  • Customer Due Diligence: Financial institutions must complete customer due diligence processes when establishing a business connection or completing a transaction that exceeds a specific level.
  • Know Your Customer (KYC): Financial institutions must verify clients’ identities as well as the purpose and nature of the business partnership or transaction.
  • Suspicious Transaction Reporting: Entities subject to the AMLA must notify suspicious transactions to Iraq’s financial intelligence unit (FIU) of suspicious transactions and wait for instruction before proceeding with the transaction.
  • Record-Keeping: Financial institutions are required to maintain accurate and full records of their transactions and client interactions. These documents must be preserved for at least five years.
  • Internal Controls and Policies: To achieve compliance with AML rules, financial institutions and DNFBPs must adopt internal controls and policies, including policies and processes for identifying, reporting, and managing money laundering and terrorism financing threats.

Financial Intelligence Unit (FIU)

The Office of Combating Money Laundering and Terrorism Financing (Money Laundering Reporting Office) was established within the structure of the Central Bank of Iraq in 2007 and was reconfigured in 2015 with complete independence following the issuance of Anti-Money Laundering and Terrorism Financing Law No. 39.

The office’s main responsibilities include:

  • Receiving Reports: Receiving, acquiring, or investigating reports or information from reporting organizations concerning operations suspected of including original criminal proceeds, money laundering, or terrorism funding.
  • Information Analysis: Conducting information analysis or communication to execute its duties.

Compliance Program

Financial institutions in Iraq, as well as certain non-financial businesses and professions, must have a compliance program in place. These initiatives will work together to help Iraq achieve the following goals:

  • Information Exchange: Information exchange on money laundering and terrorism financing with appropriate authorities in government departments and the public sector.
  • Collaboration: Collaboration with international organizations and conferences dealing with money laundering and terrorism funding.
  • Database Creation: Creating a database for the AML/CTF office.
  • Technical Guidance: Providing technical guidance in relation to money laundering and terrorism financing agreements and treaties.

Penalties for Non-Compliance

Failure to comply with these requirements may result in heavy penalties; therefore, compliance must be taken seriously. Financial institutions can ensure that their firm is in compliance with Iraq’s anti-money laundering legislation by implementing Sanction Scanner solutions.