IRAQ ENACTS STRONGER BANKING REGULATIONS TO COMBAT MONEY LAUNDERING
A Bid to Stem Illicit Financial Activities
In a bid to combat money laundering and terrorism financing, the Iraqi government has enacted stringent anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. These new laws aim to prevent, detect, and punish illicit financial activities in the country.
Key Requirements of Iraq’s AML Regulations
Customer Due Diligence Procedures
Financial institutions, non-financial businesses, professions, and designated non-financial businesses and professions (DNFBPs) must adhere to strict customer due diligence procedures. This includes:
- Verifying clients’ identities
- Verifying the purpose of business partnerships or transactions exceeding a certain threshold
- Recognizing beneficial owners when creating an account and transacting more than 10 million Iraqi dinars (approximately $8,500)
Know Your Customer (KYC) Rules
Financial entities must verify the identification of non-account holders conducting transactions worth at least five million Iraqi dinars (approximately $4,250).
Suspicious Transaction Reporting
Entities subject to the AMLA must notify suspicious transactions to Iraq’s financial intelligence unit (FIU). Suspicious transaction reports (STRs) must be completed for any transactions involving funds derived from illegal activities or money laundering, intended for the financing of crime (including terrorism), or over which a criminal organization has disposal power.
Record-Keeping and Internal Controls
Financial institutions and DNFBPs must maintain accurate and full records of their transactions and client interactions. These documents must be preserved for at least five years. To achieve compliance with AML rules, financial entities must adopt internal controls and policies, including procedures for identifying, reporting, and managing money laundering and terrorism financing threats.
Training and Supervision
Financial institutions and DNFBPs are required to conduct AML training for their personnel to ensure they are aware of the dangers of money laundering and terrorism financing. The Office of Combating Money Laundering and Terrorism Financing (Money Laundering Reporting Office) was established within the Central Bank of Iraq in 2007 and reconfigured in 2015 with complete independence following the issuance of Anti-Money Laundering and Terrorism Financing Law No. 39.
Compliance Program
Financial institutions in Iraq, as well as certain non-financial businesses and professions, must have a compliance program to help achieve the goals of information exchange on money laundering and terrorism financing with relevant authorities, participation in international organizations and conferences dealing with money laundering and terrorism funding, creating a database for the AML/CFT office, analyzing and sharing information regarding suspected money laundering or terrorist financing, supporting judicial authorities in implementing the law’s requirements, creating and analyzing precise statistics on matters pertaining to the AML/CFT Office’s functions, organizing training sessions for concerned staff, and notifying regulatory authorities of any financial institution or non-financial organization that breaches the provisions of the AML/CFT statute.
Conclusion
Iraq’s new banking regulations aim to combat money laundering and terrorism financing by imposing strict requirements on financial institutions, non-financial businesses, professions, and designated non-financial businesses and professions. Failure to comply with these requirements may result in severe penalties; therefore, compliance must be taken seriously.