Financial Crime World

Iraq’s Financial Institutions Face Regulatory Compliance Challenges Amid Anti-Money Laundering and Counter-Terrorism Financing Efforts

Baghdad, Iraq

In a bid to combat money laundering and terrorist financing, the Iraqi government has enacted a range of anti-money laundering (AML) and counter-terrorism financing (CTF) laws and regulations. Financial institutions and non-financial businesses operating in the country are now required to adhere to these measures to ensure compliance.

Anti-Money Laundering and Countering Terrorist Financing Law

Under the Anti-Money Laundering and Countering Terrorist Financing Law No. 39 of 2015, financial institutions and designated non-financial businesses and professions (DNFBPs) must conduct customer due diligence (CDD) when establishing business connections or completing transactions exceeding a specific level.

Customer Due Diligence

This involves verifying clients’ identities and the purpose and nature of the business partnership or transaction. Additionally:

  • Know Your Customer (KYC) rules apply, requiring financial institutions to verify the identification of non-account holders conducting transactions worth at least five million Iraqi dinars ($4,250).
  • Beneficial owners must be recognized when creating an account and transacting more than 10 million Iraqi dinars ($8,500).

Reporting Suspicious Transactions

Financial institutions are required to report suspicious transactions to Iraq’s Financial Intelligence Unit (FIU) within seven working days. Suspicious transaction reports (STRs) must be completed for any transactions involving funds derived from illegal activities or money laundering.

Record-Keeping and Internal Controls

In addition, financial institutions and DNFBPs must maintain accurate and full records of their transactions and client interactions for at least five years.

  • To achieve compliance with AML rules, financial institutions and DNFBPs must adopt internal controls and policies, including processes for identifying, reporting, and managing money laundering and terrorism financing threats.
  • They are also required to conduct regular training sessions for personnel on AML and CTF matters.

Office of Combating Money Laundering and Terrorist Financing

The Office of Combating Money Launderling and Terrorist Financing (Money Laundering Reporting Office) was established within the Central Bank of Iraq in 2007 and reconfigured in 2015 with complete independence. The office is responsible for:

  • Receiving, analyzing, and investigating reports of suspected money laundering or terrorist financing.
  • Transmitting communications to relevant authorities.

Compliance Program

Financial institutions operating in Iraq must also establish a compliance program, which includes information exchange on AML and CTF matters with government departments and international organizations.

Sanctions and Penalties

The Iraqi government has emphasized the importance of compliance with these regulations, warning that failure to do so may result in severe penalties. Financial institutions and DNFBPs are advised to take proactive measures to ensure compliance, including:

  • Performing customer due diligence.
  • Record-keeping.
  • Suspicious transaction reporting.

Sanction Scanner Solutions

Sanction Scanner solutions can help financial institutions operating in Iraq ensure compliance with AML regulations and mitigate the risks associated with money laundering and terrorist financing.