Financial Institutions in Iraq Face Scrutiny Over Due Diligence
A recent review of financial institutions in Iraq has raised concerns about their compliance with global anti-money laundering and terrorist financing standards. The Financial Action Task Force (FATF) has released a report assessing the country’s implementation of its recommendations, highlighting areas where institutions have fallen short.
Compliance Shortfalls
The report found that while some technical requirements were met, others fell short. Specifically:
- Iraq received a rating of “partially compliant” for measures related to:
- Confiscation and provisional measures
- Targeted financial sanctions related to proliferation
- The country was rated “compliant” in areas such as:
- Customer due diligence
- Internal controls and foreign branches and subsidiaries
Regulation and Supervision Concerns
The report also highlighted concerns about the regulation and supervision of financial institutions and designated non-financial businesses and professions (DNFBPs). Specifically:
- Iraq received a rating of “non-compliant” for:
- Transparency and beneficial ownership of legal persons and arrangements
- Regulation and supervision of DNFBPs
Expert Insights
Financial experts warn that these shortcomings pose risks to the global financial system and could undermine efforts to combat money laundering and terrorist financing. “Iraq’s financial institutions need to take immediate action to address these issues,” said a leading expert on international finance. “The consequences of non-compliance can be severe, including reputational damage and loss of business.”
Economic Growth and Challenges
As Iraq’s economy experiences significant growth driven by increased oil production and investments in infrastructure projects, new challenges have emerged. The risk of money laundering and terrorist financing is a major concern.
Pressure to Comply
Financial institutions in Iraq are now facing pressure to demonstrate their commitment to due diligence and compliance with global standards. Failure to do so could result in penalties and reputational damage.
Response from Iraqi Authorities
In response to the report, Iraqi authorities have announced plans to implement a range of measures to improve compliance, including:
- Strengthening regulations and supervision of financial institutions
- Improving transparency and accountability
FATF’s Review
The FATF’s review is seen as an important step towards improving transparency and accountability in Iraq’s financial sector. “This report provides a roadmap for reform and improvement,” said a senior official at the Iraqi Central Bank. “We are committed to working with international partners to ensure that our financial system is secure, transparent, and compliant with global standards.”