Compliance Challenges in Financial Services in Iraq: What You Need to Know About the New Regulation on Financing Medium, Small, and Micro Enterprises by Companies
Introduction
In a bid to strengthen the financial services sector in Iraq, the Central Bank of Iraq has recently issued a new regulation governing the operations of companies that finance medium, small, and micro enterprises. The regulation aims to ensure compliance with international standards and prevent financial crimes.
Key Changes Introduced by the New Regulation
- Only joint-stock companies are now permitted to engage in financing medium, small, and micro enterprises, while limited companies are explicitly barred from this activity.
- The required capital for joint-stock companies has been increased from IQD 2,000,000,000 (two billion Iraqi dinars) to IQD 100,000,000,000 (one hundred billion Iraqi dinars).
Meeting the Increased Capital Requirement
To meet the increased capital requirement, companies can make an initial payment of IQD 40,000,000,000 (forty billion Iraqi dinars) and settle the remainder in three equal annual installments, starting from the date of license issuance.
Approval Stages and Supervision
The regulation outlines a range of approval stages issued by the Central Bank of Iraq, stressing that initial approval does not guarantee final approval. The Central Bank also has the authority to audit and supervise these companies’ activities, ensuring that they are in compliance with regulatory requirements.
Obligations for Licensed Companies
Licensed companies will be required to:
- Establish specific administrative departments
- Submit periodic financial statements
- Allocate funds to mitigate risks
- Appoint an auditor
- Establish an online system for registering loan applications
Transition Period and Non-Compliance Penalties
The regulation provides a three-year grace period for companies licensed before its issuance date to align their operations with the new requirements. However, non-compliance may result in severe penalties and reputational damage.
Staying Informed and Compliant
As the financial services sector in Iraq continues to evolve, it is essential for businesses operating in this space to stay informed about regulatory changes and ensure compliance with all relevant requirements. At Al Tamimi & Company, our team of experienced lawyers is committed to providing accurate and timely legal advice to help you navigate these changes effectively.
Whether you need guidance on establishing a new entity or ensuring compliance with existing regulations, we are here to support your business needs.
Contact Us
If you have any questions or concerns about the new regulation or its implications for your business, please do not hesitate to contact us. Our team is dedicated to helping businesses in Iraq navigate the complex regulatory landscape and achieve their goals.