IRAQ: Central Bank Issues New Regulations for Financial Services, Raising Concerns Over Compliance
Strengthening Financial Regulations in Iraq
The Central Bank of Iraq has issued a new regulation governing financing medium, small, and micro enterprises by companies, effective April 28, 2024. The regulation aims to strengthen financial regulations in Iraq, but its complexity has raised concerns over compliance among financial institutions.
Key Changes and Concerns
- Only joint-stock companies are now permitted to engage in financing medium, small, and micro enterprises, effectively barring limited companies from this activity.
- The required capital for joint-stock companies has been increased to IQD 100,000,000,000 (one hundred billion Iraqi dinars), up from the previous requirement of IQD 2,000,000,000 (two billion Iraqi dinars).
- Stricter auditing and supervisory measures have been introduced, granting the Central Bank of Iraq authority to monitor and regulate financial institutions’ activities.
- Companies are now required to establish specific administrative departments, including:
- Financial management
- Risk management
- Compliance monitoring
- Credit management
- Anti-money laundering
- Counter-terrorism financing
Industry Concerns
Industry experts have expressed concerns over the complexity of the new regulation, which they say may lead to compliance issues for some financial institutions. A senior finance official noted that “the new regulation is a significant departure from previous instructions, and many companies may struggle to meet the new requirements.”
Support and Guidance
Despite these challenges, legal firm Al Tamimi & Company has announced its readiness to assist clients in navigating the transition. The company’s spokesperson emphasized their commitment to providing accurate and timely legal advice to help clients comply with the new regulation.
Penalties for Non-Compliance
The regulation introduces penalties for non-compliance, including fines and revocation of licenses. With a three-year grace period for licensed companies to align their operations with the new requirements, industry insiders stress that it is crucial for financial institutions to act quickly to ensure compliance.
Importance of Stability in Iraq’s Financial Sector
Experts emphasize that these changes are essential to maintaining stability and preventing financial risks in Iraq’s evolving financial sector. However, the complexity of the regulation has raised concerns over its implementation, highlighting the need for close monitoring and guidance from regulatory authorities.
In summary, while the new regulation aims to strengthen financial regulations in Iraq, its complexity has raised concerns over compliance among financial institutions. It is essential for companies to act quickly to ensure compliance and for regulatory authorities to provide guidance and support during this transition period.