Compliance Issues in Financial Services in Iraq: New Regulation Targets Efficiency and Transparency
Introduction
The Iraqi Cabinet has issued a significant update to its regulatory framework governing electronic payment services, aiming to strengthen efficiency, security, and transparency within the country’s financial sector. The new regulation, published in the Official Gazette on April 29, 2024, replaces the previous 2014 regulation and introduces several key changes.
Definition of Electronic Payment Services
According to the new regulation, electronic payment services encompass a range of activities related to the execution and management of legal and non-prohibited financial transactions through electronic means. This includes:
- Fund transfers
- Various forms of electronic money payments
- Systems and technological infrastructures specifically tailored for these purposes
Licensing Requirements
Entities seeking to offer electronic payment services must obtain a license from the Central Bank of Iraq and adhere to its standards and regulations. The licenses are valid for ten years and can be renewed upon request and approval.
Central Bank Authority
The Central Bank of Iraq has been granted exclusive authority over:
- Regulation, registration, and licensing of third-party-operated electronic payment systems
- Supervision and monitoring of their compliance with legal frameworks and regulatory standards
Record-Keeping Requirements
Both service providers and the Central Bank of Iraq are required to maintain records of all electronic payment transactions and related data for a minimum of five years. These records must be made available for inspection and audit when necessary, with certified copies provided to relevant parties.
Financial Guarantees and Assets
Service providers are also required to furnish financial guarantees or easily liquidatable assets for the settlement of financial transactions, in accordance with the Central Bank of Iraq’s stipulations, to ensure financial stability.
Consequences of Non-Compliance
Non-compliance with the regulation can result in penalties such as:
- Warnings
- Financial penalties
- Suspension
- Revocation of licenses
The Central Bank of Iraq is also empowered to issue instructions, directives, and guidelines for the implementation and enforcement of the regulation. Service providers must adjust their operations to comply with the regulation within six months from its enforcement date.
Anticipated Impact
The anticipated impact of this regulation is positive, as it establishes a comprehensive legal framework aimed at safeguarding consumers and fostering financial system stability in Iraq.