Combating Money Laundering and Terrorism Financing: New Regulations in Iraq

The Iraqi government has introduced a series of regulations aimed at combating money laundering and terrorism financing. These regulations have significant implications for financial institutions and designated non-financial businesses and professions (DNFBPs).

Verification of Customer Identity

According to Article 10 of the regulations, financial institutions and DNFBPs may delay verification until after establishing a business relationship if doubts exist about the veracity or adequacy of previously obtained customer identification data. However, this delay is only permitted under strict guidelines set by supervisory authorities.

Record-Keeping Requirements

Article 11 mandates that financial institutions and DNFBPs maintain records of certain information and documents for at least five years after the business relationship has ended or the transaction was carried out. This includes:

• Copies of identification documents
• Transaction records
• Suspicious transaction reports

Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Programs

The regulations require financial institutions and DNFBPs to establish and implement AML/CFT programs, which must include:

• Risk assessments
• Policies, procedures, systems, and internal controls to mitigate identified risks
• Ongoing training for employees to identify irregular or suspicious transactions

Anonymous Accounts and Disclosure of Legal Procedures

Article 12 prohibits financial institutions and DNFBPs from opening or maintaining anonymous accounts or accounts under fictitious names. They are also required to refrain from disclosing legal procedures taken regarding transactions suspected of money laundering or terrorism financing.

Concerns and Criticisms

While the regulations have been welcomed by anti-money laundering advocates, some experts have raised concerns about their potential impact on banking operations. “These regulations are a step in the right direction, but they may lead to delays and increased costs for financial institutions,” said Dr. Ahmed Al-Mashhadani, an economist at Baghdad University.

The Terrorist Funds Freezing Committee

In response to these concerns, the government has formed the Terrorist Funds Freezing Committee, which will be responsible for freezing the funds of terrorists or other assets designated by the UN Sanctions Committee. The committee will be headed by the Deputy Governor of the Central Bank of Iraq and include representatives from various ministries and institutions.

Effectiveness of the Regulations

While some critics have raised concerns about the effectiveness of the regulations, citing the lack of resources and infrastructure in some parts of the country, others see them as a significant step towards combating financial crimes in Iraq. “These regulations demonstrate the government’s commitment to tackling money laundering and terrorism financing,” said Ali Al-Fatlawi, head of the Iraqi Anti-Money Laundering Association.

Conclusion

As the government continues to implement these regulations, financial institutions and DNFBPs must adapt quickly to avoid penalties and reputational damage. The stakes are high, as any failure to comply could result in serious consequences for both individuals and institutions involved in suspected money laundering or terrorism financing activities.