Financial Crime World

Iraqi Regulators Crack Down on Money Laundering and Terrorism Financing

In an effort to curb the flow of illicit funds, Iraq’s central bank has issued new regulations aimed at preventing money laundering and terrorism financing. These measures, outlined in Article 10 of the country’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Law, require financial institutions and designated non-financial businesses and professions (DNFBPs) to implement robust customer due diligence (CDD) procedures.

Increased Scrutiny of Customer Identification

Under the new rules, financial institutions and DNFBPs must verify the identity of customers and beneficial owners whenever doubts arise about the veracity or adequacy of previously obtained identification data. This includes delaying verification until after the establishment of a business relationship, as per regulations issued by supervisory authorities.

Delayed Verification Allowed

The regulations also allow financial institutions and DNFBPs to delay verifying customer identities until after the establishment of a business relationship, provided that they have implemented robust CDD measures and risk assessments.

Reporting Suspicious Transactions

Article 11 of the law requires financial institutions and DNFBPs to maintain records of all transactions, including suspicious transactions reports (STRs), for at least five years. STRs must be submitted to the Office of AML/CFT in a timely manner.

AML/CFT Program Obligations

Financial institutions and DNFBPs are also required to establish and implement AML/CFT programs, which include:

  • Assessing money laundering and terrorism financing risks related to their business
  • Implementing policies and procedures for mitigating identified risks
  • Providing supervisory authorities with risk assessments

Independent Audit Function

The regulations also require financial institutions and DNFBPs to establish an independent audit function to assess the effectiveness of their AML/CFT programs and implementation.

Reporting Requirements

Article 12 of the law requires financial institutions and DNFBPs to report any transaction or attempted transaction suspected of money laundering or terrorism financing to the Office of AML/CFT immediately. Attorneys and other independent legal professionals are exempt from reporting requirements if they obtained the relevant information in circumstances where they are subject to professional secrecy.

International Cooperation

The regulations also require financial institutions and DNFBPs to:

  • Refrain from dealing with shell banks
  • Refrain from dealing with correspondent financial institutions that allow accounts to be used by shell banks
  • Refrain from providing services to internationally banned financing institutions
  • Apply the obligations of the law at the level of their financial group if operating outside Iraq

Terrorist Funds Freezing Committee

The regulations establish a Terrorist Funds Freezing Committee, responsible for freezing the funds and assets of terrorists designated by the UN Sanctions Committee or local authorities. The committee will be composed of representatives from various government agencies and institutions.

These measures aim to strengthen Iraq’s AML/CFT framework, enhancing the country’s ability to combat money laundering and terrorism financing, and protect its financial system from illicit activities.