Financial Institutions and Terrorist Financing in Iraq: US Takes Action Against Al-Huda Bank
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The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has taken a significant step in combating money laundering and terrorist financing by issuing a final rule that prohibits domestic financial institutions from opening or maintaining correspondent accounts for or on behalf of Iraq-based Al-Huda Bank.
Background
Al-Huda Bank has been accused of serving as a conduit for terrorist financing, particularly for Iran-backed groups. The bank has allegedly exploited its access to US dollars to support designated foreign terrorist organizations, including Iran’s Islamic Revolutionary Guard Corps (IRGC) and IRGC-Quds Force, as well as Iran-aligned Iraqi militias Kata’ib Hizballah and Asa’ib Ahl al-Haq.
Illicit Activities
The bank’s chairman has been complicit in its illicit financial activities, using front companies to conceal the true nature of and parties involved in illegal transactions. Al-Huda Bank has for years exploited its access to US dollars to support terrorist financing, making it a key channel for money laundering and terrorist financing.
Action by FinCEN
The US Treasury Department has taken this action under section 311 of the USA PATRIOT Act to protect the American financial system from Al-Huda Bank’s illicit activity. The final rule prohibits domestic financial institutions from opening or maintaining correspondent accounts for or on behalf of Al-Huda Bank and requires them to take reasonable steps to prevent transactions involving the bank.
Due Diligence Requirements
The rule also requires covered financial institutions to apply special due diligence to their foreign correspondent accounts to guard against use by Al-Huda Bank. This includes:
- Conducting enhanced customer due diligence on correspondent account customers
- Monitoring correspondent account transactions for suspicious activity
- Reporting any suspicious transactions to the Financial Crimes Enforcement Network (FinCEN)
Impact
The move is seen as a significant step in preventing Iran and its proxies from exploiting Iraq’s financial system to facilitate terrorist activities. This action sends a strong message that the US will not tolerate the exploitation of its financial system to support terrorism.
Quote
“This action sends a strong message that we will not tolerate the exploitation of our financial system to support terrorism,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “We remain committed to working with Iraq to address illicit finance-related vulnerabilities in its financial system and prevent the use of US dollars to fund terrorist activities.”
Conclusion
The prohibition on Al-Huda Bank’s correspondent accounts is a critical step in preventing the misuse of the US financial system for terrorist financing. The US Treasury Department will continue to work with international partners to combat money laundering and terrorist financing, and to protect the integrity of the global financial system.