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Washington seeks comprehensive reform of Iraqi banks.. and some sanctioned banks are "defrauding"
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[You must be registered and logged in to see this link.]'s economy in Iraq
Iraq is trying, through the efforts of the Central Bank, to reassure the American side by applying strict international standards to its banking sector , especially with the imposition of a foreign currency sales window and a package of sanctions on many private banks that violate the controls, while the dollar exchange rate in the parallel market continues to be in a state of anxiety, rising and falling without stability, despite all the regulations being implemented to ease the stranglehold on the smuggling file for years.
Last August, a delegation from the Central Bank of Iraq headed by Governor Ali Al-Alaq traveled to Washington to hold talks with the US Treasury and the Federal Reserve, as well as meetings with MoneyGram, Visa, and MasterCard, as well as State Bank and JP Morgan, and international auditing firms ( KPMG , E&Y , K2i , and Oliver Wyman ) .
According to an official statement by the Central Bank, it indicated that another meeting will be held at the end of this year to discuss the major shift in ending the work of the electronic platform for foreign transfers and replacing it with direct banking relations between Iraqi banks and the network of international correspondent banks, according to the plan in place.
Update banking work
Regarding this, the specialized banker, Mustafa Akram Hantoush, told Al-Jabal, “The United States of America wants to review the entire private banking system, as the financial auditing company that will be contracted with is the one that will prepare a study for this,” indicating that “the meetings of the Central Bank delegation with the American side were good, and one of the international financial auditing companies will work in the Iraqi banking sector.”
He continued, "The Iraqi banking system does not conduct accurate financial operations, but rather transfer operations requested by the Central Bank, which in turn relies on old standards to classify those banks," stressing that " the Central Bank must force banks to work according to international standards, because some of those banks have been around since the nineties of the last century, at a time when it is known that there are Iraqi banks that are considered the best compared to other foreign banks."
Hantoush considered that "the problem also lies in the fact that banking transactions are based on commercial activity and the issue of customs and automation that must be applied at a time when the Central Bank has appealed to banks for the purpose of linking them electronically with customs," noting that "the electronic link with banks will inevitably lead to preventing fraud and increasing state revenues by reducing economic chaos."
The specialized banker said, "The Central Bank of Iraq is now on its way to correcting the course as a first step in the issue of the banks sanctioned by the US," while he explained that "the visit that was made to Washington was serious about resolving the banking crisis and it is a necessary step that was in its place."
It is noteworthy that the Prime Minister, Mohammed Shia Al-Sudani, had received last week the head of the Private Banks Association, in the presence of a number of directors of private banks, and during the meeting he pointed out "the formation of a higher committee to undertake the development of treatments for the work of banks; to be in line with the requirements of work in the international financial arena, confirming the Central Bank's contract with Oliver Wyman Company with the aim of developing the banking and financial sector."
Al-Sudani also directed "the preparation of a draft resolution to be presented to the Council of Ministers, which includes obligating ministries to provide facilities that support the banking sector in Iraq." This was preceded by the announcement by the Central Bank of Iraq of contracting with Oliver Wyman to conduct a comprehensive review of the conditions of Iraqi banks, especially banks prohibited from dealing in the US dollar, in addition to improving the level of banks' procedures in line with international standards.
Since the beginning of 2023, Washington has intervened to limit the smuggling of dollars from Iraq, which led to the dollar price rising in the local market to a record level of 170,000 dinars, then gradually declining and stabilizing at less than 150,000 dinars per 100 dollars, due to the decline in the Central Bank’s sales of dollars, due to its subjection to the international financial system “SWIFT”.
circumventing sanctions
In contrast, the economic analyst, Omar al-Halbousi, interprets the recent visit of the Central Bank delegation to Washington as “the US Treasury Department’s summoning of the Iraqi bank’s management, which came after it was postponed twice during the same month for the purpose of the US administration completing the auditing of data and banking activities in Iraq, which proved the continued circumvention of the imposed sanctions.”
Al-Halbousi added to Al-Jabal that “ the manipulation practiced by some Iraqi banks, especially the sanctioned ones, is fully proven by the Federal Bank and the US Treasury, and they are insisting on the auditing company continuing its work in following up on transfers,” considering that “the financial situation in Iraq is now very worrying and we must be careful not to fall into new US sanctions that will cause the country further economic losses.”
He explained that "the banks that are allowed to conduct financial transfers are not Iraqi and are divided between Jordan, Qatar, the Emirates and Kuwait in cooperation with internal Iraqi banks," stressing that "the acquisition of Iraqi banks by Arab banks is a process that will lead to the entry of new foreign banks into the line of commercial transfers, which will accurately reveal the high financing line that comes out of the current Iraqi banks towards the economic offices and armed factions and will eventually expose them to new sanctions during the coming period."
It is worth noting that the Central Bank of Iraq has been planning for months to gradually cancel the electronic platform for foreign transfers during the current year 2024, until it is completely canceled by the end of the year, and to keep it for auditing and statistical purposes, as part of its efforts to enable Iraqi banks to establish and establish relations with the global and regional banking sector.
The rift between the Iraqi and the banks
Despite the government's attempts to restore confidence between citizens and the banking sector through electronic improvements and the shift to electronic payment, they are still ineffective so far. According to World Bank figures, only 23 percent of Iraqi families have an account in a financial institution, which is one of the lowest percentages in the Arab world, especially since the owners of these accounts are government employees whose salaries are distributed to public banks at the end of each month. However, these salaries also do not remain in the accounts for long, as queues quickly form in front of banks from employees who withdraw their salaries in cash and prefer to keep them at home.
In the same context, economic researcher, Nabil Al-Ali, during his interview with “Al-Jabal”, believes that “the recent Iraqi-American negotiations appeared positively through the statement of the Central Bank of Iraq because the latter tried during the past period to expand the base of banks that work directly with American correspondent banks,” stressing that “the situation is going positively because the work depends on the non-sanctioned banks and operates according to a clear system and is far from the methods of the sanctioned banks that do not develop regarding their return to dealings.”
Iranian destiny
Al-Ali pointed out that "the Central Bank will succeed in one way or another if it is able to conduct transfers to banks at a rate that covers 90 percent of the volume of Iraqi trade, and what it cannot cover will be linked to the countries sanctioned by the US, such as Iran, which produced the parallel market and raised the prices of goods as a result of the conflict between the dollar and the dinar," stressing that "the Iraqi Central Bank controlled the dollar crisis at a certain rate related to the prices of goods that come at the official price, which made them decrease after they were imported at the parallel exchange rate."
The list of banks banned in Iraq from dealing in the US dollar includes a large number of Islamic and commercial banks, including Elaf Islamic Bank, Al-Qurtas Islamic Bank for Investment and Finance, and Bank Melli Iran, as these banks cannot deal in the dollar, while they can deal in the Iraqi dinar and other currencies.
The Central Bank is responsible for determining which banks are banned in Iraq, in addition to announcing the reasons for the ban. This is a group of banks that have been announced to be banned from using the US dollar in their transactions, and their number has reached more than 20 different banks after they were included on the US sanctions list.
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8 minute read
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[You must be registered and logged in to see this link.]'s economy in Iraq
Failure to renew the banking system means meeting the Iranian fate
Iraq is trying, through the efforts of the Central Bank, to reassure the American side by applying strict international standards to its banking sector , especially with the imposition of a foreign currency sales window and a package of sanctions on many private banks that violate the controls, while the dollar exchange rate in the parallel market continues to be in a state of anxiety, rising and falling without stability, despite all the regulations being implemented to ease the stranglehold on the smuggling file for years.
Last August, a delegation from the Central Bank of Iraq headed by Governor Ali Al-Alaq traveled to Washington to hold talks with the US Treasury and the Federal Reserve, as well as meetings with MoneyGram, Visa, and MasterCard, as well as State Bank and JP Morgan, and international auditing firms ( KPMG , E&Y , K2i , and Oliver Wyman ) .
According to an official statement by the Central Bank, it indicated that another meeting will be held at the end of this year to discuss the major shift in ending the work of the electronic platform for foreign transfers and replacing it with direct banking relations between Iraqi banks and the network of international correspondent banks, according to the plan in place.
Update banking work
Regarding this, the specialized banker, Mustafa Akram Hantoush, told Al-Jabal, “The United States of America wants to review the entire private banking system, as the financial auditing company that will be contracted with is the one that will prepare a study for this,” indicating that “the meetings of the Central Bank delegation with the American side were good, and one of the international financial auditing companies will work in the Iraqi banking sector.”
He continued, "The Iraqi banking system does not conduct accurate financial operations, but rather transfer operations requested by the Central Bank, which in turn relies on old standards to classify those banks," stressing that " the Central Bank must force banks to work according to international standards, because some of those banks have been around since the nineties of the last century, at a time when it is known that there are Iraqi banks that are considered the best compared to other foreign banks."
Hantoush considered that "the problem also lies in the fact that banking transactions are based on commercial activity and the issue of customs and automation that must be applied at a time when the Central Bank has appealed to banks for the purpose of linking them electronically with customs," noting that "the electronic link with banks will inevitably lead to preventing fraud and increasing state revenues by reducing economic chaos."
The specialized banker said, "The Central Bank of Iraq is now on its way to correcting the course as a first step in the issue of the banks sanctioned by the US," while he explained that "the visit that was made to Washington was serious about resolving the banking crisis and it is a necessary step that was in its place."
It is noteworthy that the Prime Minister, Mohammed Shia Al-Sudani, had received last week the head of the Private Banks Association, in the presence of a number of directors of private banks, and during the meeting he pointed out "the formation of a higher committee to undertake the development of treatments for the work of banks; to be in line with the requirements of work in the international financial arena, confirming the Central Bank's contract with Oliver Wyman Company with the aim of developing the banking and financial sector."
Al-Sudani also directed "the preparation of a draft resolution to be presented to the Council of Ministers, which includes obligating ministries to provide facilities that support the banking sector in Iraq." This was preceded by the announcement by the Central Bank of Iraq of contracting with Oliver Wyman to conduct a comprehensive review of the conditions of Iraqi banks, especially banks prohibited from dealing in the US dollar, in addition to improving the level of banks' procedures in line with international standards.
Since the beginning of 2023, Washington has intervened to limit the smuggling of dollars from Iraq, which led to the dollar price rising in the local market to a record level of 170,000 dinars, then gradually declining and stabilizing at less than 150,000 dinars per 100 dollars, due to the decline in the Central Bank’s sales of dollars, due to its subjection to the international financial system “SWIFT”.
circumventing sanctions
In contrast, the economic analyst, Omar al-Halbousi, interprets the recent visit of the Central Bank delegation to Washington as “the US Treasury Department’s summoning of the Iraqi bank’s management, which came after it was postponed twice during the same month for the purpose of the US administration completing the auditing of data and banking activities in Iraq, which proved the continued circumvention of the imposed sanctions.”
Al-Halbousi added to Al-Jabal that “ the manipulation practiced by some Iraqi banks, especially the sanctioned ones, is fully proven by the Federal Bank and the US Treasury, and they are insisting on the auditing company continuing its work in following up on transfers,” considering that “the financial situation in Iraq is now very worrying and we must be careful not to fall into new US sanctions that will cause the country further economic losses.”
He explained that "the banks that are allowed to conduct financial transfers are not Iraqi and are divided between Jordan, Qatar, the Emirates and Kuwait in cooperation with internal Iraqi banks," stressing that "the acquisition of Iraqi banks by Arab banks is a process that will lead to the entry of new foreign banks into the line of commercial transfers, which will accurately reveal the high financing line that comes out of the current Iraqi banks towards the economic offices and armed factions and will eventually expose them to new sanctions during the coming period."
It is worth noting that the Central Bank of Iraq has been planning for months to gradually cancel the electronic platform for foreign transfers during the current year 2024, until it is completely canceled by the end of the year, and to keep it for auditing and statistical purposes, as part of its efforts to enable Iraqi banks to establish and establish relations with the global and regional banking sector.
The rift between the Iraqi and the banks
Despite the government's attempts to restore confidence between citizens and the banking sector through electronic improvements and the shift to electronic payment, they are still ineffective so far. According to World Bank figures, only 23 percent of Iraqi families have an account in a financial institution, which is one of the lowest percentages in the Arab world, especially since the owners of these accounts are government employees whose salaries are distributed to public banks at the end of each month. However, these salaries also do not remain in the accounts for long, as queues quickly form in front of banks from employees who withdraw their salaries in cash and prefer to keep them at home.
In the same context, economic researcher, Nabil Al-Ali, during his interview with “Al-Jabal”, believes that “the recent Iraqi-American negotiations appeared positively through the statement of the Central Bank of Iraq because the latter tried during the past period to expand the base of banks that work directly with American correspondent banks,” stressing that “the situation is going positively because the work depends on the non-sanctioned banks and operates according to a clear system and is far from the methods of the sanctioned banks that do not develop regarding their return to dealings.”
Iranian destiny
Al-Ali pointed out that "the Central Bank will succeed in one way or another if it is able to conduct transfers to banks at a rate that covers 90 percent of the volume of Iraqi trade, and what it cannot cover will be linked to the countries sanctioned by the US, such as Iran, which produced the parallel market and raised the prices of goods as a result of the conflict between the dollar and the dinar," stressing that "the Iraqi Central Bank controlled the dollar crisis at a certain rate related to the prices of goods that come at the official price, which made them decrease after they were imported at the parallel exchange rate."
The list of banks banned in Iraq from dealing in the US dollar includes a large number of Islamic and commercial banks, including Elaf Islamic Bank, Al-Qurtas Islamic Bank for Investment and Finance, and Bank Melli Iran, as these banks cannot deal in the dollar, while they can deal in the Iraqi dinar and other currencies.
The Central Bank is responsible for determining which banks are banned in Iraq, in addition to announcing the reasons for the ban. This is a group of banks that have been announced to be banned from using the US dollar in their transactions, and their number has reached more than 20 different banks after they were included on the US sanctions list.
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