Economy News Baghdad:
Seven years ago, the financial system in Iraq was suffering from problems. Iraqi auditors told American investigators at the time that an estimated $ 800 million of the American currency had been illegally leaked out of Iraq every week and had isolated the central bank governor from his job. After corruption has become an institutional base within the government and political system in the country, international organizations have included Iraq on the international watch lists of countries that have failed to combat money laundering.
Since then, however, the country’s efforts have been improving in combating illegal financing, and international monitoring bodies have noted this.
In an interview, Mr. Ali Mohsen Ismail Al-Alaq, the current Governor of the Central Bank of Iraq, pointed out that the fight against corruption in Iraq has been a major priority for the Central Bank since he took office in 2014.
His efforts, together with the contribution of the country’s leaders and American and international experts, have begun to bear fruit.
“We have earned this respect from international organizations and opened up opportunities for global financial institutions,” says Al-Aalak.
Iraq passed a law in 2015 criminalizing money laundering and terrorist financing, and has established an Anti-Money Laundering Council within the Central Bank and an Anti-Money Laundering and Terrorism Financing Office. The Board has become the authority to oversee compliance, while the Office has been given the task of dealing with reports of suspicious activities.
“It was important because it gave us the path to dealing with the problems we were facing at that time,” explains Alak. He added that these efforts have created the necessary infrastructure to support the country’s efforts in the fight against money laundering and the financing of terrorism.
Ayham Kamel, head of the Middle East and North Africa division of the Eurasia Group, a political risk advisory firm, notes that after the invasion,Iraq had an unregulated banking system and suffered from a lack of capacity to combat money laundering.
“Things are now very much improved, and the government is in a position to maintain the integrity and integrity of the Iraqi financial sector and will continue to adjust its regulations and procedures to ensure compliance with the broad standards of the international and financial community,” Kamel said.
According to a US State Department report in 2017, convictions for money laundering in Iraq have risen dramatically.
In June, FATF , a Paris-based international oversight body, removed Iraq from the list of countries that failed to address money laundering.
“Iraq has been facing serious problems over the years,” says John Sullivan, a former US Treasury attache in Iraq who is now a director of the Financial Integrity Advisory Network.
“The government has done a good job of getting people focused on what they need to do under the FATF plan,” Sullivan explains .
The government has already made progress in fighting money laundering, he said, citing Mr. Alaq’s efforts.
But the central bank and country leaders still have other tasks to do. Iraq ranks 168 out of 180 countries, similar to Venezuela, in the latest edition of Transparency International’s Corruption Perceptions Index.
Observers say the improvement in anti-corruption could attract foreign investors’ attention again.
Sullivan says the next round of FATF assessments will focus on the effectiveness of anti-money laundering in Iraq, rather than simply passing the right laws and setting the recommended controls.
“They need to implement and understand the laws and regulations they put in place, and use lessons learned from anti-terrorist financing efforts to address the bigger problem of money laundering linked to crime and corruption.”
“It’s the biggest security issue in Iraq today,” says Sullivan. “It’s the point where the whole country is paralyzed.”
Sullivan notes that the ability of Iraqi banks to improve in learning the spirit of law, but the country still needs a lot of human development in the fight against money laundering.
He says the Iraqi banks have referred cases of money laundering to the courts, and that the central bank has withdrawn the licenses of banking companies that were seized in the operations of the transfer of funds illegally.
“These tools are successful and they deliver results.”
Walid Raad, an EY partner, notes that corruption problems hinder Iraqi lenders from joining the international banking community. The development of correspondent banking relationships around the world will depend on strengthening the country’s defenses against corruption.
Mr Raad says the central bank is central to this effort because it has ultimate responsibility for overseeing anti-money laundering programs in the country.
“They must show the international community that they are dealing with corruption in a serious way,” explains Raad.
He said there had been “very limited” banking correspondence with local Iraqi banks in recent years, but “now we see a long list” of them, but he refused to give a specific number.
“It looks very different from before,” he said.
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