Reports And AnalysisDollar RatesU.S. Treasury DepartmentIranThe Central Bank Of IraqThe Iraqi DinarThe US Federal Bank
Twilight News / The Iraqi dinar continues to pay the price, by staggering against the dollar, and perhaps the most prominent reason lies in the noticeable change by the US Treasury Department and the Federal Reserve Bank in New York towards monetary policy in Iraq, due to currency smuggling operations to Iran, which has been suffering from severe economic sanctions for years.
The American newspaper “The Wall Street Journal” shed light on the currency file in Iraq, in a report translated by Shafaq News, noting that the Iraqi economy suffers from a taggering with the decline in the value of the dinar 10% against the dollar, which led to higher food prices.
the American procedure
The American newspaper explained in its report that “American and Iraqi officials say that the stricter controls imposed by the Federal Reserve Bank in New York, with regard to dollar transactions by Iraqi banks last November, are a step aimed at curbing money laundering and illegal smuggling of dollars to Iran and other countries in the Middle East are subject to severe sanctions.
She added that “successive US administrations have postponed the entry of the Iraqi banking system to global money transfer mechanisms so far, due to the years of weak governments in Iraq and the crises represented by the insurgency during the period of US occupation, to the control of ISIS on large parts of the country.
According to US and Iraqi officials and official data, since the new measures came into force, 80% or more of daily dollar transfers to Iraq, which previously totaled more than $250 million, have been banned in some days, partly due to insufficient information on the destination of these funds or due to other errors.
The American newspaper pointed out that “in light of the scarcity of the availability of the dollar, the Iraqi dinar fell by up to 10% against the dollar, which caused a strong rise in the prices of imported goods, including basic commodities such as eggs, flour and cooking oil.”
The Wall Street Journal report quoted the chairman of the Board of Directors of the South Islamic Bank Mahmoud Dagher (a former official at the Central Bank of Iraq) as saying that “for 20 years, we have been following the same system, but the shock policy followed by the Federal Reserve has created a crisis within the Iraqi economy.”
The report pointed out that this turmoil reflects the cautious and intertwined relations between Washington and Baghdad, recalling that since the United States contributed to the establishment of the Central Bank of Iraq in 2004, the US dollar has turned into being the main currency of the country to a large extent because a large part of Iraq’s economy is working on cash.
The report continued that in order to provide Iraq with dollars, planes transport shipments of US currency to Baghdad every few months, noting that additional dollars flow electronically through transactions carried out by Iraqi banks, which are withdrawn from official Iraqi accounts at the Federal Reserve Bank in New York, where revenues from oil sales are deposited.
US officials acknowledged that “the strict rules of electronic transfers to the dollar by Iraqi banks were not a surprise to officials in Baghdad, explaining that they were implemented jointly last November, after two years of discussion and planning by the Central Bank of Iraq, the US Treasury Department and the Federal Reserve Bank, stressing that “the increase in the dollar exchange rate was not due to the new measures.”
The American newspaper pointed out that “the scrutiny of dollar transactions caused a demand for the dollar in Iraq and a wave of criticism from Iraqi officials, bankers and importers who criticize the new regime because it caused an unnecessary financial shock and contributed to the aggravation of their acute economic problems.
The new “platform” system
“Under the new measures in place, banks must submit dollar transfer requests via a new electronic platform with the Central Bank, and then review them by the Federal Reserve Bank of New York,” she explained.
The report quoted US officials as saying that this system “aims to limit the use of the Iraqi banking system to smuggle dollars into Tehran and Damascus and safe havens to launder money throughout the Middle East.”
“Under the old rules, Iraqi bank account holders were not obliged to disclose to whom they were sending the money until the dollars had already been transferred,” the report quoted Dagher as saying.
Referring to bank accounts belonging to foreign governments under its control, similar to Iraqi accounts, a spokeswoman for the Federal Reserve Bank of New York said that “we have a strong compliance system for these accounts that evolves over time in response to new information.”
The report also quoted a U.S. official as saying that these measures would reduce “the ability of malicious parties to use the Iraqi banking system.”
The report pointed out that both the US Treasury Department and the Central Bank of Iraq declined to comment, but the Central Bank of Iraq described the new electronic platform in a statement issued on December 15, noting that it requires providing “full details of customers who want to transfer money”, including who are the ultimate beneficiaries of it, adding that “a number of errors are discovered and that what is required of
According to Iraqi officials and judicial documents, the central bank prevented four banks, including the Islamic Bank of Asia and the Middle East Bank of Iraq, from carrying out any transactions in dollars.
The report pointed out that US officials have been putting pressure on Iraq for years to strengthen its banking controls, citing US officials at the time that the Federal Reserve and the Treasury Department temporarily stopped the flow of billions of dollars to the Central Bank of Iraq in 2015 due to their fears that dollars were on their way to Iranian banks and may be transferred to ISIS militants.
The report pointed out that some Iraqi officials support strengthening control over Iraqi banks, and MP Hadi Al-Salami, a member of the Anti-Corruption Commission, was quoted as saying that political parties and militias control most banks, and use them to smuggle dollars to neighboring countries, adding, “We need to stop this immediately.”
The American newspaper considered, in its report, that the impact of the new controls can be seen in the sharp decline in banks’ dollar transactions, which the Central Bank tracks on its website, adding that on October 17 last year, before the new controls came into force, daily transfers from Iraq’s official accounts in the Federal Reserve Bank in New York and other external institutions amounted to 224.
While US officials say, according to the Wall Street Journal, that this financial confusion will ease as Iraqi account holders comply with the new controls, the newspaper pointed out that “Iraqi bankers and merchants of the operation consider that the new rules are aimed at stemming the methods of schemes used to steal dollars.”
One thought on “The Iraqi dinar is paying the price. Washington cuts the route of smuggling dollars into Iran”
Isn’t the new QFS system going to be able to curtail the direction of “FUNDS” going to BAD places?