The Central Bank of Iraq's Mechanism for Terminating the Electronic Platform for Foreign Transfers
In a significant development, the Central Bank of Iraq (CBI) has announced the mechanism for terminating the electronic platform it used for foreign transfers of hard currency. This move is part of a broader strategy to reorganize financial transfers with proactive oversight, replacing the subsequent review previously conducted by the Federal Reserve.
Transition to Direct Banking Relationships
The transition from the electronic platform to direct banking relationships between Iraqi banks and correspondent banks abroad was initiated in 2023 as a preliminary measure. By 2024, this transition has been nearly completed, with 95% of the process already achieved. The remaining 5% is expected to be finalized by the end of the year, ensuring a smooth and gradual shift.
Pre-Execution Audits and International Standards
An international auditing firm has been engaged to perform pre-execution audits of transfers before they are executed by correspondent banks. This aligns with international standards and anti-money laundering laws, aiming to maintain the official exchange rate as a true reflection of economic practices.
Impact on Exchange Rates and Transfer Operations
The CBI has assured the public that the termination of the electronic platform will not have any adverse effects on exchange rates or transfer operations. The bank emphasized that any potential impacts are unfounded, given the gradual nature of the transition and the close monitoring of the process.
New Channels for Currency Conversion
Recognizing that 70% of Iraq's foreign trade necessitates new channels for currency conversion, the CBI has already started implementing new pre-audit processes for currency transfers. This includes transactions involving the euro, Chinese yuan, Indian rupee, and UAE dirham, with 13 Iraqi banks already implementing this process.
Financial Reforms and International Engagement
In a related development, the CBI delegation led by Governor Ali Mohsen Al-Alaq held meetings in the U.S. with major financial institutions, including the U.S. Treasury, the Federal Reserve, Visa, Mastercard, and international auditing firms. These discussions highlighted advancements in monitoring foreign transfers and cash sales of U.S. dollars, aligning with international standards to enhance transparency and combat financial crimes.
Conclusion
The termination of the electronic platform for foreign transfers by the Central Bank of Iraq marks a significant step in the country's financial reforms. The move, which has been executed gradually and closely monitored, is expected to improve the stability, transparency, and efficiency of Iraq's foreign trade financing, contributing to a more stable exchange rate and a more robust financial system.
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