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WITH NEW LAWS AND SOME HELP, IRAQ TURNED AROUND ANTI-MONEY-LAUNDERING PROBLEMS
The Iraqi government was removed last year from an international watchlist
By Samuel Rubenfeld, Feb. 28, 2019
Iraqis celebrate the anniversary of the country’s victory over Islamic State, in the city of karbala. Seven years ago, Iraq’s financial system was beset by problems.
An estimated $800 million in U.S. currency was illegally flowing out of Iraq every week, Iraqi auditors told American investigators at the time. And the central bank governor was dismissed after corruption had become institutionalized within the country’s government and political system.
Iraq landed on international watchlists for money-laundering failures. Since then, however, the country’s efforts to combat illicit finance have improved, and international watchdogs have taken notice.
Cleaning up corruption in Iraq has been the central bank’s biggest priority since he came in 2014, Ali Mohsen Ismail Al-Alaq, the current Iraqi central bank governor, said in an interview. His efforts, combined with input from the country’s leaders and U.S. and international experts, have started to pay off.
“This earned us respect from international organizations and opened opportunities for global financial institutions to come in,” Mr. Al-Alaq said.
Iraq passed a law in 2015 that criminalized money laundering and terrorism financing. It created an anti-money-laundering council within the central bank. It also created an office for combating money laundering and terror finance. The council became the authority for supervision of compliance, while the office was tasked with handling suspicious activity reports.
“This was important to give us the way to deal with the problems we had at that time,” Mr. Al-Alaq said. The effort established the infrastructure needed to support the country’s anti-money-laundering and counter-terrorism-financing efforts, he said.
Iraq had an unstructured banking system after the invasion and dealt with a lack of capacity to combat money laundering, said Ayham Kamel, head of the Middle East and North Africa practice at the Eurasia Group, a political risk consultancy.
“Now, things are significantly improved and the government is in a place where it seeks to preserve the integrity and the safety of the Iraqi financial sector,” he said. “It will continue to adjust its regulations and procedures to ensure compliance with the broad standards of the international and financial community.”
Money-laundering convictions in Iraq rose dramatically, according to a 2017 U.S. State Department report.
In June, the Financial Action Task Force, a Paris-based international watchdog, took the country off its list of countries failing to tackle money laundering.
Ali Mohsen Ismail Al-Alaq, governor of the Central Bank of Iraq, said cleaning up corruption is a priority.
“Iraq has been dealing with some big problems over the years,” said John Sullivan, a former U.S. Treasury Department attaché to Iraq who now is a director with consultancy Financial Integrity Network.
“The government did a good job to get people to focus on what they needed to do under the FATF plan,” he said. They really have made progress against money laundering, Mr. Sullivan added, crediting Mr. Al-Alaq for the effort.
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