US Continues To Push Iraq To Better Regulate Dollar Auctions To No Avail

(Al Sharqiya)

The United States continues to push the Iraqi government to better regulate its dollar auctions but it is a losing battle. At the start of February Baghdad banned 8 banks from the Central Bank of Iraq’s (CBI) currency sales to try to stop money laundering. This came after a visit by a delegation from the U.S. Treasury. In July 2023 another 14 banks were banned. A Treasury official said that Iraq needed to do more against pro-Iran groups abusing the financial system to raise funds.

 

In November 2023 the Central Bank of Iraq started new restrictions on dollar sales worked out with Washington. It required banks to fill out electronic application forms with the CBI to buy dollars. That information was then reviewed by the American Federal Reserve Bank. This caused a panic in Iraq as the country has a cash economy based upon dollars. It also set off an inflationary spiral as dollars became rarer raising their value while the Iraqi dinar dropped.

 

Things eventually stabilized with a variety of actors finding new ways to cheat the system. One was exploiting the loophole that people could still buy dollars for travel abroad. They would buy a large amount of dollars at an auction, put the money onto a prepaid card and then cash it out in another country. In April the government announced it stopped an attempt to smuggle $5 million out of Iraq using this method. 

 

Most importantly there are banks and companies owned by Iraq’s ruling parties, foreign countries like Iran and Syria, and mafias that control the entire process. It doesn’t matter what new rules Washington pushes or the Central Bank attempts to implement because those forces will always find a way around them and continue to buy up dollars to enrich themselves or get around sanctions.

 

SOURCES

 

Al Aalem, “Black remittances continue to 3 countries .. What if Washington tightened measures to prevent dollar smuggling?” 4/28/23

 

Ebrahim, Hudhaifa, “US sanctions on Iran cause turmoil in Iraq," Jerusalem Post, 1/20/23

 

Al Hurra, “The dollar crisis in Iraq .. Baghdad is worried about the shock policy and Washington is trying to prevent smuggling to Iran and Syria,” 1/20/23

 

Al Mada, “More than 800 million dinars per day for the neighborhood boys in exchange for buying dollars at any price and smuggling them,” 1/21/23

- “The US Federal Reserve exposes 60 banks and a new way to smuggle dollars by forging airline tickets,” 1/5/23

 

Al Rafidain, “$400,000 Prepared For Smuggling Was Seized At Baghdad International Airport,” 10/17/23

- “Economic Experts: Influential Parties Recruit Foreign Workers To Smuggle Currency,” 1/25/24

- “Parliamentary Finance Committee: Gangs Control Dollar Exchange Through A Whatsapp Group,” 11/3/23

- “Parliamentary Integrity Committee: The Electronic Platform For Selling Dollars To Travelers Is Another Door To Corruption,” 9/27/23

 

Reuters, “Iraq bans eight local banks from US dollar transactions in attempt to reduce fraud,” 2/4/24