Iraq’s Central Bank is expected to auction around $75 billion in U.S. dollars by the end of the year. That is above previous years leading observers to believe that the government has failed once again to stop the Bank’s auctions being used for criminal activity.
At the end of October the Central Bank of Iraq sold over $65 billion in U.S. dollars. Economists estimated that around $75 billion would be auctioned by the end of the year. That averages out to around $274 million being sold a day. Analysts believed this was a sign that the sale of dollars continues to be abused.
This came after the Central Bank announced its anti-corruption regulations were working. In November the Bank’s governor released a statement saying that he had cooperated with the U.S. Federal Reserve and Treasury Department to implement new international banking standards that would crack down on illegal activities. Those moves have likely failed once again.
In Iraq banks buy dollars from the Central Bank for companies that need to pay for imported goods. Tourists are also allowed to buy dollars for foreign travel. Fake papers are often used in this process so that banks, political parties, foreign governments and individuals can get their hands on dollars which are then often sent to other countries, used for money laundering or sold on the black market for a profit. The official Iraqi dinar to dollar exchange rate is lower than what can be obtained illegally so one can buy dollars at one price from the Central Bank and then sell it at a higher price on the black market.
In April there was a report that the Financial Supervision Bureau uncovered 151,000 people that acquired dollars for travel outside Iraq that never left. More than $600 million was obtained using this method and then the dollars were sold on the black market.
In September the Wall Street Journal found that there were 20 Iraqi banks that were buying dollars from the Central Bank and then sending the money to Iran using front companies run by Hashd factions that filed fake invoices for imports to assist Tehran’s efforts to get around international sanctions. A similar process was used to fund the Assad government in Syria.
This has been going on for years and neither Baghdad nor Washington has been able to stop it. The U.S. has tried sanctioning Iraqi banks but that has done little as other institutions can be used. New regulations have also not worked as there are always loopholes. Not only that but since Iraq’s ruling parties are all involved they use their power and influence to manipulate the system and avoid prosecution. Many of those same parties are backed by Iran and help their allies in Tehran. That means these activities will continue for the foreseeable future because there is no incentive to stop it.
SOURCES
Al Aalem, “According to the documents, more than 600 million dollars were embezzled under the name of selling currency to travelers,” 4/21/24
Daoud, Mayada, “Huge rise in dollar sales .. What is happening in Iraq?” Al Hurrah, 11/26/24
Al Hurra, “Central Bank of Iraq announces progress in dollar control procedures,” 11/12/24
Organized Crime and Corruption Reporting Project, “Iraq’s Dollar Auction: The ‘Monster’ Funneling Billions to Fraudsters and Militants Through the U.S. Federal Reserve,” 10/8/24
Al Rafidain, “MP Adnan Al-Zarfi: Major political figures involved in smuggling dollars from Iraq,” 9/9/24
- “Wall Street Journal: More than twenty Iraqi banks involved in smuggling dollars to Iran,” 9/9/24
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