AML in Iraq

Iraq has implemented a range of legislation and regulations to combat money laundering (ML) and counter-terrorism financing (CTF). These measures aim to prevent, detect, and penalize the acts of money laundering and funding of terrorist activities within the country.

The fundamental legal framework for ML and CTF in Iraq is the Anti-Money Laundering and Countering Terrorist Financing Law No. 39 of 2015. This law establishes a comprehensive framework to address ML and CTF, covering prevention, detection, and punishment. The key features of Iraq’s AML regulations include:

Customer Due Diligence (CDD) Financial institutions and designated non-financial businesses and professions (DNFBPs) are required to conduct CDD processes when establishing business relationships or conducting transactions that exceed a certain threshold. CDD measures involve verifying the identities of clients and understanding the purpose and nature of the business relationship or transaction.

Know Your Customer (KYC) Requirements Entities subject to the regulations must verify the identities of non-account holders involved in transactions or series of transactions valued at least five million Iraqi dinars (approximately $4,250). Additionally, for account holders engaging in transactions exceeding 10 million Iraqi dinars (approximately $8,500), the identification of beneficial owners must be established. In practice, account opening procedures in Iraq’s state-owned and private banks often rely on client referrals and job verification, with significant variations in the application of the law.

Suspicious Transaction Reporting Entities covered by the AML regulations must report suspicious transactions to Iraq’s financial intelligence unit (FIU) and await instructions before proceeding with the transaction. Pending guidance, the relevant funds must be frozen. Suspicious transaction reports (STRs) must be filed for transactions involving proceeds from illegal activities or ML, funds intended for criminal financing (including terrorism), transactions controlled by criminal organizations, or transactions conducted to evade the law or lacking legitimate business purposes.

Record-Keeping Financial institutions and DNFBPs are required to maintain complete and accurate records of their transactions and customer interactions. These records must be retained for a minimum of five years.

Internal Controls and Policies To ensure compliance with AML regulations, financial institutions and DNFBPs must establish internal controls and policies that encompass the identification, reporting, and management of ML and CTF risks.

Training Financial institutions and DNFBPs are expected to provide AML training to their personnel to raise awareness about the risks associated with ML and CTF. Training programs equip employees with knowledge on how to identify and report suspicious activities.

Overall, these measures aim to strengthen Iraq’s capacity to combat money laundering and terrorist financing activities effectively.

The Money Laundering Reporting Office, also known as the Office of Combating Money Laundering and Terrorism Financing, was initially established as part of the Central Bank of Iraq in 2007. In 2015, it underwent restructuring to attain complete independence following the enactment of Anti-Money Laundering and Terrorism Financing Law No. 39.

As per the law, the Office of Combating Money Laundering and Terrorist Financing is mandated to operate as a public department within the Central Bank of Iraq. It is required to adhere to professional and ethical standards while maintaining financial and administrative autonomy.

The primary responsibilities of this office include:

  1. Receiving, acquiring, and investigating reports or information from reporting organizations regarding transactions suspected to involve proceeds of crime, money laundering, or terrorist financing.
  2. Analysis and communication of information. The AML/CFT office is authorized to request any additional information necessary for conducting thorough analysis from the reporting organizations.
  3. Temporary suspension of financial transactions or operations for a maximum period of seven working days in cases where there are concerns related to smuggling of illicit proceeds or potential disruption to the ongoing analysis.
  4. Transmitting communications based on reasonable suspicion of money laundering, terrorism financing, or predicate offenses to the Office of the Public Prosecutor. This initiates legal proceedings and notifies the appropriate authorities.

Financial institutions in Iraq, along with specific non-financial businesses and professions, are obligated to establish a compliance program. These efforts aim to accomplish the following objectives in Iraq:

  1. Facilitating information exchange on money laundering and terrorism financing with relevant government departments, public sector entities, and collaborating with them in joint initiatives.
  2. Engaging in the Republic of Iraq’s active participation in international organizations and conferences addressing money laundering and terrorist funding.
  3. Establishing a comprehensive database to be utilized by the AML/CFT office as a national center for analyzing and sharing information related to suspected cases of money laundering or terrorist financing. This database will also support judicial authorities in implementing the requirements of the law.
  4. Compiling and analyzing accurate statistics concerning matters pertaining to the functions of the AML/CFT office.
  5. Conducting training sessions to ensure that staff members involved are well-informed and updated on new developments in the field of money laundering and terrorism financing.
  6. Reporting to regulatory authorities or other competent entities any financial institution or non-financial businesses and professions that violate the provisions of the AML/CFT legislation.
  7. Providing technical guidance regarding agreements and treaties related to money laundering and terrorism financing.