In a decisive move to combat money laundering and financial violations, Iraq’s central bank has announced a ban on five additional local banks from engaging in U.S. Dollar transactions. The decision follows high-level meetings in Dubai between officials from the Central Bank of Iraq, the U.S. Treasury, and the Federal Reserve.
This latest action was built on last year’s ban on eight Iraqi banks from dollar dealings. The move is part of an ongoing effort by the United States and Iraq to curb illicit financial activities, including dollar smuggling and money laundering, which have long plagued the country’s banking system.
With over $100 billion in reserves held in the U.S., Iraq remains heavily dependent on Washington’s financial banking to ensure uninterrupted access to its oil revenues. However, the geopolitical landscape is shifting. U.S. President Donald Trump recently signaled a potential return to his “maximum pressure” policy on Iran, a stance that could put Iraq in a difficult position.
Iran, which wields significant political and economic influence in Iraq through its allied Shia militias and parties, has long used its neighbor as a critical financial conduit. Reuters previously reported in December that a sophisticated fuel oil smuggling network had generated at least $1 billion annually for Iran and its proxies. This financial lifeline is now under increased scrutiny.
While the banned banks can continue operations in other currencies, the restriction on U.S. dollar transactions presents a significant challenge. The dollar remains the primary currency for international trade, and without access, these banks may struggle to maintain normal operations.
