Iraqis linked to Iran use money-laundering scam to beat US sanctions

A vendor inspects Iranian rials at a currency exchange shop in Baghdad, Iraq August 8, 2018. (Reuters)
Updated 01 August 2019

Iraqis linked to Iran use money-laundering scam to beat US sanctions

  • They employ middlemen to buy US dollars and transfer funds out of country
  • Rate of dollar purchases surged after sanctions imposed, exchange dealers tell Arab News


BAGHDAD: Iraqi individuals and companies linked to Iran are smuggling cash out of the country to avoid financial sanctions imposed by the US Treasury.

Despite technically being denied access to US dollars by Iraq’s central bank, they are exploiting the bank’s daily auction of hard currency by employing middlemen to convert Iraqi dinars into dollars. The funds are then transferred out of Iraq using private exchange offices.

“In previous months, the daily release rate of the dollar at the currency auction was between $150 million and $180 million, sometimes up to $200 million. In the past few days it has reached $270 million,” the owner of a large currency exchange and financial transfer office in Baghdad told Arab News.

There is “no noticeable justification” for the sudden increase in dollar purchases, exchange operators said. Traders at Shorja Market, the largest wholesale market in Baghdad, told Arab News the surge in remittances could not be explained by any changes in the market, where there had been a shortage of hard cash since the end of last year.

Daily buying and selling remained weak, they said. One prominent banker told Arab News:

“Traders have nothing to do with this fever; 80 percent of the remittances that were made this week were cash transfers, and will be delivered by hand.”

On July 18, the US Treasury’s Office of Foreign Assets Control imposed financial sanctions on groups and individuals including two commanders of pro-Iranian paramilitary groups and two former governors supported by Iran. The sanctions were imposed under the Global Magnitsky Human Rights Accountability Act, targeting “perpetrators of serious human rights abuses and corruption,”and banned any financial dealings with those named.

In response, the Central Bank of Iraq issued a circular to all Iraqi banks ordering them to freeze the accounts of anyone targeted by sanctions, and prevent their access to funds.

There was a wave of criticism and anger from Iraqi politicians and leaders of armed factions, especially those associated with Iran, who complained of “unilateral sanctions that violate Iraqi sovereignty and target Iran and its allies in Iraq under the pretext of human-rights abuses and corruption.”

The protests were accompanied by heavy pressure on Iraqi Prime Minister Adel Abdul Mahdi and the governor of the central bank to change the policy. Four days later the bank issued a new circular that limited the financial freeze to US dollars only, permitting withdrawal of Iraqi dinars. It was then that the surge in dollar purchases through middlemen began.

Bankers said depositors were withdrawing their funds in Iraqi currency "to avoid attracting the attention of the US Treasury, which monitors the movement of the dollar in Iraq.”

Iraqi security officials, members of parliament and armed faction leaders told Arab News that most politicians and commanders associated with Iran, or who enjoyed its support, were “deeply concerned” as they believed they could be targeted by US Treasury sanctions at any time. This has prompted them to withdraw their money from Iraqi banks and transfer it abroad to “minimize the damage.”

“The sanctions have deeply confused and concerned them,” a senior Iraqi national security official said. “They began to withdraw their money from Iraqi banks and settle their financial assets with the Iraqi government to reduce the damage and avoid having their assets frozen and property seized in the event of sanctions.

“Our information suggests that they transfer most of the money to private companies in Dubai, and use some of it to buy property, both inside and outside Iraq.

“Actually, this is not new. They have been laundering their money for years, but what has happened now is that the sanctions have entangled them and forced them to change how they do it.”

Family stayed in Syrian town during offensive as fighters ousted

Updated 14 min 37 sec ago

Family stayed in Syrian town during offensive as fighters ousted

  • A renewed push by Syrian regime and Russian forces to take the area has seen heavy strikes and advances this week in the south of Idlib province

KHAN SHEIKHOUN: Russia-backed Syrian regime forces found Abu Abdo and family this week in Khan Sheikhoun, a town which almost all other residents had fled during shelling in an offensive to take the area from opposition fighters.

“The last month was very bad. We couldn’t stand by the door because of the shelling ... We couldn’t go anywhere,” 55-year-old Abu Abdo told Reuters.

He said his was one of only around three families that stayed in the town through the offensive while all other civilians fled north, away from the shelling.

“When the army came they opened the door of the house and entered, thinking no one was here. But when they saw us they were very respectful and asked us what we needed,” he said from his house which had a couple of shell holes in the walls.

Khan Sheikhoun was one of the towns lost early in the eight-year-old war to opposition fighters opposed to the rule of Syria’s Bashar Assad. On Friday the Syrian forces said they had taken it back, along with a handful of other settlements.

“The fighters ran away a day before the army entered. There was a huge number of fighters here,” Abu Abdo said, referring to the opposition.

A renewed push by Syrian regime and Russian forces to take the area has seen heavy strikes and advances this week in the south of Idlib province and nearby Hama, prompting a civilian exodus.

Hundreds of people have been killed in the campaign since late April and more than 500,000 people have been displaced, the UN said.

“The operation (to take Khan Sheikhoun) was difficult. The rebels were holed up for a month under heavy, continuous bombardment. Which caused them to withdraw to the north,” a military official said.

A Reuters team traveled to Khan Sheikhoun up a newly opened and de-mined part of the main south-north highway which once connected the capital Damascus to Aleppo. The sound of planes and distant explosions could still be heard in the large town in south Idlib province, heavily damaged by repeated aerial campaigns.

Khan Sheikhoun made headlines in 2017. Nearly 100 people died when the town was bombed with sarin poison gas. One of the deadliest chemical weapons attacks of the war, it prompted a US missile strike against a Syrian air base.