Senior US Treasury Official Visits Iraq to Combat Illicit Finance – Reuters

By Daphne Psaledakis and Timour Azhari

WASHINGTON/BAGHDAD – The top official for sanctions at the U.S. Treasury Department visited Baghdad on Sunday, aiming to address Iran’s efforts to evade sanctions in Iraq and to enhance the compliance of the country’s financial sector with international standards.

Brian Nelson, the Under Secretary for Terrorism and Financial Intelligence, traveled to Iraq from Sunday through Monday. During his visit, he engaged with senior Iraqi officials, including Prime Minister Mohammed Shia Al-Sudani, focusing on strategies to combat illicit financial activities.

While in Iraq, Nelson emphasized the importance of safeguarding both Iraqi and international financial systems from individuals involved in criminal, corrupt, and terrorist activities. He reassured that Washington is committed to supporting Iraq’s financial sector against manipulation by Iran and other harmful entities.

The current Iraqi government has been formed with backing from influential, Iran-aligned parties and armed groups that have a stake in the region’s largely informal economy.

Following his meetings, which also included discussions with the central bank governor, Nelson expressed a positive outlook. He acknowledged the central bank’s initiatives aimed at enhancing transparency and identifying suspicious financial transactions within the Iraqi financial system.

However, he cautioned that Iraq must remain vigilant regarding potential sanctions risks, stating, "We will continue to monitor Iraqi individuals, companies, and banks acting for and on behalf of U.S.-designated terrorist groups."

CONDUIT FOR TERRORIST FINANCING

On Monday, the U.S. identified Al-Huda Bank in Iraq as a significant money laundering concern, accusing it of facilitating terrorist financing. Along with this identification, the Treasury’s Financial Crimes Enforcement Network proposed a measure that would disconnect the bank from the U.S. financial system by preventing American financial institutions from maintaining accounts for it.

The U.S. government also imposed sanctions on the bank’s owner, asserting that Al-Huda Bank and its international backers, including Iran and its proxy organizations, misappropriate funds that could support legitimate businesses and economic growth for the Iraqi populace. These actions, according to the Treasury, exacerbate violence and undermine stability in Iraq, endangering both Iraqi and American lives.

Nelson’s visit aligns with the U.S. effort to counter various Iranian-supported proxies that have conducted attacks across multiple regions, including Gaza, Iraq, Lebanon, Syria, and Yemen.

Last week, the U.S. introduced sanctions against financial exchanges associated with Hamas in Gaza, an Iraqi airline, and supporters of Iranian-linked militias in Iraq, all purportedly collaborating with Iran’s elite military and intelligence division.

Washington has urged Iraq to tackle ongoing concerns related to the misuse of U.S. dollars within its commercial banking sector. In July, the U.S. prohibited 14 Iraqi banks from conducting dollar transactions as part of a larger initiative to curb the illicit utilization of these funds.

With over $100 billion in reserves held in U.S. institutions, Iraq remains highly dependent on American support to safeguard its oil revenues and financial stability from potential U.S. repercussions.

The governor of Iraq’s central bank has affirmed the country’s commitment to enforcing stricter financial regulations and addressing the smuggling of dollars.

Following his Iraq visit, Nelson plans to travel to the UAE, where U.S. officials have also raised concerns about sanction evasion.