Shafaq News- Baghdad
Iraq's return to the Financial Action Task Force (FATF) graylist could increase pressure on the country's financial system and, ifcorrective measures are delayed, risk being placed on the organization'sblacklist, economic experts warned on Saturday.
FATF's decided yesterday to place Iraq under enhancedmonitoring due to deficiencies in its anti-money laundering andcounter-terrorism financing framework.
Economic researcher and international transport consultantZiad al-Hashimi said Iraq's return to the gray list, after exiting it in 2018, isa “setback” and a “warning signal” from the international financial community.
According to al-Hashimi, international banks, particularlycorrespondent banks involved in processing US dollar transactions for Iraq, arelikely to adopt a more cautious approach. “The designation could result instricter oversight of international transfers and require the Central Bank(CBI) to implement more complex procedures to identify and prevent suspicioustransactions.”
He warned that the designation would likely increasecompliance and transaction costs, slow investment inflows, and place additionalpressure on exchange rates in the parallel market.
Separately, Manar al-Obaidi, head of the Iraq FutureFoundation for Economic Studies and Consultations, warned that failure toimplement agreed reforms within the specified timetable could expose Iraq tothe risk of being moved to the FATF blacklist. “Such a move would lead tofinancial isolation and broader economic damage that could directly affectcitizens' livelihoods,” al-Obaidi noted, adding that the opportunity to addressthe situation still exists, “but the cost of failing to do so will besignificant."
The Anti-Money Laundering and Counter-Terrorism FinancingCouncil, in cooperation with CBI, announced the adoption of a joint action planto strengthen the country's financial oversight framework.
Iraq's proactive measures had “helped the country avoidbeing placed on the FATF blacklist,” the council indicated, stressing thatauthorities remain committed to addressing identified weaknesses and complyingwith international standards.
According to the council, Iraqi institutions have mademeasurable progress since the adoption of the mutual evaluation report inNovember 2024, including strengthening market-entry controls and introducingrisk-mitigation measures in the real estate sector.
The council added that enhanced monitoring mechanisms areapplied to many countries worldwide as part of FATF's quality and consistencyreview process and risk-based assessments.
Earlier, FATF President Elisa de Anda Madrazo said theorganization's plenary meeting had decided to place Iraq on the gray listbecause additional action is needed to address risks linked to the country'scash-intensive economy. “Iraq must strengthen money laundering investigations,increase prosecutions, and make greater use of financial intelligence.”
The FATF decision followed Iraq's new government identifyingeconomic reform and anti-corruption measures as central pillars of its program. Prime Minister Ali al-Zaidi has stated since taking office in May thatrebuilding the financial system, attracting foreign investment, and combatingcorruption are among his administration's top priorities.
Iraq was removed from FATF monitoring in July 2018 afterauthorities implemented a broad compliance strategy led by the Central Bank ofIraq and anti-money laundering agencies, with support from judicial, security,and intelligence institutions across the country.
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