Wednesday, September 27, 2023

Iraq Cracks Down on Dollar Smuggling Under Pressure From U.S.

BAGHDAD—Iraq is trying again to crack down on money laundering and smuggling as the U.S. steps up pressure to stop dollars flowing to Iran and better isolate it from the rest of the world economy.

The dollar has served as almost a second currency in Iraq after the U.S. invaded in 2003, pumping greenbacks into the country to keep it functioning. Two decades later, Iraq still keeps its foreign reserves at the Federal Reserve Bank in New York, depositing the proceeds from its oil exports in its official accounts there.

Hundreds of millions of dollars a day flow through loosely-regulated Iraqi bank and currency-exchange shops, which U.S. officials say are rife with fraudulent transactions and money laundering. They say there is strong evidence that a portion of these dollars have been going across the border to Iran, providing Tehran with badly needed currency and some relief from stringent American sanctions.

Others have been going into the hands of Iraqi officials or Iranian-backed militias operating in the country, or recipients in other Middle Eastern countries.

Now Iraqi authorities are expanding raids on currency traders and increasing air and land border checks following recent moves by Washington to curb the flow of dollars that have put pressure on Iraqi Prime Minister Mohammed al-Sudani and the economy.

“It’s a battle between the state, which insists on completely reforming the financial and banking system, and a group of smugglers and price manipulators who are thriving and working to obstruct reforms,” Sudani said …