Tues. PM TNT News Articles from Iraq 5-9-23



Iraqis Fly to Nearby Countries to Get Dollars as U.S. Cracks Down on Money Laundering

The cash-driven economy relies heavily on the greenback for transactions

BAGHDAD—As the U.S. tries to stop the illegal flow of dollars into Iran, local money traders next door in Iraq are finding new ways to get hold of greenbacks as the local supply dries up: They are flying to nearby countries with stacks of bank cards to withdraw hard cash.

At least 24 Iraqis carrying around 1,200 bank cards loaded with more than $5 million have been arrested in the last two months at airports and border crossings while attempting to leave the country, according to Aladdin Al Qaisi, a spokesman for the Borders Crossings Authority. On Friday, authorities detained another Iraqi traveler trying to sneak out 300 bank cards in cigarette packs at the international airport in the central Iraqi city of Najaf. 

“This use of credit [bank] cards in smuggling dollars is a new tactic that started when the government started cracking down,” he said.

In another case, an individual was arrested in Baghdad airport after an employee handed him a bag containing 300 bank cards after he went through security screening, Mr. Al Qaisi said.  

Iraq for years has been a cash-driven economy that relies heavily on U.S. dollar transactions, making it a significant source of illicit greenbacks for neighboring Iran and other Middle East countries under Western sanctions. In November, the U.S. Treasury and the Central Bank of Iraq began enforcing tighter controls on international dollar transactions by Iraqi banks in an attempt to curtail money laundering and smuggling, the Journal has reported.


The U.S.-led efforts to stem the flow of dollars out of Iraq drove up the value of the greenback against the Iraqi dinar in the gray market, sparking demand for dollars. A dollar sold for as much as 1,750 dinars at exchange shops in February, a 20% premium over the official exchange rate of 1,460 at the time. 

Ordinary Iraqis can acquire dollars at exchange shops at the market rate. But Iraqi banks are permitted to issue depositors cash-cards loaded with currency worth as much as $10,000 at the official exchange rate that can be used overseas to take out cash.

Currency traders in recent months began applying for dozens of bank cards and giving them to travelers, who flew to nearby countries such as the United Arab Emirates, Turkey and Jordan to withdraw dollars, according to traders and Iraqi officials. Over the weekend, authorities said they detained an Iraqi who was attempting to take 128 bank cards across the land border to Iran.  

The hard currency was sold at a premium in the gray market, traders said. Some of it was also used to purchase goods abroad, they said.  

While the value of currency smuggling via the bank-card route is relatively small compared with what flows through the overall economy, it shows the scale of demand for the greenback in Iraq. 

To keep Iraq supplied with dollars, planes deliver pallets of U.S. currency to Baghdad every few months. But far more dollars flow electronically in transactions by Iraq’s private banks, processed from Iraq’s official accounts with the Federal Reserve Bank of New York, where proceeds from its oil sales are deposited.

The system allows Iraqi importers to convert their dinars to dollars to pay suppliers outside Iraq. But for over a decade, U.S. and Iraqi officials say, it also became a lucrative source of illicit dollars for Iraq’s powerful militias and corrupt politicians, as well as for Iran.


Under the old rules, Iraqi account holders weren’t required to disclose to whom they were sending money until after the dollars had already been transferred. In November, Iraqi banks were subjected to the Swift global financial messaging system, requiring them to provide detailed information about who dollar transfers were going to.

After the new procedures went into effect, 80% or more of Iraq’s daily dollar wire transfers, which previously totaled over $250 million a day, were blocked initially because of insufficient information about the funds’ destinations or other errors, according to U.S. and Iraqi officials and official Iraqi government data.

The use of multiple cash cards emerged in recent months to get around the restrictions on moving dollars out of Iraq, though it likely involves only a fraction of the dollars transferred electronically by banks. 

In response, the Central Bank of Iraq last month restricted bank card withdrawals to no more than $250 in cash a day for each card, making it more time-consuming to withdraw the full value of the cards.

“Whenever the difference between the official and the market exchange-rates increase some parties find profitable arbitrage opportunities,” said Central Bank of Iraq Gov. Ali Mohsen Al-Alaq. The move to set card limits will end these opportunities, he added.

The central bank’s move managed to reduce the outflow via this route but didn’t succeed in preventing it completely, said Abdul Rahman Al Mashhadani, professor of international economic relations at Iraqi University. “Traders still do it,” he said. “The money is still going out.”

In one scheme, currency traders bought bulk airplane tickets to obtain dollars, said Mr. Mashhadani. Iraqis are permitted to convert dinars to dollars at private banks and exchange shops for travel expenses as long as they present a plane ticket showing they plan to travel out of the country. 

The Central Bank of Iraq raised the amount Iraqis could receive for traveling expenses from $5,000 to $7,000 in February but then lowered it to just $2,000 in March to choke off the ticket-buying spree.

Iraqi Prime Minister Mohammed al-Sudani criticized Iraq’s banking sector Wednesday as weak, saying that the greater scrutiny of dollar flows by U.S. and Iraqi authorities since last fall had caused economic upheaval. But he defended the new Swift rules for dollar transactions—referred to in Iraq as the “currency auction”—saying they had helped to halt fraudulent transactions.

“Unfortunately we do not have a banking system, whether government or private one, and this is a real problem,” he said in remarks at the Iraq Forum, a policy conference in Baghdad put on by the Middle East Research Institute. “It was a money laundering process, smuggling of currency and a fake trade with fake documents.”


The exchange rate in the gray market has fallen to around 1410 dinars to the dollar in recent weeks, compared with the official exchange rate of 1320 now. Wire transfers from Iraqi banks have also picked up, signaling Iraqis are adapting to the stricter rules. 

At Umm Qasr, Iraq’s port in the Persian Gulf, unloading of shipping containers nearly ground to a halt last month because many importers accustomed to Iraq’s lax enforcement of import rules lacked proper documentation to get their goods purchased with dollars cleared through customs, according to Hameed Abo Fatma, a customs clearance agent at the port.

“Traders didn’t have the proper documents,” which “led to congestion of containers of goods at the port and business almost stopped,” he said, adding that that backup has eased recently after importers adapted to the new rules and Iraqi officials eased enforcement. link

Source: Dinar Recaps


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