ERBIL, Kurdistan Region - Iraqi Prime Minister Ali al-Zaidi announced on Saturday that seven banks previously banned from dealing with foreign currencies can resume transactions in US dollars after "meeting compliance and governance requirements," citing an "understanding" between the Central Bank of Iraq (CBI) and the US Department of Treasury.
"The qualification of seven Iraqi banks to resume correspondent banking in foreign currencies, as a step toward restoring their eligibility to conduct transactions in U.S. dollars upon meeting compliance and governance requirements, reflects the success of the government's financial reform agenda," Zaidi wrote in a post on X.
He added that he will continue to support financial and banking reforming while reinforcing "the principles of transparency and good governance in a manner that serves Iraq's interests and enhances its regional and international economic standing."
In early 2024, the CBI barred eight local commercial banks from conducting transactions in US dollars, blocking their access to the CBI's daily dollar auction over illicit dollar flows and currency smuggling to Iraq.
The banks included Ashur International Bank for Investment, Investment Bank of Iraq, Union Bank of Iraq, Arabia Islamic Bank, and al-Huda Bank.
Al-Huda Bank was specifically targeted for routing billions of dollars to Iran-backed groups.
Previously, in mid-2023, the US Treasury had banned 14 other Iraqi banks.
The banks had allegedly used fraudulent trade invoices to exploit the auction, siphoning dollars out of the formal Iraqi economy and smuggling them straight into Iran, Syria, and sanctioned armed groups.
Brian E. Nelson, under-secretary for the Treasury's anti-terrorism unit, said at the time that "Iraq has made significant progress in rooting out illicit activity from its financial system, but unscrupulous actors continue to seek to take advantage of the Iraqi economy to raise and move money for illicit activity."
Iraq's international oil revenues are directly deposited into the Federal Reserve Bank of New York, giving the US substantial leverage in influencing Baghdad's fiscal and financial policies.
The US Department of Treasury suspended the delivery of dollar banknotes to Iraq in late February, coinciding with the outbreak of the US-Israeli war against Iran.
In April, the restrictions culminated in the pausing of $500 million in physical cash deliveries.
However, Washington lifted the four-month-long dollar pause earlier in July.
Notably, Zaidi's announcement comes just days before he concludes his week-long visit to the United States, where he has signed 48 deals and memoranda of understanding with the US government and companies across a wide range of fields, including oil, electricity, and technology.
