Baghdad:

Iraq banned eight local commercial banks from U.S. dollar transactions in a move to reduce fraud, money laundering and other illicit uses of the U.S. dollar, days after a visit by senior U.S. Treasury Department officials.

The banks are barred from participating in Iraq’s central bank’s daily dollar auctions, the main source of hard currency for the import-reliant country that has become the focus of a U.S. crackdown on currency smuggling to neighboring Iran.

A rare ally of the United States and Iran, with more than $100 billion in U.S. reserves, Iraq relies heavily on Washington’s goodwill to ensure its access to oil revenue and finances remains unhindered.

Central bank documents verified by central bank officials list the banned banks.

They are: Assur International Investment Bank; Investment Bank of Iraq; United Bank of Iraq; Kurdistan International Islamic Bank for Investment and Development; Al Huda Bank; Al Janoob Islamic Investment and Finance Bank; Arab Islamic Bank and Hammurabi Commercial Bank.

The head of the Iraqi Private Banking Association, which represents the banks involved, as well as Ashour and Hammurabi did not immediately respond to requests for comment. Reuters is contacting other banks.

A Treasury spokesman said: “We commend the Central Bank of Iraq for its ongoing measures to protect Iraq’s financial system from abuse, which has enabled legitimate Iraqi banks to achieve international interconnectivity through corresponding banking relationships.”

In July 2023, Iraq banned 14 banks from U.S. dollar transactions as part of a broader crackdown on the smuggling of U.S. dollars into Iran through the Iraqi banking system. The decision was taken at the request of Washington, according to Iraqi and U.S. officials.

The central bank said banks banned from U.S. dollar transactions can continue to operate and trade in other currencies.

Brian Nelson, the Treasury Department’s top sanctions official, met with senior Iraqi officials in Baghdad last week to discuss how to protect Iraq and the international financial system from crime, corruption and terrorists.

The Treasury Department announced the action against Huda Bank during the visit, saying the bank was involved in transferring billions of dollars to Iran-backed groups.

Washington wants Iraq to take more action to help combat Iran-backed militant groups operating in Iraq after the killing of three U.S. soldiers, an incident blamed on hardline Iraqi factions, a senior Treasury official told Reuters.

The current Iraqi government came to power with the support of powerful Iranian-backed political parties and armed groups with interests in Iraq’s highly informal economy, including the financial sector, which has long been considered a money laundering hotspot.

Still, Western officials praised cooperation with Iraqi Prime Minister Mohammad Shia al-Sudani in implementing economic and financial reforms aimed at curbing Iran and its allies’ ability to obtain dollars and bringing the Iraqi economy into line with international standards.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)