Baghdad, Iraq – In an economic development with strategic implications, the Financial Action Task Force (FATF) has officially placed Iraq on its list of countries under enhanced monitoring, known as the “grey list.” The FATF’s decision follows a comprehensive evaluation that lasted approximately two years. This decision places the Iraqi financial system under intense international scrutiny and returns the country to a difficult test after it had successfully been removed from the list in 2018.
Justifications for inclusion: Challenges of criticism and transparency
The head of the Financial Action Task Force (FATF), Elisa de Anda Madrazo, explained that the decision stemmed from fundamental gaps requiring urgent attention. These gaps center on the high risks associated with the cash economy, which continues to dominate a significant portion of the Iraqi market. Furthermore, there is an urgent need to accelerate judicial investigations into money laundering offenses. The use of financial intelligence in tracking suspicious activities and terrorist financing must also be enhanced.
Experts warn: “The danger of blackness”
Economic reactions warning of the consequences of this listing have been swift. Ziad al-Hashemi, a researcher and consultant in economics and international transport, views this move as a “worrying setback” and an international warning sign highlighting the shortcomings in the application of compliance standards.
Al-Hashemi pointed out that this development will inevitably lead to increased caution among international correspondent banks in handling Iraqi dollar transfers. Consequently, this will necessitate complex and lengthy due diligence procedures that could disrupt the smooth flow of financial transactions.
For his part, Manar al-Obeidi, head of the Iraq Future Foundation for Studies, warned that delays in implementing reform measures within the established timeframes could push Iraq onto the “blacklist.” This scenario poses the risk of complete financial isolation and direct economic damage affecting citizens’ livelihoods. He also stressed that there is still an opportunity to rectify the situation, but the cost of neglecting it will be exorbitant.
Official position: Action plan and political commitment
At the governmental level, the Anti-Money Laundering Board and the Central Bank of Iraq affirmed their full commitment to a joint action plan with international financial institutions (FATF and MENAFATF). The Board explained that Baghdad had managed to avoid being blacklisted through proactive measures. It also noted significant progress since November 2024, including the implementation of stricter market entry controls and measures to mitigate risks in the real estate sector. The United States also welcomed these official commitments, reiterating its support for structural financial reforms.
These developments come at a time when the Iraqi government has placed financial reform and combating corruption as top priorities in its ministerial program. Since Prime Minister Ali Zaidi took office last May, government rhetoric has focused on rebuilding confidence in the financial system. It has also emphasized attracting foreign investment and fighting corruption.
Observers believe that the inclusion on the grey list, despite its severity, could provide a strong incentive to accelerate long-awaited legislative and regulatory reforms. While Iraq faces increasing pressure to cleanse its financial system of irregularities, attention remains focused on the authorities’ ability to transform this challenge into a genuine opportunity to enhance transparency. This also aims to reduce reliance on cash and build a banking system that complies with international standards. Such measures would ensure the stability of the Iraqi economy and protect citizens’ interests against any potential isolation.
