Wednesday, July 18, 2012


If you work in an international bank, and you are shipping US Dollar currency (notes) to the Central Bank of Iraq, or to financial institutions located in Iraq, you are probably facilitating a major international sanctions evasion scheme. US Dollars are flooding into Iran and Syria, through a variety of pipelines:

(1) Bulk Cash Smuggling.
(2) Payment, directed to "merchants" in Iran and Syria, employing invoices for phantom sales of goods or services.
(3) Hawala.
(4) Unregulated, unlicensed and unofficial financial institutions, or non-bank financial institutions (NBFI).

The daily figure in Iraq of currency auction volume is averaging $260m per day, five times the pre-sanctions figure, and of the 33 so-called financial institutions purchasing from the CBI, only 21 are licensed. There is actually so much US Dollar purchasing at this time, that it has hurt the value of the Iraqi Dinar, and the Iraqi economy. Unlicensed currency traders number in the hundreds. Know also that the Kurdish Region contains the worst offenders.

If you are charged with the assessment of country risk at your compliance department, consider the facts, and decide whether you should raise Country Risk for Iraq to a high level.

If your bank has a relationship with Iraqi financial institutions, NBFIs, or any financial services company, it is time that you take a hard look at that business, and exit if if there are any indications that you are shipping bulk cash. Note well what is about to happen to HSBC for its dealings with Iran.

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