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'"The U.S. has taken action to block the suspected Iraqi banks from using the Fed system to transfer dollars, Nelson told the Journal in an interview. “It’s been important for Treasury to ensure those funds are not diverted in support of the Iranian regime.” Nelson, who left Treasury in August, declined through a spokeswoman to discuss his talks with Iraqi officials.
The crackdown on Iraqi banks started in late 2022 after more than a decade of U.S. inaction, even after warnings by the Pentagon inspector general as long ago as 2012 of potential fraud on the order of $800 million a week. Current and former U.S. officials said that over the years the U.S. implemented temporary restrictions on cash flows to Iraq, but feared that tight or permanent controls would plunge Iraq into economic chaos and set back its fight against Islamic State.
For Iran, which has been sanctioned for illicit nuclear activity and for supporting terrorism, access to dollars is critical for buying weapons and parts for drones and missiles, and financing armed groups it supports around the Middle East, U.S. officials said.
Those include Hamas in Gaza and Hezbollah in Lebanon, U.S.-designated terrorist groups that have battled Israel since last October, raising tensions in the Middle East to the highest level since the U.S.-led invasion of Iraq two decades ago.
After the invasion of 2003, Washington agreed to hold Iraq’s earnings from oil sales—tens of billions a year—at the New York Fed. To circulate the proceeds back into Iraq, the Fed began shipping dollars in cash to Baghdad and processing commercial wire transfers from Iraq’s private banks for international trade, hoping to revive its shattered economy after years of war and sanctions.
The ad hoc system lacked a key check that is standard in international banking: It didn’t require the banks to divulge specifically who was getting the funds they were wiring out of Iraq."'
Something else to keep an eye on...
Published in the Wall Street Journal today:
The U.S. set up an ad hoc banking system in Iraq to handle the country’s oil earnings. Iraqi banks used it to funnel dollars to Iran. https://www.wsj.com/politics/national-security/iraq-banks-u-s-fed-iran-financing-0c3e740c?st=7n3nngeyygivnlg&reflink=share_mobilewebshare
'"The U.S. has taken action to block the suspected Iraqi banks from using the Fed system to transfer dollars, Nelson told the Journal in an interview. “It’s been important for Treasury to ensure those funds are not diverted in support of the Iranian regime.” Nelson, who left Treasury in August, declined through a spokeswoman to discuss his talks with Iraqi officials.
The crackdown on Iraqi banks started in late 2022 after more than a decade of U.S. inaction, even after warnings by the Pentagon inspector general as long ago as 2012 of potential fraud on the order of $800 million a week. Current and former U.S. officials said that over the years the U.S. implemented temporary restrictions on cash flows to Iraq, but feared that tight or permanent controls would plunge Iraq into economic chaos and set back its fight against Islamic State.
For Iran, which has been sanctioned for illicit nuclear activity and for supporting terrorism, access to dollars is critical for buying weapons and parts for drones and missiles, and financing armed groups it supports around the Middle East, U.S. officials said.
Those include Hamas in Gaza and Hezbollah in Lebanon, U.S.-designated terrorist groups that have battled Israel since last October, raising tensions in the Middle East to the highest level since the U.S.-led invasion of Iraq two decades ago.
After the invasion of 2003, Washington agreed to hold Iraq’s earnings from oil sales—tens of billions a year—at the New York Fed. To circulate the proceeds back into Iraq, the Fed began shipping dollars in cash to Baghdad and processing commercial wire transfers from Iraq’s private banks for international trade, hoping to revive its shattered economy after years of war and sanctions.
The ad hoc system lacked a key check that is standard in international banking: It didn’t require the banks to divulge specifically who was getting the funds they were wiring out of Iraq."'