Foreign companies in Iraq often assume anti-money laundering rules concern only banks. In practice, the law reaches many businesses and affects every company that uses the Iraqi banking system. Banks apply strict checks before opening accounts or processing transfers. Companies that cannot show who owns them or where their funds come from may find payments blocked and accounts closed.
Legal Framework
The Anti-Money Laundering and Counter-Terrorist Financing Law No. 39 of 2015 criminalises money laundering and terrorist financing in Iraq. It sets preventive duties for financial institutions and certain non-financial businesses and professions. The law replaced the earlier anti-money laundering framework issued in 2004.
The law created an Anti-Money Laundering and Counter-Terrorist Financing Council and a specialised office linked to the Central Bank of Iraq. The office receives and analyses suspicious transaction reports. The law operates alongside the Banking Law, the Central Bank Law and Iraq’s counter-terrorism legislation, and is supported by regulations and instructions.
Key Points for Foreign Companies
Who Must Comply
The law applies to financial institutions, including banks, exchange companies, insurers and payment providers. It also covers designated non-financial businesses and professions, such as:
- real estate agents;
- dealers in precious metals and stones;
- lawyers, accountants and notaries in certain transactions.
A foreign company in one of these sectors carries direct obligations under the law.
Customer Due Diligence
Covered entities must identify and verify their customers before establishing a relationship or carrying out certain transactions. They must understand the purpose of the relationship. Enhanced checks apply to higher-risk customers, including politically exposed persons.
Beneficial Ownership
Covered entities must identify the natural persons who ultimately own or control a customer. Foreign companies with complex group structures should expect detailed questions. Clear ownership charts and certified documents will speed up bank onboarding.
Record Keeping
Records of customer identification and transactions must be kept for the period set by the law. These records must be available to the competent authorities on request. Companies should align their document retention policies with Iraqi requirements.
Suspicious Transaction Reporting
Covered entities must report suspicious transactions to the specialised office without delay. Reports made in good faith are protected from liability. Disclosing to a customer that a report has been made is prohibited.
Freezing of Terrorist Assets
The law provides a mechanism for freezing funds of persons linked to terrorism, including those on relevant United Nations lists. Covered entities must screen customers and transactions against these lists. Contracts with Iraqi counterparties should allow for compliance with freezing orders.
Cross-Border Movement of Cash
Persons entering or leaving Iraq with cash or bearer instruments above a set threshold must declare them. Failure to declare can lead to seizure and penalties. Staff travelling with cash should be briefed before every trip.
Penalties
The law imposes criminal penalties, including imprisonment and fines, for money laundering and terrorist financing offences. Administrative sanctions also apply to covered entities that fail in their preventive duties. Liability can extend to legal persons as well as individuals.
Practical Recommendations
- Determine whether your Iraqi activities place you within the categories of covered entities under the law.
- Prepare a complete beneficial ownership file before opening accounts with Iraqi banks.
- Screen Iraqi customers, agents and partners against sanctions and terrorism lists as standard practice.
- Train local staff on suspicious activity, tipping-off rules and cash declaration duties.
- Review retention and data policies to ensure required records are available in Iraq when requested.
Conclusion
The Anti-Money Laundering and Counter-Terrorist Financing Law No. 39 of 2015 shapes how every company accesses the Iraqi financial system. Foreign companies that prepare transparent ownership records and sound compliance controls will find banking in Iraq far smoother.
This article provides general information only and does not constitute legal advice. For advice on anti-money laundering compliance in Iraq, contact Etihad Law team.