The Central Bank of Iraq has issued a new directive regulating the sale and purchase of real estate properties which is more than 100MIQD. This decision mandates both the seller and the buyer to open a bank account to complete the transaction, with a requirement to verify the source of used funds in the purchase. This decision aligns with governmental efforts to enhance financial transparency and combat money laundering practices that exploit the real estate sector for illegal financial transactions.
Implications and Immediate Effects of the Decision
The primary objective of this decision is to limit the flow of illegal funds through the real estate market, ensuring that all financial transactions are subject to banking system supervision. This will lead to a reduction in price manipulation and unauthorized contracts that have historically been used to obscure the origins of illegal funds. Additionally, the decision will help bridge the gap between the actual market value of real estate and artificially inflated prices that have been leveraged for money laundering activities.
Benefits of the Decision
This decision strengthens economic stability by improving oversight of financial inflows within the real estate sector, thereby reducing inflation in property prices caused by illegal cash flows. It also contributes to the development of Iraq’s banking system by increasing trust in banking transactions and encouraging individuals to rely on banks for their financial transactions. Furthermore, the decision provides legal protection for market participants, ensuring the rights of buyers and sellers while minimizing the risk of disputes or fraudulent activities.
Impact on the business Market and the Real Estate Sector from a Legal Perspective
From a legal standpoint, the decision represents a significant step toward regulating the real estate market, rendering any sale or purchase transaction that is not formally recorded through the banking system unlawful, this procedure closes loopholes that have been exploited for financial misconduct and fraudulent real estate registrations. Moreover, by enforcing compliance with international anti-money laundering standards, the decision enhances transparency within the sector.
Regarding its impact on the business market, the decision is expected to create new opportunities in the banking sector due to the increased demand for financial services. Additionally, it will foster a more secure and reliable investment climate within the real estate sector, attracting investors who prioritize legally sound and transparent transactions.
The Decision’s Role in Iraq’s Fight Against Money Laundering:
This decision is a crucial component of Iraq’s strategy to combat money laundering, as it limits the use of real estate as a channel for integrating illegal funds into the economy. By enforcing banking compliance procedures, all investors will be required to disclose the sources of their funds, thereby facilitating the identification of illegal financial activities. Furthermore, the decision will enhance Iraq’s financial reputation on an international level, promoting economic cooperation and attracting foreign investments. It will also strengthen the country’s institutional framework for combating financial crimes.
Conclusion
The Central Bank of Iraq’s mandate requiring banking transactions for high-value real estate deals represents a fundamental step toward real estate market reform and financial stability. Beyond protecting citizens from fraud, this decision fosters a more transparent investment environment, restricts the flow of illicit funds, and ultimately contributes to the overall development of Iraq’s economy.
Mohammed Rafea
m.rafea@etihad-law.com