The Iraqi Islamic Financial Institutions and Anti-Money Laundering Regulation

Abstract

Money laundering is an issue faced by the financial system in many countries today. Money laundering has a negative impact on Islamic financial institutions, which in turn affects customers' willingness to deal with them. This issue in Iraq is a serious obstacle for financial institutions in general and Islamic financial institutions in particular.  The Central Bank of Iraq (CBI) supervises Islamic banks in the country, and it is the responsibility of the CBI to resolve money laundering issues. In this context, a special Act to protect the financial system from money laundering in Iraq is called the Anti-Money Laundering and Counter-Terrorism Financing Law No. (39) 2015. This Act has a significant role in reducing money laundering in Iraq. To prevent money laundering by financial institutions, the CBI is currently working to transform the Iraqi financial system, primarily shifting from cash to electronic payments. However, money laundering is still a serious threat faced by the financial system of Iraq. Since using e-payment and credit cards is new in Iraq, money laundering is still widespread in Iraq, especially through cash transactions, according to the Iraqi observers. Therefore, this paper will examine money laundering specific to Iraqi Islamic financial institutions. The paper will identify the main area of money laundering in the Iraqi Islamic financial system. In addition, the role of Islamic financial institutions will be evaluated concerning this issue. Some questions should be answered here. First, what is the role of the Islamic financial institutions in money laundering in Iraq? Second, what is the role of the Anti-Money Laundering and Counter-Terrorism Financing Law No. (39) 2015 in reducing money laundering in Iraq? This paper found that a more comprehensive awareness of money laundering in the Islamic financial system should be developed to customize supportive efforts to encourage the integrity of Islamic financial institutions and ensure the industry against money laundering. Furthermore, Islamic banks should build additional mechanisms to determine money laundering financing and implement protective standards customized to the nature of their products and services.