Iraqi Banks Barred from Dollar Transactions in Crackdown on Currency Siphoning to Iran

The United States has reportedly banned 14 Iraqi banks from conducting transactions in dollars in a crackdown on the siphoning of US currency to Iran.

The ban was imposed by the Treasury Department and the Federal Reserve Bank of New York, the Wall Street Journal reported on July 19, citing U.S. officials.

According to the report, the United States has information that the 14 Iraqi banks engaged in money laundering and fraudulent transactions, some of which may have involved sanctioned individuals and raised concerns that Iran could benefit.

"We have strong reason to suspect that at least some of these laundered funds could end up going to benefit either designated individuals or individuals who could be designated," the newspaper quoted a senior US official as saying.

"And of course the primary sanctions risk in Iraq relates to Iran," the official added.

The banks targeted by the ban include Al Mustashar Islamic Bank, Erbil Bank, World Islamic Bank and Zain Iraq Islamic Bank, according to the Wall Street Journal.

Iraq's private banks association, the Iraqi government, the US Treasury Department and the Federal Reserve Bank did not immediately respond to requests for comment.

Washington has put pressure on Iraq to stem the flow of dollars into neighboring Iran, which has been unable to access billions of dollars in assets held in several countries due to US sanctions.

Meanwhile, an unidentified US official told Reuters news agency that Secretary of State Antony Blinken signed a 120-day waiver allowing Iraq to pay Iran for electricity via non-Iraqi banks in third countries.

Oil-rich Iraq is heavily dependent on Iranian electricity.