Iraq’s economy is reeling after stricter controls on wire transfers targeting Iran led to a sharp rise in import costs and rapid depreciation in the dinar, reports the Wall Street Journal’s David S. Cloud. The New York Fed began enforcing stricter controls on international dollar transactions by commercial Iraqi banks in November to curb money laundering and illegal transfer of dollars to heavily sanctioned countries such as Iran.
Iraqi officials, bankers and importers blame the new system for a financial jolt that is exacerbating already severe economic woes. US officials said the tighter rules, which bring Iraq in line with global standards for transparency, were implemented after two years of coordination with the central bank.
Since the procedures went into effect, 80% or more of Iraq’s daily dollar wire transfers, which previously totaled over $250 million some days, have been blocked due to insufficient information about the funds’ destinations or other errors.