PMF June salary delays raise questions over financial structure and US oversight

BAGHDAD — Delays in June salary payments to Iraq’s Popular Mobilization Forces have raised concerns about the force’s financial structure and its exposure to U.S. oversight, according to officials and experts who spoke to 964media.

The delay — the first since the PMF was formally incorporated into Iraq’s security structure in 2016 — followed the withdrawal of Rafidain Bank and Qi Card from payment processing. The PMF blamed a “technical problem,” tied to a transition in the payment system, and denied “the existence of sanctions against firms disbursing PMF salaries.”

Salaries were eventually paid out, but experts say the episode exposed structural issues. PMF members lack official employment numbers and are not covered by a standardized service or retirement law, complicating their inclusion in Iraq’s payroll system.

The banking shift followed a Wall Street Journal report alleging Iran-linked militias had used Visa and Mastercard for transactions. It cited a 2,900% spike in electronic payments in early 2023.

The PMF has since partnered with Al-Nahrain Islamic Bank, a smaller state-run institution.

Meitham Al-Zaidi, commander of the Abbas Combat Division, rejected the “technical” explanation and blamed U.S. sanctions. He proposed distributing salaries in cash via the Ministry of Finance and called for an internal PMF payment system.

Experts told 964media that such proposals — including creating a “special bank for the PMF” — all reflect an effort to “distribute salaries within a local circle away from the eyes and interference of the United States and global banking oversight bodies.” Al-Zaidi later acknowledged this would not be possible due to Iraq’s “lack” of financial sovereignty.

Iraq’s foreign currency reserves are held at the Federal Reserve Bank of New York. While nominally under Iraqi control, their use is subject to U.S. approval. In 2023, the U.S. barred 14 Iraqi banks from dollar access over misuse concerns.

Economist Dr. Mustafa Hantoush said the Central Bank could reduce risk by distributing PMF salaries across several banks. “One solution is for the Central Bank to distribute PMF salaries in specific proportions to various Iraqi banks, so that the issue is not concentrated in a single bank and thus becomes a target,” he said.

He suggested other options, including acquiring payment firms or using cash, though he added, “Cash payment is an option, but I do not prefer this solution.”

Dr. Ahmed Huthal, an economics professor, warned cash payments would harm Iraq’s financial system. “What is being proposed as an alternative solution, such as distributing salaries in cash is merely a traditional approach,” he said. “It represents a setback in financial inclusion and exposes Iraq’s Ministry of Finance to suspicions that could lead to the isolation of Iraq’s financial system internationally.”

Huthal said such methods increase U.S. leverage under what he called “the dominance over financial and economic decision-making.” He noted that while Al-Nahrain Bank operates outside U.S. scrutiny, its limited capacity makes it unsustainable long term.

“The real remedy lies in restructuring the PMF’s financing mechanism within the Ministry of Finance system and integrating its payroll data with the state salary system to ensure transparency and formal auditing, like any other government institution,” he said.

Many PMF members, he added, lack employment records due to their classification as a “sensitive security entity.”

To avoid external pressure, Huthal called for domestic financial infrastructure. “We need internal payment systems that are not linked to external networks, such as locally issued cards,” he said. “We need to reach a fundamental solution that convinces the West that the PMF is a security institution under the law.”

U.S. affairs expert Aqil Abbas compared the PMF salary dispute to tensions over payments to Kurdistan Regional Government employees. “There is no trust between Baghdad and the Kurdistan Region regarding salaries because of the absence of transparency,” he said. “Baghdad wants the KRG salaries to be deposited in Rafidain Bank, with each employee’s fingerprint and personal data recorded and their workplace identified, and so on.”

“The root of the matter is that the PMF wanted to receive the entire budget and then distribute salaries to its members directly, despite suspicions of numerous ghost employees within the PMF and concerns about funds being smuggled to Iran or to armed factions,” he added.

Experts said resolving the issue may require diplomatic engagement, recommending that Prime Minister Mohammed Shia Al-Sudani and Central Bank Governor Ali Al-Allaq lead a delegation to Washington to clarify the PMF’s financial status.

They also cited unresolved internal issues, including the PMF’s legal role and ties to sanctioned armed factions. Without addressing these, Iraq risks continued entanglement with international oversight bodies.