Banks tighten checks on politicians to avoid Iran sanctions exposure

BAGHDAD — Iraqi banks are tightening scrutiny of politicians, their relatives and associates to keep the banking system clear of transactions that could expose it to sanctions linked to Iran, financial expert Mahmoud Dagher told 964media.

“The latest sanctions on Iran sounded an alarm bell in Iraq and prompted multiple measures to prevent these sanctions from affecting the Iraqi financial system, particularly given the overlap of economic and banking relations between Iraq and countries in the region,” he said. Banks have been told to apply stricter controls to high-risk categories including politicians and those connected to them, and “the review process may extend to family members and people close to politicians to verify sources of income and the integrity of financial transactions.”

Some politicians or their associates may have dealings with entities outside Iraq, he said, and banks must now check more thoroughly that funds carrying sanctions risk do not pass through them. “What was possible previously in terms of sending assistance or making some transfers to entities or other countries has today become more difficult and sensitive.”

The Central Bank issued a directive on Aug. 29 requiring due diligence on accounts linked to politically exposed persons. Financial sources told 964media on Sunday that the measures extend to spouses, relatives to the third degree and personal security details, with banks told to build dedicated databases as part of know-your-customer procedures. The U.S. Treasury sanctioned networks across several countries on Aug. 7 that it said moved hundreds of millions of dollars for Iran through shadow banking, and Treasury Secretary Scott Bessent warned Iran’s trading partners on Aug. 24 about expanded secondary sanctions.