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Iraqi private banking advisor to Rudaw: There are 2,000 exchange companies that should be merged or converted into banks.
6/4/2025
Sherwan Anwar Mustafa, advisor to the Iraqi Private Banks Association, revealed details about the US companies Visa and MasterCard issuing millions of bank cards without adequate controls to combat money laundering and terrorist financing. He pointed out the need to merge or transform the country's 2,000 exchange companies into banks, given their large number worldwide.
Visa and Mastercard vulnerabilities
“The truth is that recently, about three weeks ago, the Wall Street Journal published an investigative report stating that Visa and Mastercard, two of the largest American financial settlement companies, allowed electronic payment companies and banks to issue millions of Visa and Mastercard cards, but without adequate controls, systems, or procedures to combat money laundering and terrorist financing,” Mustafa told Rudaw on Tuesday (June 3, 2025).
The dollar as a weapon in trade wars
Mustafa explained, "Iraq is part of a system, and the world today is witnessing trade wars. America, and especially the new American regime, considers the dollar a means of achieving gains in negotiations between countries, between America and the countries of the world. At the same time, they consider it part of American national security, because they want to track the sources of money flowing specifically in dollars and where it goes."
He pointed out that "there are those who exploit loopholes in regulations, systems, and other issues. Many people have multiple cards with different companies and banks. One person owns multiple cards, which they top up with dollars, and then they withdraw them within minutes in other countries. For them, there are certain controls that must be strict."
The role of the Financial Action Task Force
He emphasized that "the controls overseeing this issue are the international Financial Action Task Force (FATF), which monitors the issue and issues Special Instruction No. 27 on the matter. The FATF issues recommendations to all countries and financial institutions. The group says: Establish robust systems and monitor who transfers funds."
He revealed a serious loophole in the Iraqi banking system, saying, "We have not yet identified this MCC (Merchant Category Code), the merchant category code. What is this merchant's business? Does he import food, wood, or iron, or does he transfer money to various countries? The truth is that we are part of a system within which we must control our affairs. We are trying, and the Central Bank—may God help it—is trying, but these measures require cooperation with other government institutions."
He added, "The Companies Registration Department must determine this merchant's business, who his international clients are, and where he imports from. He must not import from any unknown entity, location, or country. We are negligent in this regard, and we must get our affairs in order."
He referred to a recent international conference, saying, "A few days ago, we attended an international conference in Baghdad sponsored by Mr. Al-Sudani. The Association of Banks, along with the Union of Arab Banks, was present. Ms. Samia Abu Sharif, the head of the Middle East and North Africa region at MENA, was also present. There are many recommendations that we must adhere to."
He stressed that "the Central Bank is in a race against those who seek to exploit these vulnerabilities and enrich themselves at the expense of or to achieve certain political and other objectives."
Strict new instructions
He revealed strict new measures, saying, "The latest Central Bank instructions state that I am not allowed to deposit funds into another person's card. This is prohibited. Previously, it was permissible for an individual to issue more than one card from the same company, but this is now strictly prohibited. You know that this is an ongoing struggle between phishers and those trying to control them."
He explained: "Now, you can only deposit funds into your card yourself. This is an important issue, and at the same time, the bank must... The bank is responsible, of course. Some of these accounts are prepaid accounts, meaning they are not linked to a bank account and are subject to audit by the bank's advanced systems. This is where the problem lies, as the majority of them are prepaid cards."
Blacklist and Freeze System
Regarding the mechanism for dealing with violations, he explained: "If I have an account with serious banking legal violations, it will be frozen. The account will remain frozen, and that person will be placed on the Central Bank's blacklist, meaning all blocked accounts will be frozen. Blocked means that all money transfer and electronic payment companies and banks must verify before depositing any amount into that account, so that the system automatically audits it."
He added, "This freeze is for external purposes only. However, inside Iraq, it can be used and fully processed, and can be transferred within Iraq. However, for the purpose of withdrawing dollars from outside Iraq, this is 100% prohibited. Because the card is either issued by Visa or MasterCard, and when they place a hold on this card, this person cannot go abroad to transfer, withdraw, or deal with the money in dollars. However, he can fully deal with it within Iraq."
Legal prosecutions
He explained the nature of the legal proceedings, saying: "Regarding legal proceedings... this is not a violation or a crime in the strict sense. The Central Bank calls this the judicial prosecution system or the reporting system by the Payments Division, which is a division within the bank that is responsible for reporting violations. If the violations amount to a crime, the Central Bank refers them to a fact-finding committee, which may take legal action depending on the nature of the violation."
He revealed the details of the mechanism of action, saying: "They buy a license from Visa or MasterCard and pay millions of dollars to obtain it. There are three activities, one of which is issuance, meaning that it is a MasterCard issuer. When someone comes to open a prepaid account or a bank account and wants a Visa card, the bank is authorized, according to the contract with Visa Card, to issue a Visa card for them, provided that the bank adheres to the auditing, controls, and banking procedures to combat money laundering."
Regarding the current state of banks, he said, "I believe that most cards and banks have suspended their operations, with the exception of banks and companies that have accounts with US banks only, including Al-Ahli, Al-Mansour, Baghdad, the Smart Card, and even the TBI card."
He explained, "Cihan Bank is not subject to any prosecutions, nor is Arti Bank. All banks that do not have restrictions on dollar transactions outside Iraq can use their cards outside Iraq. Why? Because they have a co-founder bank that implements the systems, operates a joint clearing house, and has a branch in Jordan, Dubai, or Kuwait."
Withdrawal limits for travelers and merchants
Regarding travelers, he explained: "Regular travelers traveling outside Iraq for medical treatment, tourism, and other purposes are granted $3,000 from outlets approved by the Central Bank. As for importing merchants, as I mentioned, the Merchant Category Code (MCC) governs this matter. It is a global code that must be applied by our banks and companies to make it easier for them to identify each merchant's business."
He added, "This is done in coordination with the Companies Registration Department, which issues this code. It is used by all state institutions for imports. The Central Bank is currently linking its systems with the customs and tax systems, which is an important step toward bringing matters under control."
Global economic threats
He warned of the coming risks, saying, "We are now in a threatening global situation, that is, we are threatened by a new financial situation, and the United States may take customs measures that will affect global trade. The dollar is currently the main currency for financial settlements, especially for oil transactions. Our country is considered to be in an economically fragile region, and we depend primarily on oil exports and budget spending, i.e. by more than 90 percent."
Customs as a revenue stream
He pointed to the potential for increased revenues, saying, "When I mention customs, it's because it could be a good entry point and could generate around $10 billion annually, but it's much less than that due to the lack of control over financial transfers. If we don't accept the sacrifices, we'll get tired."
He emphasized that "the Central Bank, as the state's representative, is responsible for monetary policy in cooperation with the Ministry of Finance. We must accept the sacrifices and agree to regulate our banking procedures."
Shocking figures about the banking sector
Mustafa revealed shocking figures about the size of the banking sector, saying, "Global banks are monitoring our banks and saying their capital is low and their numbers are large. This is not just about banks, but also about financial services and exchange companies. The number is very large, exceeding the estimates of all international institutions."
He explained the details: "Regarding banks, there are 51 Iraqi private banks and seven government banks. There is a program to restructure government banks, led by Rafidain Bank, and the rest of the banks. In total, there are 71 banks under the umbrella of the Central Bank."
He added, "Financial companies include 17 electronic payment companies and thousands of exchange and transfer service companies. There are approximately 2,000 exchange companies, which is a huge number. These companies will either merge or transform into banks, and the Central Bank will issue instructions in this regard."
Financial inclusion strategy and criticisms
Mustafa concluded by referring to the financial inclusion strategy, saying, "I can point to the NFIS 25 Financial Inclusion Strategy that the Central Bank Governor presented at the meeting a week ago. Financial inclusion... There is a very important point. Where does the NFIS (National Financial Inclusion Strategy) work? The World Bank and the International Monetary Fund support financial inclusion in Iraq."
He added, "When you support financial inclusion—that is, increasing accounts and remittances—you shouldn't be surprised by a significant financial transfer. But that doesn't mean you should impose a ban on Iraqi financial institutions, as that would be a grave injustice. Iraqi financial institutions are trying, and so is the Central Bank."
Since the beginning of this month, the Central Bank of Iraq has imposed strict restrictions on the use of bank cards outside Iraq. This move aims to combat financial irregularities and manipulation in the banking system. It has pledged to find temporary solutions before the end of the month.
The restrictions included two main types of questionable bank cards. The first is counterfeit cards or those issued in fictitious names. Bank cards are used abroad in the names of people who have never left Iraq, indicating organized fraudulent operations in the banking system.
The second type of bank cards experiencing problems is those that do not have a US banking brokerage. This type of card is not working, and according to information from Rudaw, it is scheduled to be resolved by the end of this month through the Trade Bank of Iraq (TBI).
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