Iraqi Dollar Smuggling 'Turns Regional' Amid High Iranian Demand For Greenbacks

 
Iraq / Economy     Amwaj.media  An Iraqi man counts US dollar bank notes in Baghdad on May 4, 2020. (Photo via Getty Images)   Jun. 24, 2025   The story: Iraq has recently been riled by reports of a multi-billion dollar cash smuggling scheme allegedly orchestrated by Iran and its allies. Apparently aiming to circumvent US sanctions, the controversy has sharpened attention to Iran’s extensive regional shadow economies in Iraq. Emerging shortly before the recent attacks on Iran by Israel and the US, the crisis has led to intense scrutiny on ties between Tehran and Iraqi armed groups. 

The coverage: Dollar smuggling from Iraq to Iran, and between other regional countries, has been a well known practice in Iraqi banking and political circles for over a decade.
 
●    However, citing Iraqi and US sources, a recent Wall Street Journal report has drawn attention to the claimed scale, ingenuity and organization of the enterprise—and Iran’s allegedly central role in orchestrating it.
 
●    A reported arbitrage scheme has apparently involved Iran-linked smugglers acquiring large quantities of Mastercard and Visa prepaid debit cards.
 
Leveraging Iraq's informal dual exchange rates, couriers are reported to have withdrawn greenbacks at the official rate at ATMs primarily in Jordan, Turkey and the United Arab Emirates (UAE).
 
●    The couriers are claimed to then return to Iraq and use ubiquitous money exchange kiosks to convert the cash to dinars at the higher unofficial exchange rate.
 
●    As a result of these alleged activities, cross-border card transactions reportedly surged from 50M USD to 1.5B USD monthly between early 2023 and Apr. 2023, generating an estimated 450M USD in profits in 2023 alone.
 
https://flo.uri.sh/visualisation/12677369/embed?auto=1
 
The reactions in Iraqi media and on social networks have broadly been one of frustration, with critics leveling anger at Iran’s armed allies—and at Iraqi and international regulators for seemingly turning a blind eye to the trade.
 
●    As anger mounts, one Iraqi political observer speculated in a post to Twitter/X that the funds may be used in Iran to pay pensions to government beneficiaries.
 
Other Iraqi outlets noted how the currency trade, exacerbated by recent regional instability, has weakened the Iraqi dinar.
 
●    One Iraqi analyst told Erbil-based Rudaw that exchange rate spikes “hit ordinary people the hardest,” as they drive up the prices of staple goods and services.
 
The context/analysis: The alleged profiteering from Iraq’s effectively dual exchange rates appears to be the latest evolution in a longstanding pattern of sanctions evasion schemes by Iran and its regional allies.
 
●    Prepaid cards are particularly attractive for such schemes because they offer anonymity, require minimal identity verification, provide global reach through payment networks and allow for discreet transport as alternatives to large volumes of cash.

Earlier currency smuggling schemes in Iraq were reportedly scaled dramatically through the Qi Card salary distribution system. Partnered with Visa and Mastercard, the network serves millions of government employees, including members of the Popular Mobilization Units (PMU).
 
●    Thousands of PMU employees receive state salaries through Qi Cards, with some commanders reportedly seizing subordinates' payment cards, or creating fake identities to obtain additional payouts. https://datawrapper.dwcdn.net/hTN42/14/
 
In late 2022, the US Treasury and Federal Reserve clamped down on allegedly fraudulent wire transfers from several Iraqi banks amid concern over dollar smuggling.
 
●    Those new restrictions are believed to have forced Iraqi armed groups to pivot to prepaid debit cards and the exploitation of regional banking networks.
 
Adding to the controversy, both Mastercard and Visa have allegedly profited significantly from the current alleged scheme, reportedly earning collectively around 120M USD through transaction fees of 1% to 1.4% on cross-border transactions.
 
●    Both Mastercard and Visa have been accused of delaying enforcement calls for action from the US Treasury for months. This is claimed to have allowed transactions to continue, ranging from 400M USD to 1.1B USD monthly until early 2025.
 
Adding to the rising awareness of the problem, anecdotal reports have suggested long lines of Iraqis at ATMs in regional countries withdrawing large amounts of cash.
 
●    However, such reports have been apparently dismissed by Iraqi officials as negligible and blamed on “criminal gangs.”
 
    Central Bank of Iraq (CBI) Governor Ali Al-Allaq in April stated that
 
his institution was targeting the “Visa and Mastercard card problem abroad,” although he emphasized that  the crisis stemmed from “misunderstandings.”

State-owned banks in Iraq
Agricultural Cooperative Bank of Iraq  Founded: 1935
Alnahrain Islamic Bank  Founded: 2012
Bank of Iraq  Founded: 1948
Industrial Bank of Iraq  Founded: 1941
Rafidain Bank  Founded: 1941
Rasheed Bank  Founded: 1988
Trade Bank of Iraq  Founded: 2004
Source: News agencies • Collated by: Amwaj.media
 
The future: The apparent dollar smuggling enterprise has seemingly fallen off Washington's radar for now,
 
as attention has shifted to the renewed outbreak of conflict between Iran and Israel
—and more recently the US bombing of Iranian nuclear sites.
 
●    Yet, the effects on Iraq’s banking sector may be long-lasting, as seen in a broader tightening of oversight over the financial sector.
 
●    Regulatory institutions have implemented monthly caps of 300M USD on all cross-border transactions and limited individual cardholders to 5,000 USD monthly.
 
The US Treasury's blacklisting of three Iraqi card issuers and the blocking of over 200,000 apparently fraudulent cards represent the most significant enforcement actions against allegedly Iran-linked illicit financial networks to date.
 
●    However, the historical pattern of adaptation suggests that new loopholes will likely emerge and be exploited for as long as there is high demand for US dollars.
 
Nevertheless, the controversy over the prepaid debit cards has accelerated banking sector reform in Iraq, with comprehensive regulatory changes scheduled for implementation beginning in early 2026.
 
●    The CBI has announced reforms that include unified regulatory frameworks, enhanced anti-money laundering capabilities and mandatory compliance with international standards.     
  
https://amwaj.media/en/media-monitor/iraqi-dollar-smuggling-claimed-to-turn-regional-amid-high-iranian-demand-for-gree