Iraq risks financial isolation after FATF gray list return
Shafaq News- Baghdad
Iraq's return to the Financial Action Task Force (FATF) gray list could increase pressure on the country's financial system and, if corrective measures are delayed, risk being placed on the organization's blacklist, economic experts warned on Saturday.
FATF decided yesterday to place Iraq under enhanced monitoring due to deficiencies in its anti-money laundering and counter-terrorism financing framework.
Economic researcher and international transport consultant Ziad al-Hashimi said Iraq's return to the gray list, after exiting it in 2018, is a “setback” and a “warning signal” from the international financial community.
Read more: Iraq advances cooperation with FATF, says US official
According to al-Hashimi, international banks, particularly correspondent banks involved in processing US dollar transactions for Iraq, are likely to adopt a more cautious approach. “The designation could result in stricter oversight of international transfers and require the Central Bank (CBI) to implement more complex procedures to identify and prevent suspicious transactions.”
He warned that the designation would likely increase compliance and transaction costs, slow investment inflows, and place additional pressure on exchange rates in the parallel market.
🔴 عودة العراق (للقائمة الرمادية) في مجموعة العمل الدولية بعد ان خرج منها في 2018، هي خطوة للوراء وجرس إنذار دولي يشير ان معايير غسل الأموال وتمويل الإرهاب لاتزال غير مطبقة كما يجب في العراق! 🔴 أسباب اعادة العراق للقائمة الرمادية تتعلق بالمخاطر المستمرة في القطاع المصرفي،…
— زياد الهاشمي (@ziadalhashimi) June 20, 2026
Separately, Manar al-Obaidi, head of the Iraq Future Foundation for Economic Studies and Consultations, warned that failure to implement agreed reforms within the specified timetable could expose Iraq to the risk of being moved to the FATF blacklist. “Such a move would lead to financial isolation and broader economic damage that could directly affect citizens' livelihoods,” al-Obaidi noted, adding that the opportunity to address the situation still exists, “but the cost of failing to do so will be significant."
The Anti-Money Laundering and Counter-Terrorism Financing Council, in cooperation with CBI, announced the adoption of a joint action plan to strengthen the country's financial oversight framework.
Iraq's proactive measures had “helped the country avoid being placed on the FATF blacklist,” the council indicated, stressing that authorities remain committed to addressing identified weaknesses and complying with international standards.
According to the council, Iraqi institutions have made measurable progress since the adoption of the mutual evaluation report in November 2024, including strengthening market-entry controls and introducing risk-mitigation measures in the real estate sector.
The council added that enhanced monitoring mechanisms are applied to many countries worldwide as part of FATF's quality and consistency review process and risk-based assessments.
Earlier, FATF President Elisa de Anda Madrazo said the organization's plenary meeting had decided to place Iraq on the gray list because additional action is needed to address risks linked to the country's cash-intensive economy. “Iraq must strengthen money laundering investigations, increase prosecutions, and make greater use of financial intelligence.”
The FATF decision followed Iraq's new government, identifying economic reform and anti-corruption measures as central pillars of its program. Prime Minister Ali al-Zaidi has stated since taking office in May that rebuilding the financial system, attracting foreign investment, and combating corruption are among his administration's top priorities.
Iraq was removed from FATF monitoring in July 2018 after authorities implemented a broad compliance strategy led by the Central Bank of Iraq and anti-money laundering agencies, with support from judicial, security, and intelligence institutions across the country.
Read more: What does Iraq's new government promise? A guide to Ali Al-Zaidi's ministerial program
