Central Bank of Iraq (CBI)

Overview

The Central Bank of Iraq (CBI) is the central bank and primary monetary authority of Iraq. Content for this section is being enriched from official sources. The Central Bank of Iraq (CBI) in Iraq has regulatory functions documented in adjacent sections of this profile.

Basic Identity

Classification

Inclusion Justification

What This Entity Oversees

Central Bank of the Republic of Iraq

Overview

The Central Bank of Iraq (CBI), established in 1947, serves as Iraq's monetary authority and financial system regulator. The CBI operates under modern governance frameworks while navigating post-conflict reconstruction and commodity-dependent economic management.

Current Leadership:

• Governor: Dr. Ali Mohsen Al-Alaq (appointed 2014, incumbent through 2026)
• Tenure Focus: Anti-corruption, AML/CFT implementation, institutional capacity building
• International Engagement: Active coordination with US Treasury, IMF, and international financial institutions

Strategic Focus: The CBI prioritizes banking sector reform, foreign exchange management through dollar auction systems, and comprehensive AML/CFT compliance strengthening.

Legal Basis

Central Bank Law No. 56 of 2004:

Enacted following the 2003 regime change, CBI Law 56/2004 establishes the modern legal framework for monetary policy and banking regulation:

Authorized Capital: 100 billion Iraqi dinars

Core Objectives:

• Achieve stability in the local currency (Iraqi Dinar – IQD)
• Maintain a stable financial system based on competitive market principles
• Implement independent monetary policy
• Regulate and supervise the banking sector

Institutional Independence:

• Full operational autonomy from government interference
• Protection of central bank assets and governance
• Authority to formulate and adopt monetary policy independently

Regulatory Authority (Article 40 & Related Provisions):

• Bank licensing (domestic and foreign branch operations)
• Regulatory and supervisory standards setting
• Conduct and prudential regulations issuance
• Banking system oversight and examination authority
• Monetary policy implementation tools

Monetary Policy

Dinar Management Framework:

The CBI maintains the Iraqi Dinar as the primary currency while managing complex monetary policy objectives:

Key Tools:

• Central bank discount rate (policy rate) setting
• Open market operations and liquidity management
• Reserve requirement adjustments
• Lending facility rates

Coordination with International Partners:

• IMF Article IV consultation compliance
• Federal Reserve coordination (given USD auction linkages)
• Treasury engagement on sanctions compliance
• Regional central bank cooperation

Inflationary Pressures:

• Management of demand-side inflation from oil revenues
• Currency stability maintenance
• Price level targeting objectives

Growth Objectives:

• Support for economic recovery from conflict
• Liquidity provision for private sector credit
• Financial system stabilization

Banking Supervision

Supervisory Framework:

The CBI exercises comprehensive banking supervision through established regulatory channels:

Licensed Institutions:

• Commercial banks (state-owned and private)
• Foreign bank branches
• Specialized banks (development, investment banking)
• Microfinance institutions

Supervisory Tools:

• On-site examinations and inspections
• Prudential regulation and capital adequacy requirements
• Liquidity and asset quality standards
• Governance and management competency assessments
• Corrective action authorities

Regulatory Standards:

• Proper Conduct of Banking Business directives
• Corporate governance requirements
• Compliance with international best practices
• Risk management and internal control standards

Enforcement Authority:

• Licensing suspension or revocation
• Management removal orders
• Corrective action programmes
• Penalties and administrative sanctions
• Corrective measures for non-compliance

Payment Systems

Domestic Settlement Infrastructure:

The CBI operates and oversees Iraq's payment and settlement systems:

Core Systems:

• Real-time gross settlement (RTGS) system for high-value transfers
• Automated clearing house (ACH) for routine payments
• Wire transfer networks for inter-bank settlements
• Cheque clearing and collection mechanisms

Participants:

• Licensed commercial and state banks
• Authorized financial institutions
• Money changers (regulated non-bank entities)
• Electronic fund transfer operators

Regulatory Oversight:

• System safety and efficiency standards
• Operational reliability and security requirements
• Participant competency and capital standards
• Settlement finality and risk mitigation

Challenges:

• Integration of informal money transfer sector
• Compliance standardization across institutions
• Technological infrastructure modernization

Foreign Exchange Regulation

Dollar Auction System:

The CBI manages foreign exchange through an institutionalized auction mechanism:

Operational Framework:

Daily Auction Process:

1. CBI sells US dollars held in Development Fund for Iraq (DFI) account at New York Federal Reserve
2. Licensed Iraqi banks submit bids on behalf of importers
3. Importers provide invoices for imported goods documentation
4. Winners receive dollar allocations
5. Payment wired by New York Fed to Iraqi bank account
6. Funds transferred to pay for imports

Mechanics:

• Transparent price discovery through competitive bidding
• Direct linkage to import financing and trade activity
• Documented goods import requirement (anti-speculative)
• Weekly or daily frequency adjustment based on demand

Objectives:

• Ration scarce foreign exchange supplies
• Prioritize essential imports and economic activity
• Generate government revenue through auction premiums
• Reduce black market pressure on currency
• Prevent currency speculation

Management:

• CBI sets auction terms and participation rules
• Eligible bank list management and enforcement
• Bid evaluation and allocation processes
• Transparency and fair competition maintenance

Challenges:

• Fraud allegations regarding auction participation
• Smuggling and illegal fund flows through adjacent banking channels
• Pressure for continued auction reliance given limited non-oil revenues

AML/CFT Framework

Legal and Institutional Foundation:

Competent Authorities:

• Central Bank of Iraq: Supervision of financial institution compliance
• Iraqi Financial Intelligence Unit (FIU): Suspicious transaction reporting and analysis
• Compliance Offices: Established in Baghdad and regional centers

Legislative Basis:

• AML/CFT Law 2015 (implementing FATF recommendations)
• CBI Regulations and Directives on AML/CFT
• UN Security Council sanctions implementation
• Money laundering criminalization

Key Standards:

• Customer due diligence (CDD) and Know Your Customer (KYC)
• Beneficial ownership identification
• Suspicious transaction reporting (STR)
• Enhanced due diligence for high-risk jurisdictions
• Sanctions screening and designation matching
• Transaction monitoring and reporting

2024-2025 Initiatives:

The CBI highlighted Iraq's commitment to strengthening AML/CFT standards through:

Intensified Controls:

• Enhanced internal procedures and control systems
• Comprehensive inspections of banking and non-banking institutions
• Third-party compliance monitoring

International Coordination:

• US Treasury engagement and cooperation (2024)
• MENAFATF (Middle East and North Africa FATF-Style Group) alignment
• Pre-audit of foreign transfers by specialized international firms
• US dollar delivery restrictions at airports
• Enhanced foreign currency transaction screening

Specialized Measures:

• AML/CFT and Compliance Office establishment in Baghdad
• Staff training on FATF standards and techniques
• International firm contracts for transaction pre-auditing
• Enhanced due diligence on correspondent banking

Mutual Evaluation Progress:

• Participation in MENAFATF Mutual Evaluation (concluded May 2024)
• Implementation of priority actions identified in assessment
• Regular progress reporting to FATF

Enforcement Actions

Supervisory Enforcement:

The CBI maintains strong enforcement authority over banking system compliance:

Tools:

• Administrative penalties and fines
• Management dismissal orders
• Operational restrictions and activity limitations
• License suspension or revocation
• Corrective action programmes with oversight
• Public enforcement actions and disclosure

Focus Areas:

• AML/CFT compliance violations
• Anti-terrorism financing breaches
• Sanctions evasion prevention
• Prudential standard violations
• Governance failures

Coordination with Other Authorities:

• Joint investigations with FIU
• Cooperation with US Treasury and OFAC
• International law enforcement cooperation
• Extradition coordination for financial crimes

International Relations

International Monetary Fund:

Iraq maintains ongoing engagement with the IMF:

• Article IV Consultations: Annual staff reviews (2024 conducted March 2024)
• Technical Assistance: Monetary policy, banking supervision, payment systems
• Programme Relationships: Previous EFF and current support for reforms
• IMF Staff Reports: Regular analysis and recommendations

US Treasury Coordination:

Active cooperation on:

• Sanctions implementation and enforcement
• AML/CFT compliance strengthening
• Banking sector reform
• Currency and monetary policy stability
• Anti-terrorism financing efforts
• Trade finance facilitation

Bank for International Settlements:

• Member institution participation
• CPMI payment systems engagement
• Financial stability information sharing
• Central bank technical cooperation

Regional Cooperation:

• Gulf Cooperation Council (GCC) central bank coordination
• Arab Monetary Union participation
• Regional payment system integration discussions

Contacts

Central Bank of Iraq Headquarters:

• Address: Rashid Street, Baghdad, Iraq
• Website: www.cbi.iq
• Governor: Dr. Ali Mohsen Al-Alaq (incumbent)
• Main Telephone: +964-1-8814-2100

Key Departments:

• Banking Supervision Department: Regulatory oversight and examination
• Monetary Policy Department: Policy formulation and implementation
• Payment Systems Department: Settlement system operation and oversight
• AML/CFT Coordination: Compliance standards and supervision
• FX Management: Dollar auction administration

International Relations Office:

• IMF and World Bank coordination
• Bilateral central bank relationships
• International financial institution engagement

Sources

Regulatory Powers

This entity exercises the following regulatory powers as the central monetary authority:

Regulatory Role and Function

Legal Foundation

Established by primary legislation (Central Bank Act or equivalent enabling statute) enacted by the national legislature. Operates under a statutory mandate that defines its objectives, powers, governance structure, and relationship with government. The legal framework typically provides for operational independence in monetary policy while maintaining accountability to the legislature.

Licensing and Authorization Relevance

The Central Bank of Iraq (CBI) is a key licensing authority in Iraq's financial system:

The licensing process typically involves assessment of capital adequacy, fitness and propriety of management, business plan viability, AML/CFT compliance frameworks, and IT systems readiness.

Payments and Money Movement Relevance

The Central Bank of Iraq (CBI) plays a central role in Iraq's payment ecosystem:

Payment Systems Governed or Overseen

The CBI operates and/or oversees the national payment and settlement infrastructure of Iraq. Specific systems include:

[Further detail on specific system names requires verification from official sources]

Relationship to Other Regulators

The Central Bank of Iraq (CBI) operates within Iraq's broader financial regulatory architecture and maintains relationships with:

Geography and Jurisdiction Notes

Important Departments and Divisions

Key Public Resources

Notes on Naming and Language