Through powerful Iraqi Shi’a militias, political allies, and a web of business networks, Iran has long utilized the Iraqi banking sector as a main artery for its economic activity in Iraq. The Central Bank of Iraq (CBI) has played an important role in Iran’s exploitation of the Iraqi economy, providing Iran critical access to hard currency and profits from illicit and quasi-legitimate financial activity.
This report looks at how Iran, in cooperation with Iraqi agencies and actors, has steadily drained Iraq’s currency reserves and inflicted massive losses on Iraqis. For many years, draining copious funds from Iraq has occurred through the CBI’s daily currency auctions and through the CBI’s coordination with the Iraqi State Organization for Marketing of Oil (SOMO). This report highlights these patterns and profiles Iraqi banks that are central to economic networks headed by top-tier Iraqi oligarchs who collaborate with the IRGC, Lebanese Hezbollah and others enabling Iranian economic activity in Iraq.
Iraqi Central Bank
Until recently, the CBI and other important institutions have been run by corrupt associates of former Prime Minister Nouri al-Maliki, such as Ali al-Alaq, who served as Governor from 2014-2020. Alaq’s role in illicit activity has been well known to Iraqis. Iraqi economists have objected to the CBI’s role in cultivating what they see as Iranian monopoly in certain sectors. They have complained about the destruction of Iraqi local business and efforts to prevent foreign investment to no avail.
In 2019, Alaq, who frequently met with Abu Mahdi al-Muhandis, was personally named as an accomplice in major money laundering and counterfeiting schemes. Investigative reports showed that he coordinated collaboration between the CBI and Iran-linked Iraqi militias in money laundering and counterfeit schemes. Iraqis and Iranian tourists were apprehended after smuggling counterfeit Iraqi dinars from Iran and Lebanon into Iraq, where the funds were laundered and exchanged for U.S. dollars. The dollars were being flown to Beirut Rafiq Hariri International Airport, which is controlled by Hezbollah, and transferred to the Hezbollah Iraqi affairs chief to dispense to the IRGC and Hezbollah officials. Employees of the financial institutions that carried out the transactions were threatened by the IRGC and Hezbollah operatives in Iraq.
In September 2020, major reports uncovered fraudulent activity through daily currency auctions as well as massive transactions from Deutsche Bank to a number of Iraqi banks under Alaq’s watch. The funds are suspected of reaching ISIS and armed groups and are part of money laundering operations on behalf of Iran.
Daily currency auctions are at the heart of allegations concerning money laundering and CBI policies which prioritize Iranian over Iraqi interests. Iraqi analysts already sounded the alarm that the CBI monetary policy on auctions was enabling the formation of financial groups supporting Iranian ambitions over Iraqi interests. Private exchange companies complained that the CBI was authorizing the sale of US dollars to intermediaries in exchange for commissions.
The use of the CBI’s daily currency auctions for illicit Iranian activity facilitated by Iraqi actors was brought into scrutiny by a damning New York Times report, “Inside the Iraqi Kleptocracy.” It finds:
“The auction has also enabled a large-scale embezzlement scheme that has funneled billions of dollars to Iraq’s power brokers. This fraud was based on the difference between the fixed exchange rate offered by the central bank — which is pegged to the dollar — and the fluctuating market rate, which is often much higher. Soon after the auction started in 2003, the money launderers realized that if they could fake an import deal, they could then resell the dollars they’d acquired from the central bank, realizing an instant profit on the rate spread. As soon as Iraq’s political bosses realized how much money was to be made, they seized control of access to the auction. Ordinary companies and banks wanting to do legitimate imports or lending were squeezed out by those with backing from the main political parties and militias. To disguise this takeover, the newly minted plutocrats bought up almost all the remaining commercial banks, turning them into mere vehicles for the auction scheme.”
Iraq’s main Shi’a political parties and militias have bought up almost all remaining commercial banks!
Iranian Banks in Iraq
The CBI has also promoted sanctioned unstable Iranian banks which have caused major economic losses for Iraqis. When Iran’s currency collapsed in 2018, Iraqis lost savings in Iranian banks promoted by the CBI. An Iraqi professor of international economy blamed the Iraqi government and CBI for massive losses, and pointed out that Iraqi economists warned the CBI about these Iranian banks. He asserted that “Iranian banks committed fraud in an official way,” and that “Iraqis have a responsibility not to waste their national wealth in this way.” An executive director of a Baghdad-based money transfer company claimed “Iranians are directly responsible for the confusion in the market, instability of the Iraqi dinar and the US dollar hemorrhage.” He added that Iranians use many methods to move dollars from Iraq to Iran.
In March 2019, the CBI was forced to place branches of two sanctioned Iranian banks, Bank Melli and Bank Parsian, under guardianship due to concern of bankruptcy. The opening of seven new branches of Bank Parsian was approved by the CBI in September2019, after it was warned against conducting transactions with these banks.
These banks in Iraq have been directed by the Iranian Central Bank to convert the value of dues owed to Iranian exporters, eliminating Iraqi money changers. Iranian exporters receive the dinar or dollar directly from Iraqi importers, with the Iranian banks in Iraq behaving as the cashiers.
Islamic Regional Cooperation Bank (also Islamic Regional Cooperation Bank for Development and Investment) was also sanctioned in 2018. The bank is jointly owned by Iranians and Iraqis. It has been exposed for carrying out fraudulent transactions involving the Iraqi State Organization for Marketing of Oil (SOMO) discussed below.
Central Bank of Iraq Coordination between SOMO and Iraqi Banks Tied to Iran
In January 2020, documents that show evidence of fraud committed by SOMO were leaked to the press. The documents are letters of guarantee sent by the CBI to private Iraqi banks, requesting they open credit accounts in U.S. dollars for the import of Iranian oil derivatives. The banks named in the leaked documents are either jointly owned or controlled by Iran or Iraqis with strong ties to Iran. The report further shows Iran is:
– exporting oil derivatives to Iraq at a price supported by the CBI
– obtaining dollars from the CBI’s daily currency auctions through middlemen, profiting from the currency exchange
– and financing these private banks as reward for their readiness to collaborate with SOMO, Tehran and the CBI by transferring the funds out of Iraq to Iran via currency exchange companies and banks.
According to the documents, the sums are over 21 billion dollars during the years 2010-2017.
This is not SOMO’s first time running afoul of sanctions and coming under Iraqi oversight committees for its fraudulent conduct. In November 2019, SOMO was also caught bribing a major Shi’a political party. SOMO offered four million barrels of crude oil at a low price for political and legal protection from accountability. The most disturbing part of this corruption is that Iraq’s Minister of Oil Thamer al-Ghadban approved the offer.
The Iraqi banks involved in the fraud involving the CBI, SOMO, and Iran, are part of networks and fraudulent activity reported in “Inside the Iraqi Kleptocracy” and discussed below. They are: Al-Bilad Islamic Bank, Elaf Islamic Bank, Union Bank, Islamic Regional Cooperation Bank (owned by Iranians and Iraqis), United Bank for Investment.
The sanctioned Al-Bilad Islamic Bank is named as one of the banks involved with the SOMO payments. It has since changed its name to al-Ataa Islamic Bank.
Aras Habib, the Chairman and Chief Executive of Al-Bilad Islamic Bank for providing assistance to the IRGC-QF and enabling Iran to exploit Iraq’s banking sector to serve as a conduit for funds from the IRGC-QF to Iranian-backed militias in Iraq and to Lebanese Hezbollah. In 2004, he was reported as a paid Iranian agent.
Al-Bilad Islamic Bank and Aras Habib work closely with one of Iraq’s top oligarchs, Essam al-Asadi, who is widely known for stealing Iraq’s national wealth in an unprecedented scope and using it to support terrorist groups and militias. Habib and Al-Asadi are partners in a number of Al-Bilad Islamic Bank’s subsidiaries, such as Baghdad Soft Drinks Co. (Pepsi Cola Baghdad). Al-Asadi, Chairman of the Board of the company that distributes Pepsi Cola products, is well known for his companies’ massive corruption scandals and for his close relationships to Nouri al-Maliki and Abu Mahdi al-Muhandis.
Together with Sami al-Asadi, nephew of Iraq’s former acting Interior Minister, Adnan al-Asadi, Essam al-Asadi accesses state contracts. He has embezzled billions of dollars through reconstruction projects given to his many oil, hotel, and construction companies. This money has gone to the IRGC, Lebanese Hezbollah and Kataib Hezbollah. Essam al-Asadi and Sami al-Asadi own and control SMS-I Operations and Logistics, which is part of the Kataib Hezbollah orbit. Sami al-Asadi owns many companies in the security, oil and shipping, and financial brokerage sectors, many that have worked with American companies and are under US Department of Justice investigation for corruption.
Essam al-Asadi uses his family in Europe to funnel Iraqi wealth he has stolen and transfer it to IRGC operatives in Germany. His son, who studied banking and finance at Queen Mary University and oil and gas management at University of Plymouth, operates part of the network’s activity from London.
Essam Al-Asadi is also Vice Chairman of the Board of Director for Warka Bank for Investment and Finance. In 2016, the CBI delisted Warka Bank after it faltered and caused many Iraqis to lose their money. Alaq reinstated the bank in 2019. Warka Bank is a subsidiary of Al-Mamoura for Real Estate Investments, which is owned by Al-Bilad Islamic Bank and a fund located in the Cayman Islands.
Al-Ameen for Financial Investment, a subsidiary of Baghdad Soft Drinks, is a shareholder Al-Warka Bank. Al-Ameen for Financial Investment has tens of subsidiaries linked to various networks and banks laundering money and acting for Iran.
Central Iraqi companies in the banking and financial sector are part of the Habib/Asadi, and other networks. Iyad Yahya, a main investor and General Manager of Baghdad Soft Drinks (PepsiCo.), controls Al-Khaima for Financial Investment Co. together with associates from the al-Asadi and Salman Families. Al-Khaima for Financial Investment is a subsidiary of Bilad Islamic Bank (30.6%). One of the investment company’s subsidiaries is Al Ayaam for Financial Investment Co., which is also controlled by the Salmans.
Essam al-Asadi’s cousin, Sami al-Asadi and Farhan Nour Muften are Directors at Noor al-Wamidh for Financial Brokerage Co. This financial investment company has subsidiaries in a number of countries and sectors, including an Islamic bank in Pakistan, and investment, oil, real estate, and hotels in Kuwait and Jordan. It is a crucial channel of funds to the IRGC.
A major Iraqi company, Gulf Insurance Company is integral to the Habib/Asadi network. Munir Abdel Razzal al-Wakil, Chairman of the Board at Gulf Insurance Company is involved in the management and ownership of other companies in the Asadi network such as al-Mamoura for Real Estate. Two Asadis (relation to Essam and Sami unknown) also sit on the Board of Gulf Insurance Company. Gulf Insurance Company has major state contracts and works with entities linked to networks of Iraqi kleptocrats. It also has works with Sina Construction, an Iranian construction company that operates in Iraq.
Al-Mamoura for Real Estate Investments is a key entity in the Habib/Asadi network and a leading private company in Iraq’s real estate sector. Business filings show that Munir Abdel Razzal al-Wakil of the aforementioned Gulf Insurance Company is also a board member of Al-Mamoura for Real Estate Investments. Additionally, he leads the Board of Directors at Al-Nukhba for General Contracting and Real Estate, until recently, a partial owner of Al-Bilad Islamic Bank.
Gulf Commercial Bank, which is owned and managed by representatives from energy and aviation companies, is an important link between the Asadi-Habib network and other networks and kleptocrats discussed in this report. The bank is a subsidiary of Baghdad Soft Drinks, Al-Ameen for Financial Investment, and Ahlia Insurance Co. Tens of subsidiaries of Gulf Commercial Bank include many other entities that Iran employs – banks and companies spanning the Iraqi real estate, tourism, hotel, and manufacturing industries. Also, Sama Babel Aviation Company, an owner of Gulf Commercial Bank, has stakes in a number of the companies controlled by Essam al-Asadi.
Babylon Bank is central to the Asadi-Habib network, specifically to the network’s assets in the banking and financial investment sectors. Sumer Commercial Bank, Al-Warka Bank, and a number of its own financial investment subsidiaries own Babylon Bank. In October 2020, the Iranian ambassador to Iraq, Iraj Masjedi, waltzed into the Central Bank of Iraq to intervene on behalf of a sanctioned Iranian construction company and Babylon Bank. He demanded the CBI adopt a favorable attitude to these two entities and guarantee credits and money transfers.
Elaf Islamic Bank is one of the main banks named in the SOMO-CBI scheme. In 2013, it was designated for sanctions because it had facilitated transactions worth millions of dollars on behalf of Iranian banks that are subject to sanctions for their links to Iran’s illicit proliferation activities. However, sanctions were lifted the same year. It is owned by Emad Qasim Salman and Abbas Qasim Salman. The Salmans and Sami al-Asadi also own and manage World Islamic Bank for Investment and Finance. Through a number of its subsidiaries, namely Al-Khair for Financial Investment, Elaf Islamic Bank also possesses connections to the Muften and Abu Rami networks (discussed below).
Ashur International Islamic Bank, owned by the Al-Handal Group, is a private subsidiary of Elaf Islamic Bank. Elaf Islamic Bank is owned by associates of Maliki: Saif al-Din Saad Hashem (goes by Saif Badir), Sami al-Asadi, and Emad Qassim Salman. Deutsche Bank has done business with sanctioned Iranian entities in the past, and a report from September2020 shines light on this activity once again. Documents show that Deutsche Bank made massive money transfers to Iraqi banks designated for sanctions. The second largest bank involved in these transfers was the Ashur International Islamic Bank at a sum of over $15 million. The funds reached ISIS and other armed groups in Iraq.
Iraq Middle East Investment Bank
Namarq Mahni Khairy Abbas al-Asadi (relation to other Asadis unknown), Ali Muhammad Ghulam, and a number of businesspersons who had their funds seized by the CBI in 2013, jointly own Iraq Middle East Investment Bank. The CBI took this measure against the former owners and directors of money exchange companies due to “their involvement in economic crimes.” Documents published by an Iraqi newspaper revealed corruption through CBI currency auctions reaching 312 billion dollars. They also confirmed that Ali Muhammad Ghulam’s family used his money exchange company for other fraudulent activity. A new bank, Al Qabedah Islamic Finance and Investment Bank has been opened by owners of the Iraq Middle East Investment Bank.
Commercial Bank of Iraq
As of at least 2016, Baghdad Soft Drinks and Al-Ameen for Insurance (different ownership from Al-Ameen for Financial Investment) were shareholders in Commercial Bank of Iraq. Today, Ahli United Bank owns 85% of the Commercial Bank of Iraq. Ahli United, a Bahraini bank, collaborated with Bank Saderat and Bank Melli in a joint venture to establish Future Bank. Future Bank was placed under sanctions in 2018 for facilitating transactions for terrorists.
Commercial Bank of Iraq’s board includes representatives of energy and marine trading companies. Among the Bank’s subsidiaries are the aforementioned Amwal for Electronic Banking Services (a subsidiary of Iraq Middle East Investment Bank) and Union Bank of Iraq, which is part of the Muften Network, another of the largest networks of IRGC, Lebanese Hezbollah, and Kataib Hezbollah operating in Iraq that does business with many European and American countries in Iraq.
The brothers Imad Nour Muften and Farhan Nour Muften control the Muften Group. They are linked to Habib-Asadi network through their joint ownership in Baghdad Soft Drinks and many other companies in Iraq’s hotel, oil, real estate, insurance, financial, and construction sectors. The Muften brothers and al-Asadi are also childhood friends. Farhan Muften and Sami Asadi own and manage Noor al-Wamidh for Financial Brokerage Co. The Muften Group has tens of companies in oil and gas, shipping and marine services, aviation, construction, real estate, tourism and hospitality, that receive state contracts and work with European and American companies military forces. These banks and entities are vehicles for participating in the currency auctions and blending and selling Iranian oil.
Union Bank of Iraq
The Muften’s Union Bank of Iraq is one of the banks that has coordinated with SOMO to sell Iranian oil. The brothers Aqil and Ali Muften, also close allies to Nuri Al-Maliki and Al-Alaq, own and manage the bank. Union Bank and Iraqi Land Transport Company, another crucial part of the Muften Network that coordinates with the Al-Iraqia Shipping Services and Oil Trading Company (AISSOT) to use the Iraqi oil industry and Iraqi assets to export Iranian oil and deliver funds to the IRGC.
The Muftens’ Iraqi Union Bank was banned from currency auctions in 2018 for an illegal $6 billion transfer out of Iraq to the owner of a sanctioned Al-Huda Bank, Hamad Musawi, another Maliki associate.
Ali Muften is also linked to the Habib-Asadi network’s schemes through his role in oil and transport companies and the Sadeer Hotel.
A key Muften associate, Mohamed Abdulhussein Gaafar is the Chairman of the Board and CEO of the Iraqi Land Transport Company. He is an owner of the Iraqi Land Transport Company and the Union Bank of Iraq. Additional joint owners of the Iraqi Land Transport Company include Babylon Bank and the Iraqi Company for General Transportation and Oil Production.
Mohamed Abdulhussein Gaafar and a number of other associates and entities of the Muften network have links to Lebanese Hezbollah operatives in Latin America.
Abu Rami Network
United Bank for Investment
The United Bank for Investment was also involved in the CBI–SOMO fraudulent activity. It is owned by Fadel Al-Dabbas and Hassan Nasser Jaafar al-Lami, known as “Abu Rami”. A Jordanian prosecutor issued a memo to Interpol for Al-Dabbas’s arrest for his financial crimes. In January 2020, the Lebanese Satellite MTV aired an interview with a former CBI employee. She called Abu Rami, who owns 40% of United Bank for Investment, as “the financial Qassem Soleimani of Iraq.” She is in possession of documents that demonstrate al-Lami is among the key figures that facilitate the financing of Iran and Hezbollah through his many companies and banks’ exploitation of the daily currency auctions to obtain foreign currency.
Trans Iraq Bank and Iraqi Noor Islamic Bank
Abu Rami also owns Trans Iraq Bank and Iraqi Noor Islamic Bank. In 2017, the CBI imposed penalties on Trans Iraq Bank for failing to review its customers’ source of funds. United Bank for Investment and Trans Iraq Bank’s subsidiaries include three aforementioned banks (Al-Warka Bank, Gulf Commercial Bank, Commercial Bank of Iraq) as well as others.
Munir Abdel Razzal al-Wakil and Al-Nukhba for General Contracting and Real Estate – important players from the Asadi/Habib network – lead to a complicated but critical new dimension in the use of the Iraqi financial sector to advance Iran’s agenda.
Faisal Kedairy (also spelled Khudairi) controls a web of companies located in Europe, Jordan, Africa, Australia, and Iraq, including a number of companies in Iraq’s banking and financial sectors. He comes from an Iraqi merchant family that currently holds vast stakes through oil, construction, engineering, transportation, and trade companies based in Iraq, Jordan, Texas, and Dubai. Investigative reporting by British journalist, Nafeez Ahmed, from March 2017 shows that a network connecting Faisal Kedairy, Cambridge Analytica, the Hudson Institute, Islamic insurgents, ExxonMobil, and Koch is behind the promotion of the break-up or decentralization of Iraq. More specifically, based on primary documents, Nafeez Ahmed demonstrates that this network’s lobbying efforts drove ExxonMobil to bypass Baghdad and strike an oil deal with the Kurdistan Regional Government in order to promote Kurdish autonomy in northern Iraq, which is considered a first step to Iraq’s break-up or decentralization. According to him, Faisel Kedairy has been operating to promote the break-up of Iraq, which will grant his family access to and control of western Iraq’s energy resources. Kedairy’s strategy has been to fuel chaos in any way possible, including arming al-Qaeda. Kedairy also has a clear business relationship with a German arms dealer.
How does this relate to Iran’s role in Iraq’s banking sector?
A number of companies controlled by Kedairy and his business associates, including Al-Zawraa Financial Investment, Nukhba for General Trading and Real Estate, Dar al-Salam Insurance (the aforementioned Gulf Insurance Co owns 79 % of Dar al-Salam Insurance), and Dar es Salam Investment Bank are enmeshed with key companies of the Habib/Asadi network, such as Mamoura Real Estate Investment and Warka Bank.
The Khudairi Group (with major oil and engineering companies in Iraq, Dubai and Texas) admits that Faisel Kedairy is a relative, but they deny busisness relations. This is difficult to not easy to believe. Sameer Khudairi, managing director at Al Khudairi Marketing and Distribution, a Khudairi Group company that is a Macro Distributor of Shell Lubricants, previously worked at Faisal Kedairy’s Amman-based company, Rhodes Precast Concrete Ltd. Rhodes Precast was used as a lobbying arm for the ExxonMobil deal.
The ruling Shia political class has utilized Iraq’s political system to create vast networks, private entities, and fiefdoms that use Iraqi ministries and institutions such as the Central Bank of Iraq and SOMO to steal Iraqi wealth and funnel it to Iran to allocate to its proxies throughout the region. The companies of these networks do extensive business with international conglomerates and American and European companies in Iraq. Pepsi Cola is just one example. Through willing or naïve foreign companies and through the children and other associates of the Iraqi oligarchs, some of this money finds its way to IRGC operatives in Europe.