US accuses Iraqi bank of serving as conduit for terrorism financing

Treasury accuses Al-Huda Bank of diverting ‘funds that would otherwise support legitimate business and economic aspirations of the Iraqi people’

The US has sanctioned Iraq’s Al-Huda Bank after accusing it of serving as a conduit for funding Iran-backed terrorist activity, the Treasury Department announced on Monday.

The Treasury said the bank and its foreign sponsors – including Iran and its auxiliary groups – “divert funds that would otherwise support legitimate business and economic aspirations of the Iraqi people”.

“Treasury remains committed to its long-standing shared work with the government of Iraq to strengthen the Iraqi economy and protect both the US and Iraqi financial systems from abuse,” the department said in a statement.

Washington also accused Al-Huda Bank of exploiting its access to the US financial system to support Iran’s Islamic Revolutionary Guard Corps as well as the groups Kataib Hezbollah and Asaib Ahl Al Haq.

The US sanctioned the bank’s owner for his support of the IRGC’s Quds Force.

The Financial Crimes Enforcement Network has proposed a rule that would sever Al-Huda Bank from the US financial system by barring domestic financial institutions and agencies from opening or maintaining a correspondent account on the bank’s behalf.

“By identifying Al-Huda Bank as a key money laundering channel for destabilising terrorist activity by Iran … we can help protect the Iraqi financial system and its legitimate businesses, as well as the international financial system, from abuse by Iran and other illicit actors,” said Brian E Nelson, undersecretary of the Treasury for terrorism and financial intelligence.

Monday’s actions come as the US seeks to crack down on illicit financing used by Iran to support proxy forces in the Middle East.

Last week, the US sanctioned Iraqi airline Fly Baghdad and Kataib Hezbollah for supporting the IRGC’s Quds Force and other proxy groups in Iraq, Syria and Lebanon.

Mr Nelson has met Iraqi Prime Minister Mohammed Shia Al Sudani and other senior officials to discuss countering illicit financing, Reuters reported, citing a Treasury representative.

The Treasury official was also expected to travel to the UAE this week.