U.S. Cut Cash to Iraq on Iran, ISIS Fears

[yota691]

U.S. Cut Cash to Iraq on Iran, ISIS Fears Fed and Treasury officials were concerned that dollars were ending up at sanctioned Iranian banks and possibly being funneled to Islamic State militants

 

ENLARGE

Currency is exchanged at a market in Erbil, Iraq, last year. A temporary move by the U.S. to stop cash shipments to Iraq’s central bank pushed the country’s financial system to the brink of a crisis this year. PHOTO: GETTY IMAGES

By 

EMILY GLAZER in New York,

 

NOUR MALAS in Baghdad and

JON HILSENRATH in Washington

Nov. 3, 2015 12:00 a.m. ET

 

The Federal Reserve and Treasury Department temporarily shut off the flow of billions of dollars to Iraq’s central bank this summer as concerns mounted that the currency was ending up at Iranian banks and possibly being funneled to Islamic State militants, according to U.S. and Iraqi officials and other people familiar with the matter.

The previously unreported move to stop the cash shipments pushed the Iraqi financial system to the brink of crisis and marked a climactic moment in efforts to avert the flow of dollars to U.S. foes.

The situation sheds light on an important facet of the long-running U.S. battle against terror: Just as military officials worry about U.S. weapons getting to enemies, finance officials are on a global hunt to keep dollars from getting into the hands of adversaries who could use it to finance their activities.

After Iraqi officials this summer agreed to institute tighter controls on the distribution of U.S. dollars by Iraq’s central bank, the dollars are flowing again and with better oversight, according to U.S. and Iraqi officials and people familiar with the matter.

Still, the spread of Islamic State set off alarms among U.S. officials about the potential for the currency shipments to be exploited by terrorists. The Sunni extremist group controls about a third of the war-torn country, including the second-largest city, Mosul, and is already well-funded from tax collections, oil sales and a range of other activities.

 

•  

Finance Minister Hoshyar Zebari said Iraqi authorities have taken a number of measures to crack down on illicit money flows to Islamic State, but that it is an uphill struggle to keep hard currency within the country because of corruption and the cash-based economy.

 

 

The problem dates to last December when Fed and Treasury officials called a secret meeting in an Istanbul hotel conference room with Iraqi officials. The Americans were alarmed by the rising volume of dollars being shipped into Iraq and the lack of clarity into where the cash was ending up, the people said.

Since the U.S. overthrew Saddam Hussein and helped establish the Central Bank of Iraq in 2004, the U.S. dollar has largely become the country’s chief currency because so much of the economy runs on cash. When Iraq needs more paper currency, the money is drawn from the country’s account at the Fed, funded largely by oil reserves, and flown to Baghdad.

The amounts have been soaring. In 2014, annual U.S. dollar cash flow from the Federal Reserve Bank of New York to Iraq was $13.66 billion, more than triple the $3.85 billion in 2012, according to data compiled by Iraq’s parliament and reviewed by The Wall Street Journal.

That spike doesn’t mesh with the sluggish Iraqi economy of late, and as a result U.S. officials suspected the dollars were being hoarded rather than circulated.

It was hard to know for sure. Until recently, New York Fed officials who supervised the money flows received only spotty monthly reports in Arabic and English in a mix of Excel spreadsheets, unsearchable digital documents and some hard-copy reports, including handwritten notes, according to U.S. officials and people involved in the process.

At the Istanbul meeting, U.S. officials insisted on tighter controls and information-sharing regarding how the dollars are distributed to financial firms in Iraq, according to U.S. and Iraqi officials. Iraqi central-bank officials started sharing more information in January.

The system for distributing dollars within Iraq works like this: Foreign central banks hold dollars and can call on the Fed for currency distribution. The new $100 notes are flown to Baghdad after leaving a Fed facility in East Rutherford, N.J. In Baghdad, the bills are moved to the Iraqi central bank, where they are sold in daily auctions in which Iraqi financial firms request dollars that they pay for largely using dinars, the country’s currency.

Early on, U.S. concerns centered on roughly 2,000 financial firms called exchange houses, which are active participants in these auctions.

U.S. officials believe several of these Iraqi firms have ties to Islamic State and have deep concerns the exchange houses are being used as conduits of dollars to the group, said a U.S. official and another person familiar with the matter. While the U.S. inevitably loses control at some point over the dollars it sends abroad, the Fed is barred from sending cash to entities it knows will distribute it to U.S. enemies.

“The Federal Reserve seeks to accommodate other countries’ need to have access to their dollar deposits in the form of U.S. banknotes for legitimate purposes,” a Fed spokeswoman said. “A number of central banks around the world, including the Central Bank of Iraq, maintain accounts at the Federal Reserve Bank of New York and at times withdraw currency from their accounts. In providing this service, the Reserve Bank works ‎closely with the Treasury Department to ensure central banks comply with laws prohibiting transactions with sanctioned foreign regimes, terrorists, and international narcotics traffickers. In response to larger-than-usual currency requests and to the evolving security situation, the Reserve Bank increased its monitoring and controls of currency shipments to Iraq. Currency shipments were suspended for a time this year as the Treasury Department and the Federal Reserve worked with the Central Bank of Iraq to strengthen the controls it had in place.”

Some Iraqi officials had similar concerns at the time, and also said corruption and graft have been a problem for years and question why U.S. officials only recently considered the currency issue an urgent one to be addressed. U.S. officials said the situation in Iraq has evolved over the past few years, and they have given it more attention as dollar demand increased.

Around June, Iraqi officials working under the enhanced information-sharing agreement reported to their U.S. counterparts that three sanctioned Iranian banks—Islamic Regional Cooperation Bank, Bank Melli and Parsian Bank—had obtained at least millions of dollars through the auction. Like other Iranian banks, those were operating under international sanctions, and it was illegal for the Fed to knowingly ship dollars to them.

U.S. officials around that time had concerns that Islamic State had gained access to dollars through the auctions, U.S. officials and people familiar with the matter said. The Iraqi officials believe the money has definitely gone to Islamic State through these auctions.

Exchange houses in the northern, Kurdish-controlled city of Kirkuk—outside of Islamic State control but close to extremist front lines—are among the most active in allowing dollar flows into Islamic State-controlled territory and to Islamic State militants, Iraqi officials said. In addition, Islamic State in 2014 stole about $100 million from a Central Bank of Iraq-run vault in Mosul, said a person familiar with the theft.

Based on the new information, U.S. officials sent a written demand around July to Iraqi officials that the Iranian banks be cut off and separately conveyed to Iraqi officials that the Fed wouldn’t approve cash requests until the overall situation improved.

The decision was delivered just as Iraq’s central bank was running out of cash. Many Iraqis panicked after large withdrawal requests were denied, and the exchange rate fluctuated much more than usual.

Iraq’s central-bank governor didn’t reply to requests for comment.

In July, several U.S. officials, including Daniel Glaser, assistant secretary for terrorist financing in the Treasury’s Office of Terrorism and Financial Intelligence, flew to Baghdad to discuss potential solutions. At a meeting in the U.S. Embassy dining room, Iraqi officials including Iraqi central bank governor Ali Allaq agreed to turn over reams of data to the Fed, which also shares it with U.S. intelligence agencies. They later hired U.S. accounting firm Ernst & Young to monitor the auctions.

On Aug. 6, just days before Iraq’s central bank said it would run out of dollars, the Fed and the New York Fed sent nearly $500 million. It has sent several more in the weeks since then.

“From a counterterrorism perspective, it is not in our interest for there to be an economic crisis in Iraq derived from a lack of U.S. dollars,” Mr. Glaser said in an interview.

The issue isn’t fully resolved. On Oct. 2, the Treasury hosted a classified meeting in Washington focused on Iraq exchange houses that could have connections to Islamic State, according to people familiar with the meeting.

A couple of those exchange houses are owned by politically connected Iraqis, and U.S. officials discussed how best to persuade other Iraqi officials to terminate those relationships, one of these people said.

[SocalDinar]

Now that is some article. Really explains why the Market rate did a nose dive in July.

Thanks

[yota691]

Washington stopped pumping Iraqi Central Bank funds to prevent the arrival of the dollar's "enemies"

Economy and Tenders

 Since 03/11/2015 14:34 pm (Baghdad time)

Follow-up - the balance of News

US and Iraqi officials announced that the US Federal Reserve board, "central bank" and the US Department of the Treasury temporarily stopped the flow of billions of dollars to the Central Bank of Iraq this summer, in light of mounting concerns that the currency ends on Iranian banks and may seep into the organization "Daash", according The newspaper "Wall Street Journal" reported.

The newspaper said - in the context of a report published Tuesday on its website: "The move to stop shipments of money paid Iraqi financial system to be on the verge of a crisis and represented the summit to avoid the flow of dollars to the efforts of the enemies of the United States."

The newspaper added that the situation highlights the important face of US long-term battle against terrorism, and that is that while is concerned military officials on the fall of American arms in the hands of the enemies, the financial officials are looking around the world to prevent the arrival of dollars into the hands of enemies who might use them to finance their activities .

According to US and Iraqi officials and people familiar with the case After it this summer, Iraqi officials agreed to develop a more assertive on the distribution of US dollars restrictions by the Central Bank of Iraq, the flow of dollars back, but under the supervision of the best.

According to the person familiar with the case, the problem dates back to the end of December last year when he called on officials of the Federal Reserve and the Treasury Department the Americans to a secret meeting in one of Istanbul hotels with Iraqi officials, who expressed Americans for discomfort due to the increasing volume of dollars that are shipped to Iraq and the lack of clarity on the place where the money ends.

The paper that since the US overthrow of Saddam Hussein and to assist them in the establishment of the Central Bank of Iraq in 2004, the dollar generally has become in the main currency in the country due to the fact that many aspects of the economy depend on the dollar, and when Iraq needs more than paper currency, the money comes from the country's account in the US Federal Reserve Council with funding from the oil reserves in general and pumped to Baghdad.

It is noteworthy that the amount of money flowing into Iraq is increasing in recent years, as it is in the 2014 annual flow of funds US from Federal Reserve Bank of New York to Iraq 66.13 billion, or more than three times the amount in 2012, which was 85.3 billion dollars, according to data collected by the Iraqi parliament and it is seen by the newspaper.

The focus of US concerns about some 2,000 exchange companies and Iranian banks subject to sanctions actively involved in the Auctions America selling dollars in exchange for Iraqi dinars organized by the Central Bank of Iraq, where US officials believed that many of those Iraqi companies have links to al "Daash." Ended 29 / p 18

 

[sandfly]

AND IT TOOK THEM UNTIL NOW TO FIND THIS OUT, AND THEY SAY WE ARE DUMB. AT LEAST WE HAVE BEEN KNOWING ABOUT IT

[TLHUBER]

AND IT TOOK THEM UNTIL NOW TO FIND THIS OUT, AND THEY SAY WE ARE DUMB. AT LEAST WE HAVE BEEN KNOWING ABOUT IT

Thanks (he he ). Love ya Sandfly

[yota691]

AND IT TOOK THEM UNTIL NOW TO FIND THIS OUT, AND THEY SAY WE ARE DUMB. AT LEAST WE HAVE BEEN KNOWING ABOUT IT

They been knowing this for couple maybe 3 years..The IMF had a visit (December) with Iran during Mr.M tenure as PM....about this subject...

[nannab]

Not that they look at the emails,how about we start sending your findings to all

lawmakers along with a ps we are not as stupid as you think and your welcome.

[Officiallytook]

Dedolarize

[divemaster5734]

Either that or ocrap mad about Iran helping Russia target ISL and stopping arms drops heading to resupply their ISL boys.

 

While it's obvious the seized shipment heading to the Kurds was probably  ONE group that is actually fighting ISL, we all know about several others that were "mistakenly" droped off target, but US officials "promised" no enemies ever got them.

Until they did, then we were told what they got was "useless", until it was proven it wasn't.

Then we were told they only got about a 1/2 million worth of "basic small arms", until we found out there were lots of SAM's and LAW's.

 

We know Iran is run by a bunch of fanatics that hate America.

But that doesn't mean that America is run by a bunch of fanatics that love America.

I know there have been operations either not carried out, or "altered", that would have caused more harm than good.

"Thwarted" by honest, decent, patriots serving America, doing everything they can to stem the flow of assistance to freedom's enemies.

 

Our military is caught in the crossfire.

While we are allowing obama, clinton, and other inept, corrupt, incompetent, and divisive libtards and RINO's spend trillions of our tax dollars to fuel the worlds destruction, we have our solders with their hands tied behind their backs, the state department refuses to act on good intel, absurdly inadequate resources are being sent, (I'm not putting down our special forces, but expecting 50 warriors to put down 100,000 terrorists with limited or no collateral resource support is nothing short of a suicide mission).

The fact every man that goes will be a volunteer for the mission should make your heart swell with pride for the courage demonstrated by those that do.

 

No matter what happens to the USD, our military is as under siege as are our domestic peace keepers.

While odumbass hasn't trash talked about them since 2009, (not directly, it isn't politically acceptable, for now), his contempt for all services is obvious as he has mandated absurd rules of engagement that refuse to allow return fire, going so far as to entrap, criminalize, incarcerate, and dishonorably discharge servicemen for defending themselves.

 

Until we can get rid of the destroyer and his henchmen, please take a moment to send a word of prayer for divine protection to all our protectors.

Whether that's a police responding to a "suspicious person" report, or a Ranger just trying to get to mess, they're not getting the help or support they need, they know it, but they are still doing what they believe in.

Ready to fight for what they believe in to their death.

May God Bless Each and Every One.

[four wheel drift]

Divemaster, I love the way you think. I hope the truth hurts some poor whips out there.

FWD

GO RV

[George Hayduke]

Mess...? You're dating yourself DM, it's called it the 'DEFAC' now. It can be a tent in the middle of a COP surrounded with 12ft hescoes but it is now considered a Dining Facility.  The food is pretty much the same but if you're eating SOS in a DEFAC it will probably taste better, right?