Iraq’s CBI: Fixing Flaws for Global Inclusion
Global banking is the invisible engine that keeps international trade, investment, and finance running smoothly. At its core, it’s a web of interconnected financial institutions that handle everything from cross-border payments and currency exchanges to large-scale lending and sovereign debt. For countries looking to thrive in today’s global economy, integration into this system isn’t optional—it’s essential. Iraq, rich in natural resources and historical wealth, has faced major challenges in aligning itself with modern global banking standards. Understanding how global banking operates helps explain what steps Iraq missed, and why its financial future hangs in the balance.
Global banking is built on trust, transparency, and systems that share a common financial language. Countries that wish to participate must have internationally recognized banking laws, enforce anti-money laundering (AML) rules, maintain a stable currency, and connect their central banks to international payment systems, such as SWIFT. Global banks need to know that transactions from a country are traceable, that financial data is accurate, and that banks follow the same protocols as institutions in London, New York, or Tokyo. Countries that fail to meet these standards are isolated or flagged as risky, which limits everything from investor confidence to foreign trade.
Iraq, emerging from decades of sanctions, war, and internal dysfunction, has been trying to modernize its banking system, but progress has been slow and disjointed. One of the biggest issues is Iraq’s lack of digitized, compliant, and interconnected banking systems. Most of the country still operates on a cash-based system. Private banks often act more like currency exchange houses than modern lenders or credit institutions. This makes it difficult to track money, enforce financial laws, or ensure banking transparency—key requirements for global banking partnerships.
Another critical missed step was failing to fully integrate with the SWIFT system until recently. SWIFT allows banks worldwide to send secure, traceable messages and transactions. For years, Iraq’s limited or shadow use of SWIFT excluded it from international banking norms. That made it hard for global companies to trust or do business with Iraqi banks. Even worse, some Iraqi institutions were suspected of allowing dollar leakage to sanctioned countries like Iran or Syria, drawing the scrutiny of the U.S. Treasury.
The Central Bank of Iraq (CBI) has also been slow to enforce internationally accepted AML and Know-Your-Customer (KYC) policies. Without strong financial controls, corruption and currency smuggling became rampant. This weakened the country’s ability to maintain a stable exchange rate and destroyed the credibility of its financial institutions. The lack of confidence among global investors led to less foreign capital entering Iraq, which stalled growth and reconstruction.
In 2023, 2024, and 2025, Iraq took more aggressive steps to address this issue. The CBI implemented reforms to digitize banking, introduced tighter dollar control mechanisms, and started pushing for greater transparency. It also began working more closely with the U.S. Federal Reserve and the IMF to align its practices with international standards. However, progress has been patchy. While some banks complied, others resisted change, fearing the exposure of past practices.
In global banking, speed, transparency, and compliance open doors to economic power. Iraq missed these key steps for years, resisting digitization, operating in a cash-heavy and opaque environment, and lacking accountability in dollar transactions. Now, facing growing global demand for transparency and new financial technologies like central bank digital currencies (CBDCs), Iraq is being forced to catch up.
If Iraq wants to play a serious role in global finance, it must fully modernize its banking system. This entails enforcing AML/KYC rules, expanding its SWIFT usage, digitizing operations across all major banks, reducing reliance on cash, and fostering trust with international partners. The foundation for wealth already exists—oil, a young population, and a strategic location. However, until Iraq aligns its banks with global standards, its financial potential will remain locked behind outdated systems and missing steps.
