In a move to safeguard the global financial system from misuse by terrorists, fraudsters, and money launderers, the US Department of the Treasury is cracking down on al-Huda Bank, an Iraqi bank allegedly involved in channeling funds for “terrorist activities”.

The Treasury has officially identified Al-Huda Bank as a foreign financial institution posing a significant risk for money laundering. The Financial Crimes Enforcement Network (FinCEN) is proposing a rule to cut off the bank's access to the US financial system.

This means that domestic financial institutions and agencies will be prohibited from opening or maintaining accounts for Al-Huda Bank. Additionally, the Office of Foreign Assets Control (OFAC) is imposing sanctions on the bank's owner.

Al-Huda Bank, along with its foreign backers, including Iran and its proxy groups, is accused of diverting funds that could otherwise support legitimate businesses and economic development in Iraq. These actions contribute to violence that jeopardizes the stability of Iraq and poses a threat to the lives of both US and Iraqi citizens.

Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E. Nelson, emphasized the importance of addressing illicit activities in the Iraqi financial system. Despite Iraq's progress in curbing such activities, Nelson highlighted the ongoing efforts of malicious actors seeking to exploit the Iraqi economy for their illicit gains.

Last week, the US imposed sanctions on the Iraqi airline Fly Baghdad and its CEO for providing assistance to Iran's Islamic Revolutionary Guard Corps. Additionally, three leaders and supporters of Kata’ib Hizballah, a militia group, and a business serving as a cover for their funds were designated for sanctions.

The finding reveals that Al-Huda Bank has been facilitating the financing of “foreign terrorist organizations”, including the IRGC and Iran-aligned Iraqi militia groups. The bank's chairman is implicated in money laundering operations on behalf of these groups. Al-Huda Bank provides access to the US financial system to actors known for using fraudulent documentation, fake deposits, and counterfeit currency, making it difficult to trace transactions.

To counter Al-Huda Bank's illicit activities, FinCEN is taking action under the USA PATRIOT Act, proposing measures to prevent its access to the US financial system.

OFAC is imposing sanctions on Hamad al-Moussawi, the owner and president of the board of directors of Al-Huda Bank, for “his support” to the IRGC-QF and its proxy militia groups in Iraq. Moussawi “has been involved” in money laundering operations and has used various tactics, including forged documents, to execute substantial wire transfers out of Iraq.

As a result of these actions, all assets of the designated individuals in the US are blocked, and any transactions involving their property are prohibited, subject to OFAC regulations. Non-US financial institutions engaging with sanctioned entities may also face sanctions or enforcement actions.