US to review irregular Iraqi financial records, signals new terror-linked sanctions

ERBIL, Kurdistan Region - The US will conduct “a comprehensive review” of questionable payment records and transactions as part of a new effort to disrupt smuggling and money-laundering networks that finance “terrorist activities,” US President Donald Trump’s Special Envoy for Iraq, Mark Savaya, said, adding that the review could lead to further sanctions against “malign actors.”

In a statement posted on X, Savaya said he met on Wednesday with the US Treasury Department and its financial intelligence and enforcement agency, the Office of Foreign Assets Control (OFAC), “agreed to conduct a comprehensive review of suspected payment records and financial transactions involving institutions, companies, and individuals in Iraq linked to smuggling, money laundering, and fraudulent financial contracts and projects that finance and enable terrorist activities.”

The push, according to Savaya, is part of an effort to “address key challenges and reform opportunities across both state-owned and private banks, with a clear emphasis on strengthening financial governance, compliance, and institutional accountability.”

Discussions also covered “next steps related to forthcoming sanctions targeting malign actors and networks that undermine financial integrity and state authority,” the top US diplomat said.

Earlier in October, Washington had imposed new sanctions targeting Iraqi bankers it accused of having ties to blacklisted armed groups, engaging in corruption, and helping Iran evade international sanctions.

“We are working to dismantle the financial networks that enable these terrorist groups to operate,” Under Secretary of the Treasury for Terrorism and Financial Intelligence John K. Hurley said in a press release, adding that “cutting off their financial flows is essential to protecting American lives and our national security.”

The sanctions included three Iraqi bankers accused of using their positions to “generate revenue and launder money” for the powerful Iran-aligned armed groups Kata’ib Hezbollah and Asa’ib Ahl al-Haq, as well as for Tehran’s Islamic Revolutionary Guard Corps (IRGC). The individuals were identified as Ali Mohammed Ghulam Hussein al-Anssari and brothers Ali and Aqeel Meften Khafeef al-Baidani.

Hurley said the bankers were “abusing the Iraqi economy to launder money for Iran and a terrorist front company that provides support and services to Iraqi militia groups.”

The company referenced was the Muhandis General Company (MGC), which the Treasury said is controlled by Kata’ib Hezbollah and used to “divert funds from Iraqi government contracts” and smuggle weapons under the cover of an affiliated agricultural firm, Baladna Agricultural Investments.

The Iraqi government approved the establishment of MGC in November 2022 with a capital of 1 billion Iraqi dinars (approximately $68.5 million). The company takes its name from Abu Mahdi al-Muhandis, the deputy chief of the Popular Mobilization Forces (PMF), who was killed in a US airstrike in Baghdad in January 2020.

The Iraqi government previously censured the US Treasury’s decision to sanction MGC “and some other entities on the pretext of their connection to parties subject to American legal procedures.”

Despite this, the Special Envoy for Iraq, Savaya, said Wednesday that “the relationship between Iraq and the United States has never been stronger than it is today under the leadership of President Donald J. Trump.”