ERBIL, Kurdistan Region - The head of Iraq’s state-owned Rafidain Bank has strongly criticized what he described as a “systematic targeting” of the country’s banking sector, claiming it is driven by political agendas and misinformation.
His remarks follow reports of accusations by US officials that the bank’s branch in the Yemeni capital Sana’a had facilitated transactions for the Iran-aligned Ansarullah Movement - otherwise known as the Houthis - which is designated as a terrorist organization by Washington.
In a statement released late Monday, Rafidain Bank Director General Ali Karim al-Fatlawi stated, “It is clear that there is a systematic targeting of the Iraqi banking system by parties with political agendas or opportunistic personal interests. These groups seek to distort the image of our national institutions by spreading rumors and feeding false and misleading information to international actors.”
Just two days earlier, Fatlawi had announced a major partnership between Rafidain Bank and global risk and compliance firm K2 Integrity. Describing the agreement to the state-run Iraqi News Agency (INA), he called it a “strategic step” toward transforming Rafidain into “an integrated banking platform aligned with international standards.”
He said the partnership supports the Iraqi government’s broader reform agenda, which seeks to restructure the banking sector, reinforce Iraq’s financial and economic sovereignty, and restore the country’s standing in the global financial system “with confidence and transparency.”
On Monday, Fatlawi reiterated that the deal with K2 Integrity would establish “clear and transparent rules for compliance and governance,” ensuring that “the voice of reform - not the voices of misinformation or politicization - reaches the world.”
“We are taking confident steps to build a modern Iraqi banking system rooted in transparency and credibility,” he said, adding, “We will not allow external agendas or narrow interests to obstruct the path of reform. This international partnership is a testament to integrity and trust, and a clear message that Rafidain is charting a new course to restore Iraq’s rightful place in the global banking community.”
Founded in 1941, Rafidain Bank is a central pillar of Iraq’s financial infrastructure, offering a wide array of services. It has previously been subjected to international sanctions, including US blacklisting during Saddam Hussein’s regime and UN sanctions following the 1991 Gulf War - both of which have since been lifted.
US accusations, diplomatic response
Fatlawi’s remarks follow media reports and statements by US officials alleging that the bank was processing payments for Yemen’s Houthis, accused of disrupting global shipping in the Red Sea. According to Fox Business, the accusations were raised during a high-level meeting on April 29 between US Treasury officials - led by Deputy Secretary Michael Faulkender - and Iraqi Foreign Minister and Deputy Prime Minister Fuad Hussein.
During the meeting, US officials reportedly warned that Rafidain Bank must “stop conducting business with the Iranian regime-backed Houthi organization.” They also urged that the bank’s branch in Yemen be relocated from Houthi-controlled Sana’a to the southern city of Aden, where the internationally recognized Yemeni government is based.
In response, Foreign Minister Hussein affirmed that Iraq only recognizes and “deals with the internationally recognized Yemeni government,” which maintains an embassy in Baghdad. He firmly denied the existence of any such transactions, stating there is “no possibility of the Houthis accessing the Iraqi financial system,” and pledged to “personally verify this matter.”
Echoing this denial, a spokesman for Iraq’s embassy in Washington, Sadeq Ali Hasan, told Fox Business that the allegations were “categorically false.” He emphasized that Rafidain’s Sana’a branch has been “fully non-operational since 2017” and lacks the infrastructure to process any financial transactions.
The embassy also addressed separate claims linking Rafidain Bank to the Iran-aligned Popular Mobilization Forces (PMF), stating, “We confirm that Rafidain Bank no longer holds any PMF-related accounts.”
US pressure on Iraqi banks
Iraq’s banking system has been under increasing strain, caught between domestic corruption and intensifying US financial pressure. Since 2003, the sector has seen a proliferation of private banks, many of which are widely viewed as serving political elites rather than the national economy.
US scrutiny has also intensified, with the Treasury Department sanctioning numerous Iraqi banks for alleged money laundering and financing of armed groups. The Central Bank of Iraq (CBI) has also come under pressure, prompting the US Federal Reserve to impose tighter controls, including requiring Iraqi banks to report all dollar transactions via an electronic platform.
Notable institutions targeted include al-Huda Bank - deemed by the US Treasury as a “primary money laundering concern” for transferring funds to Iran’s Islamic Revolutionary Guard Corps (IRGC) - as well as al-Bilad Islamic Bank and al-Khalidi Exchange Company, both accused of similar illicit financial activities.
In July 2023, the US Treasury barred 14 more Iraqi banks from foreign currency trading. This was followed by the CBI banning an additional eight in early 2024, to restrict dollar flows to sanctioned entities and curtail illegal financial practices.
As of August 2025, over 35 of Iraq’s 72 banks have been subjected to US sanctions or restrictions on dollar transactions. With Rafidain Bank now under the spotlight due to its perceived opacity, it may well be the next focus of Washington’s financial scrutiny.