Dollar ban imposed on International Development Bank, with transactions to be wound down by October 30

Key Facts

The Central Bank of Iraq has barred International Development Bank from dealing in U.S. dollars, according to coverage by Al-Mustaqilla news agency, which cited a letter issued by the Banking Supervision Department. The move follows U.S. sanctions against the bank, with temporary authorization to wind down existing transactions expiring in October 2026. The U.S. Office of Foreign Assets Control listed the institution under its official name, "International Development Bank for Investment and Finance," as it appears on the sanctions list. The U.S. Treasury Department said the bank was designated under Executive Order 13902 for operating in the financial sector of the Iranian economy. The U.S. decision blocks the assets of designated entities located in the United States, as well as assets in the possession or control of U.S. persons.

The Treasury said the bank provides Iran with financial services and access to dollars, and maintains ties to Iranian government entities and Iran-aligned armed groups in Iraq. It accused the bank of abusing its access to the dollar transfer auction, which was subsequently abolished, as part of its account of the activities it attributed to the bank. It added that the bank's current leadership received ownership from a financier holding Iranian and Iraqi citizenship who it said works for the Iranian Revolutionary Guard's Quds Force. According to the department's account, Bank Melli transferred its capital to International Development Bank after it was closed because of U.S. sanctions. The Treasury also alleged that the bank collects profits from its operations and sends them back to Iran in dollars every month, allegations the bank rejected.

Responding to the U.S. measures, International Development Bank rejected the Treasury Department's allegations that it helped Iran access dollars, according to Shafaq News. It expressed its readiness to cooperate with the Central Bank of Iraq and the U.S. Treasury Department through official and legal channels to address the developments. The bank said "protecting depositors and customers remains a priority," reaffirming its position on its obligations to those dealing with it. It added that it was coordinating efforts to maintain permitted banking services while working to manage liquidity. Meanwhile, the Treasury warned foreign financial institutions that they could face secondary sanctions if they engage in certain transactions with entities on the sanctions list.

Iraq has previously restricted local banks' access to the U.S. currency, banning 14 banks from dealing in dollars in July 2023, according to Reuters. That decision was part of a broader campaign to combat dollar smuggling to Iran through Iraq's banking system. Under its current exchange-rate policy, the Central Bank of Iraq set the cash dollar selling rate for the public at 1520 dinars per dollar as part of its exchange-rate adjustment in October 2026. In its latest statement on imports, the central bank affirmed "the continued regular financing of imports." It added that it provides foreign currency through banks to cover requests that meet the conditions, alongside measures regulating dollar dealings in the banking sector.

The next step in the U.S. process concerns winding down existing transactions, with the Office of Foreign Assets Control issuing a general license for that purpose covering International Development Bank for Investment and Finance. The authorization extends to any entity in which the bank owns, directly or indirectly, a stake of 50 percent or more. The license requires any payments owed to blocked persons to be deposited into a blocked account under the relevant U.S. rules. The temporary authorization does not permit other prohibited transactions, including dealings with blocked persons outside its specified scope, unless separately authorized. The temporary authorization to wind down covered transactions expires on October 30, 2026, according to the deadline set by the Office of Foreign Assets Control.