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This was all a mistake. 

Surely, the United States wouldn’t intentionally create a system that facilitated Iraqi banks to illegally funnel money into Iran’s terrorist regime. 

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Right? Right?!

Iraq gets a substantial fraction of its electric power from Iran, and the United States set up a system through which the Iraqis could pay for the power without violating sanctions. 

The Federal Reserve helped set it up, and yet these galaxy brains supposedly were so incompetent that they left back doors that made it possible to funnel vast sums of cash through this US-designed system. 

Ali Ghulam was the undisputed dollar king of Iraq for almost a decade.

His three Baghdad banks wired tens of billions of dollars in that time outside the country, ostensibly for car parts, furniture and other imports. He was one of the biggest operators in an ad hoc banking system set up around two decades ago under the U.S. occupation that gave the Federal Reserve Bank of New York a key role in processing Iraq’s international transactions. 

Years later, when the Fed finally began looking closely at where the money was going, it shut him down almost overnight.

U.S. officials suspect his banks were among more than two dozen Iraqi banks involved in funneling dollars to Iran and its militia allies, using front companies and falsified invoices to circumvent sanctions that block Iran from the global financial system. Audits of Ghulam’s banks completed in May, reviewed by The Wall Street Journal, reveal extraordinary details of overseas dollar transactions that auditors said raised money-laundering concerns. Ghulam, in interviews, denied the allegations.

Among Iraqi banks overall, as much as 80% of the more than $250 million in dollar wire transfers flowing through them on some days were untraceable and some portion of that amount went secretly to Iran’s Islamic Revolutionary Guard Corps and the anti-U.S. militias it supports, according to U.S. officials. 

A top U.S. Treasury official told Iraqi officials at a Baghdad meeting in January that Iraqi banks “deliberately exploited” their access to U.S. dollars to support the Quds Force, a paramilitary arm of the IRGC, and also the militia groups operating in Iraq that the Iranian government backs, according to U.S. officials familiar with the discussions.

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Call me crazy, but it seems passing strange that money that flows through the New York Fed made its way through the byzantine system set up by the US without anybody here having a clue about where it was going. 

If so, people should be fired. If not, people should go to jail. 

For 12 of the years over which these transactions took place, the American government was playing footsie with Iran, trying to buy their friendship. We were cutting deals, sending billions in cash there on pallets, and allowing the Iranians to bank over $100 billion that we know of. 

Plus, of course, there is this secret money flow. 

Perhaps I am being cynical when I say that these revelations have more to do with our client in Iraq probably screwing us than his bank doing something we didn’t approve of. Probably excessive graft, not violating sanctions. IF the US designed the system, I doubt we never checked what it was doing, and surely the NY Fed had an inkling. 

Again, if not, close it down and make Ron Paul happy. They are boobs. The truth is, though, that they knew. They were even told. 

The crackdown on Iraqi banks started in late 2022 after more than a decade of U.S. inaction, even after warnings by the Pentagon inspector general as long ago as 2012 of potential fraud on the order of $800 million a week. Current and former U.S. officials said that over the years the U.S. implemented temporary restrictions on cash flows to Iraq, but feared that tight or permanent controls would plunge Iraq into economic chaos and set back its fight against Islamic State.

For Iran, which has been sanctioned for illicit nuclear activity and for supporting terrorism, access to dollars is critical for buying weapons and parts for drones and missiles, and financing armed groups it supports around the Middle East, U.S. officials said. 

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I am more interested in the question of who knew what, when, what kickbacks they got, and whether the Biden administration used this back door to funnel money to Iran in ways we don’t already know. 

Chances are we will never know. Certainly nobody in government will ever want to tell us.