BILLING CODE: 4810-02
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506-AB65
Imposition of Special Measure regarding Al-Huda Bank as a Financial Institution of
Primary Money Laundering Concern
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Final rule.
SUMMARY: FinCEN is issuing this final rule to prohibit covered U.S. financial
institutions from opening or maintaining a correspondent account for, or on behalf of AlHuda Bank, a foreign financial institution based in Iraq found to be of primary money
laundering concern pursuant to section 311 of the USA PATRIOT Act. The rule further
requires covered U.S. financial institutions to take reasonable steps not to process
transactions for the correspondent account of a foreign banking institution in the United
States if such a transaction involves Al-Huda Bank. It also requires covered institutions
to apply special due diligence to their foreign correspondent accounts that is reasonably
designed to guard against their use to process transactions involving Al-Huda Bank.
DATES: This final rule is effective [INSERT DATE 30 DAYS AFTER DATE OF
PUBLICATION IN THE FEDERAL REGISTER].
FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support
Section at 1–800–767–2825 or electronically at frc@fincen.gov.
SUPPLEMENTARY INFORMATION:
I.

Background
A. Statutory Provisions

On October 26, 2001, the President signed into law the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001, Public Law 107-56 (USA PATRIOT Act). Title III of the USA PATRIOT
Act amended the anti-money laundering (AML) provisions of the Bank Secrecy Act
(BSA) to promote the prevention, detection, and prosecution of international money
laundering and the financing of terrorism.1 Section 311 of the USA PATRIOT Act
(section 311), codified at 31 U.S.C. 5318A, grants the Secretary of the Treasury
(Secretary) authority, upon finding that reasonable grounds exist for concluding that one
or more financial institutions operating outside of the United States is of primary money
laundering concern, to require domestic financial institutions and domestic financial
agencies to take certain “special measures.” The authority of the Secretary to administer
the Bank Secrecy Act (BSA) and its implementing regulations has been delegated to
FinCEN.2
The five special measures set out in section 311 are safeguards that may be
employed to defend the U.S. financial system from money laundering and terrorist
financing risks. The Secretary may impose one or more of these special measures in
order to protect the U.S. financial system from such threats. Through special measures
one through four, the Secretary may impose additional recordkeeping, information
collection, and reporting requirements on covered domestic financial institutions and
domestic financial agencies — collectively, “covered financial institutions.”3 Through
special measure five, the Secretary may prohibit, or impose conditions on, the opening or
maintaining in the United States of a correspondent account for or on behalf of a foreign

The BSA, as amended, is the popular name for a collection of statutory authorities that FinCEN
administers that is codified at 12 U.S.C. 1829b, 1951-1960 and 31 U.S.C. 5311-5314, 5316-5336, and
includes other authorities reflected in notes thereto. Regulations implementing the BSA appear at 31 CFR
Chapter X.
2 Pursuant to Treasury Order 180-01 (Jan. 14, 2020), the authority of the Secretary to administer the BSA,
including, but not limited to, 31 U.S.C. 5318A, has been delegated to the Director of FinCEN.
3 31 U.S.C. 5318A(b)(1)–(b)(4).
banking institution, if such correspondent account involves the foreign financial
institution found to be of primary money laundering concern.4
B. Al-Huda Bank
Al-Huda Bank is a private commercial bank registered and headquartered in
Baghdad, Iraq, with five branch locations in Baghdad, Karbala, and Nasiriyah, Iraq. AlHuda Bank has no subsidiaries or branches outside of Iraq and is regulated by the Central
Bank of Iraq (CBI).
Al-Huda Bank has no direct U.S. correspondent banking relationships but
interacts with the U.S. financial system indirectly through U.S. dollar (USD)
correspondent accounts at six foreign financial institutions. In other words, Al-Huda
Bank interacts with foreign banks that themselves have correspondent accounts with U.S.
banks.
II.

FinCEN’s Section 311 Rulemaking Regarding Al-Huda Bank
A. Finding
In a notice of proposed rulemaking (NPRM) published in the Federal Register on

January 31, 2024, FinCEN found that reasonable grounds exist for concluding that AlHuda Bank is a foreign financial institution of primary money laundering concern
pursuant to 31 U.S.C. 5318A.5
As described in the NPRM, FinCEN assesses that Al-Huda Bank has exploited its
access to USD to support designated foreign terrorist organizations (FTOs), including
Iran’s Islamic Revolutionary Guard Corps (IRGC) and IRGC-Quds Force (IRGC-QF), as
well as Iran-aligned Iraqi militias Kata’ib Hizballah (KH) and Asa’ib Ahl al-Haq
(AAH).6 Since its establishment, Al-Huda Bank has been controlled and operated by the

31 U.S.C. 5318A(b)(5).
89 FR 6074 (Jan. 31, 2024).
6 The U.S. Department of State has authority to designate organizations as FTOs. The U.S. Department of
the Treasury’s Office of Foreign Assets Control (OFAC) has also designated the IRGC, IRGC-QF, KH,
and AAH pursuant to multiple sanctions authorities.
4
IRGC and IRGC-QF. Moreover, the chairman of Al-Huda Bank is complicit in Al-Huda
Bank’s illicit financial activities, including money laundering through front companies
that conceal the true nature of and parties involved in illicit transactions, ultimately
enabling the financing of terrorism.
Given the nature of Iraq’s economy and trade relationships, Iraqi businesses that
import goods into Iraq rely on wire transfers of USD from the CBI account at the Federal
Reserve Bank of New York (FRBNY), a process known as the wire auction, or more
generally the “CBI dollar auction.”7 Many Iraqi businesses and financial institutions use
the CBI dollar auction for legitimate purposes. However, FinCEN assesses that Al-Huda
Bank has deliberately embarked on a strategy that relies on exploiting the CBI dollar
auction to support designated FTOs, including the IRGC, IRGC-QF, KH, and AAH, with
the support of the Iranian government. Al-Huda Bank has actively supported terrorist
groups and abused the CBI dollar auction through numerous money laundering
typologies, including use of fraudulent documentation to obscure the ultimate
beneficiaries of the transactions. Given these facts, FinCEN assesses that there is a high
risk of Al-Huda Bank exploiting USD correspondent relationships to support its money
laundering and terrorist financing activity.
1. Al-Huda Bank has exploited its access to USD through the wire auction
Individual Iraqi businesses that import goods into Iraq rely on wire transfers of
USD from CBI’s account at the FRBNY. The wire auction, a part of what is known as
the CBI dollar auction, is the mechanism by which the CBI provides USD to facilitate the
purchase of imports. When Iraq sells oil in the international petroleum markets, the
revenues are credited in USD to the CBI’s account at the FRBNY. Iraqi companies with

The CBI dollar auction comprises both (1) the wire auction, and (2) bulk USD banknote shipments to Iraq
which the CBI sells to exchange houses and banks in return for Iraqi dinar (IQD). The latter is known as
the “cash auction” and is a separate process from the wire auction. Al-Huda Bank’s known illicit finance
activities described herein are related to the wire auction.
accounts at Iraqi banks can then access the CBI dollar auction to purchase USD with IQD
to pay for imports. USD are transferred from the CBI’s FRBNY account to an Iraqi
bank, and onward to a third-country bank on behalf of a third-country exporter.
Many Iraqi businesses and their banks use the CBI dollar auction for its intended,
legitimate purpose of facilitating imports of goods. However, FinCEN assesses that AlHuda Bank has deliberately embarked on a strategy that relies on illegitimate exploitation
of the CBI dollar auction to support designated FTOs, including the IRGC, IRGC-QF,
KH, and AAH, with the support of the Iranian government.
With the knowledge of Al-Huda Bank’s chairman, Al-Huda Bank’s abuse of the
CBI dollar auction was obfuscated through the application of numerous money
laundering typologies, including the use of fraudulent documentation, fake deposits,
identity documents of the deceased, fake companies, and counterfeit IQD, which were
used to purchase USD and support terrorist groups and militias. For years, Al-Huda
Bank has been involved in these deceptive money laundering activities. Examples of
three of these money laundering typologies are discussed below: (1) fraudulent
documentation; (2) stolen identities; and (3) counterfeit IQD. Al-Huda Bank’s use of
these money laundering typologies also risks exposing covered financial institutions to
Al-Huda Bank’s exploitation of USD correspondent banking relationships to support its
terrorist financing activities.
Since at least 2012, Al-Huda Bank has used fraudulent documentation to purchase
foreign currency — including USD — from the CBI at CBI dollar auctions. Based on
media reporting, between 2012 and 2014, Al-Huda Bank filed false documentation to
justify international transfers of over $6 billion to banks and companies.8 On at least one
occasion, government authorities detected Al-Huda Bank’s filing of fraudulent

Al-Arabiya, “Billions of Dollars” Smuggled Out of Iraq During Maliki’s Rule (Nov. 9, 2015), available
at https://english.alarabiya.net/News/middle-east/2015/11/09/Iraq-smuggled-billions-of-dollars-duringMaliki-s-rule.
documentation, which resulted in freezing of a transfer of a significant amount of money.
In another scheme, Al-Huda Bank would deposit fake checks to make the balance seem
higher on the account Al-Huda Bank used in CBI dollar auctions. The fake check
deposits would allow Al-Huda Bank to purchase USD using that false higher balance
before the fake check bounced, which Al-Huda Bank would then write off.
Al-Huda Bank, with its chairman's knowledge, has also abused the CBI dollar
auction by utilizing stolen identities. In one scheme, the Al-Huda Bank chairman and
other Al-Huda Bank officials would use the identification documents of deceased
individuals to purchase USD in CBI dollar auctions. Al-Huda Bank officials would also
pay living people for use of their identification documents. The illicit use of
identification documents allowed Al-Huda Bank to circumvent limits on currency
purchases.
With the knowledge of Al-Huda Bank’s chairman, Al-Huda Bank has also been
involved in funneling of counterfeit IQD through fake businesses in Iraq. The counterfeit
IQD would be printed in Iran, funneled through Iraqi businesses, and then exchanged for
USD. The use of counterfeit IQD greatly increases the amount of illicit profit gained
from exchanging IQD for USD at the CBI dollar auction, and the funneling of counterfeit
IQD through Iraqi businesses disguises the counterfeit IQD’s source in Iran.
2. Through the exploitation of the wire auction, Al-Huda Bank has provided
support to designated FTOs
Iran has exploited its relationship with Iraq-based, Iran-backed militias to
influence Iraqi businesses and officials to generate illicit revenue for the militias’
operations. As part of this effort, Iran has developed a network of commercial platforms,
including financial institutions, to move funds and misrepresent trade-based financial
transactions that obscure the ultimate beneficiaries, namely Iran-backed terrorist groups
and militias.

Since its establishment, Al-Huda Bank has been controlled and operated by the
IRGC and IRGC-QF. In 2008, the chairman of Al-Huda Bank established the bank
specifically for the benefit of KH and has met with and taken orders from IRGC-QF
leadership in Tehran, Iran. After establishing the bank, the Al-Huda Bank chairman
began money laundering operations on behalf of the IRGC-QF and KH.
Al-Huda Bank has funded Iran-aligned militias through a scheme in which AlHuda Bank and other Iraqi banks have falsely claimed imports into Iraq that did not exist
worth billions of dollars to justify the purchase of USD in the CBI dollar auction. AlHuda Bank would purchase the USD with counterfeit IQD printed in Iran. Al-Huda
Bank was not allowed to conduct financial transactions without the Iran-aligned militias’
involvement and Al-Huda Bank would provide part of Al-Huda Bank’s revenue from this
scheme to those Iran-aligned militias.
This fraudulent scheme has been a substantial source of funding for Iran-aligned
militias’ operations. The Iran-aligned Iraqi militia AAH has used companies based
across Iraq to generate revenue, launder illicit profits, and convert IQD to USD. AAH
has used Al-Huda Bank to maintain accounts for some of these companies, as well as to
access the currency auction. The use of false imports, counterfeit currency, and front
companies are essential components of exploitation of the CBI dollar auction by
obscuring the source of funds and the purpose and ultimate beneficiaries of the
transactions that support Iran-aligned Iraqi militias. Overall, IRGC and IRGC-QF use of
Al-Huda Bank and several other Iraqi banks to access the CBI dollar auction resulted in
approximately $70 billion USD in profit, from 2019 through 2020.
B. Proposed Special Measure
In the NPRM, FinCEN proposed: (1) to prohibit covered financial institutions
from opening or maintaining a correspondent account in the United States for, or on
behalf of, Al-Huda Bank; (2) to prohibit covered financial institutions from processing a

transaction involving Al-Huda Bank through the United States correspondent account of
a foreign banking institution; and (3) a requirement for covered financial institutions to
apply special due diligence to their foreign correspondent accounts that is reasonably
designed to guard against their use to process transactions involving Al-Huda Bank.9 The
comment period for the NPRM closed on March 1, 2024.
As further described below, FinCEN is adopting the proposal as a final rule. In so
doing, FinCEN has considered public comments and the relevant statutory factors and
has engaged in the required consultations prescribed by 31 U.S.C. 5318A.
C. Subsequent Developments
Following the issuance of the NPRM, the CBI banned Al-Huda Bank from
accessing the CBI dollar auction.10 However, in light of Al-Huda Bank’s consistent and
longstanding ties to terrorist organizations since its inception and its history of
obfuscating transactions and account holders in support of those organizations, it is
reasonable to assess that Al-Huda Bank will seek ways to continue that support even
without access to the CBI dollar auction, through its access to USD correspondent
banking relationships in the region. Therefore, Al-Huda Bank remains of primary money
laundering concern.
D. Consideration of Comments
Concurrent with the issuance of the NPRM on January 31, 2024, FinCEN opened
a comment period that closed on March 1, 2024. FinCEN received seven comments; they
are described below, along with FinCEN’s response. Neither Al-Huda Bank nor its
officers submitted any comments.

89 FR 6074 (Jan. 31, 2024).
Reuters, Iraq bans 8 local banks from US dollar transactions (Feb. 4, 2024), available at
https://www.reuters.com/business/finance/iraq-bans-8-local-banks-us-dollar-transactions-2024-02-04/.
10

1. Comments attesting to Al-Huda Bank’s or bank owner Hamad alMoussawi’s good reputation
In response to the NPRM, FinCEN received four comments attesting to the good
reputation of the owner and chairman of Al-Huda Bank, Hamad al-Moussawi (alMoussawi). Commenters claimed that al-Moussawi is “pro-Western,” a “democracy
supporter,” and holds “purely liberal ideas.” Several commenters also claimed that alMoussawi “does not have any suspicious relationships”, or ties with “Iranian backed
groups” or “extremist Islamic parties or other sectarian parties.” Two commenters
commented on the reputation of Al-Huda Bank itself. One described the bank as “one of
the disciplined banks with a good reputation.” The second claimed that “the bank has not
faced any accusations of this kind previously.” These commenters have not provided any
specific evidence or documentation to support their claims. Further, even if they could be
substantiated, such general claims about Al-Huda Bank and its owner al-Moussawi would
not allay FinCEN’s concerns regarding Al-Huda Bank’s specific illicit conduct.
2. Comments disputing the feasibility of money laundering typologies
outlined in the NPRM
Two commenters claimed that it would be “impossible” or “unrealistic” for a
bank to conduct the type of illicit activity described in the NPRM, given the CBI’s
supervision and controls. Specifically, these commenters disputed the ability of any Iraqi
bank to utilize forged checks and counterfeit IQD.
These comments do not allay FinCEN’s concerns regarding Al-Huda Bank, as the
commenters have not provided specific evidence or documentation to support their
claims.
3. Comments questioning the sources cited in the NPRM
Four comments claimed that FinCEN did not provide sufficient evidence, and/or
relied upon inaccurate, biased public and non-public information. Four comments
questioned the veracity of media reporting as evidence in the NPRM. One commenter

found that the NPRM “relied on information from media sources” and stated that “media
in the Middle East, as a whole, is unprofessional, participates in corrupt practices, lacks
neutrality, and is irresponsible.” Another commenter claimed that information FinCEN
used, including media reporting, “is often not thoroughly researched, and if the reports
received by [FinCEN] originated from Iraqi parties, […] those reports were built on the
basis of animosity towards individuals and a desire to harm their interests, rather than a
desire to present facts.” These comments do not allay FinCEN’s concerns regarding AlHuda Bank, as they cite no specific evidence that would call into question the reliability
of the media reporting and sources upon which FinCEN has relied.
Moreover, FinCEN based its findings on corroborated evidence from both public
and non-public sources, of which media reporting was only a small part. In making its
finding of primary money laundering concern and adopting special measure five to
address it, FinCEN has considered the totality of information available to it, including
from media organizations, and has independently evaluated its sources for credibility,
potential bias, and accuracy. One commenter claimed to have “found a document issued
by the Central Bank of Iraq denying the accuracy” of an article cited in the NPRM. The
article reported that, from 2012 to 2014, Al-Huda Bank used forged documents in
transfers of over $6 billion to banks and companies outside of Iraq.11 The document
stated that there were no such personal money transfers transferred out of Iraq to the
account of Al-Huda Bank’s owner. Because the document focuses narrowly on the
owner’s personal money transfers, it does not contradict the information reported in the
article, which is also corroborated by other sources.
E. Summary of FinCEN’s Ongoing Concerns Regarding Al-Huda Bank

Al-Arabiya, “Billions of Dollars” Smuggled Out of Iraq During Maliki’s Rule (Nov. 9, 2015), available
at https://english.alarabiya.net/News/middle-east/2015/11/09/Iraq-smuggled-billions-of-dollars-duringMaliki-s-rule.
After considering comments received from the public, as well as other
information available to the agency, including both public and non-public information,
FinCEN is issuing this final rule, imposing a prohibition on U.S. financial institutions
from opening or maintaining a correspondent account for, or on behalf of, Al-Huda Bank.
The information available to FinCEN provides reason to conclude that Al-Huda Bank
continues to be a foreign financial institution of primary money laundering concern.
III.

Imposition of a Special Measure regarding Al-Huda Bank as a Foreign
Financial Institution of Primary Money Laundering Concern
Based upon this finding, FinCEN is authorized to impose one or more special

measures. Following the required consultations and the consideration of all relevant
factors discussed in the NPRM, FinCEN proposed a prohibition under the fifth special
measure.12
After reviewing the comments and considering all potential special measures,
FinCEN concludes that a prohibition under special measure five is warranted. Consistent
with the finding that Al-Huda Bank is a foreign financial institution of primary money
laundering concern, and in consideration of additional relevant factors, this final rule
imposes a prohibition on the opening or maintaining of correspondent accounts by
covered financial institutions for, or on behalf of, Al-Huda Bank. This prohibition will
help guard against the money laundering and terrorist financing risks to the U.S. financial
system posed by Al-Huda Bank, as identified in the NPRM and this final rule.

Prior to issuing the January 2024 NPRM and this final rule, FinCEN consulted with representatives and
staff of the following Departments and agencies regarding this action: Department of Justice; the
Department of State; the Board of Governors of the Federal Reserve System; the Federal Deposit Insurance
Corporation; the Securities and Exchange Commission; the Commodity Futures Trading Commission; the
Office of the Comptroller of the Currency; and the National Credit Union Administration. During those
consultations, FinCEN shared drafts and information for the purpose of obtaining interagency views on: (1)
the finding that Al-Huda Bank is of primary money laundering concern; (2) the imposition of special
measure five prohibiting covered U.S. financial institutions from opening or maintaining a correspondent
account for, or on behalf of Al-Huda Bank and requiring covered U.S. financial institutions to take
reasonable steps not to process transactions for the correspondent account of a foreign banking institution
in the United States if such a transaction involves Al-Huda Bank; and (3) the effect such prohibition would
have on the domestic and international financial system. Those views are reflected in FinCEN’s
explanation of the reasons for issuing this final rule.
A. Whether similar action has been or is being taken by other nations or
multilateral groups regarding Al-Huda Bank
Following the issuance of the NPRM, the CBI banned Al-Huda Bank from
accessing the CBI dollar auction.13 Nevertheless, as indicated above, FinCEN remains
concerned by Al-Huda Bank’s continued potential to interact with the U.S. financial
system indirectly through U.S. dollar (USD) correspondent accounts at six foreign
financial institutions.
B. Whether the imposition of any particular special measure would create a
significant competitive disadvantage, including any undue cost or burden
associated with compliance, for financial institutions organized or
licensed in the United States
While FinCEN assesses that the final rule will place some cost and burden on
covered financial institutions, these burdens are neither undue nor inappropriate in view
of the threat posed by the illicit activity facilitated by Al-Huda Bank. As described in the
NPRM, Al-Huda Bank has had access to USD through the CBI dollar auction, which
does not require Iraqi banks to have direct USD correspondent relationships. Further, as
described above, Al-Huda Bank has no direct USD correspondent relationships with U.S.
financial institutions. Rather, it accesses USD through its nested correspondent
relationships, including, but not limited to, six USD accounts outside the United States.
These accounts may be used for commercial payments, as well as foreign exchange and
money markets. Covered financial institutions and transaction partners have ample
opportunity to arrange for alternative payment mechanisms in the absence of
correspondent banking relationships with Al-Huda Bank.
As such, a prohibition on correspondent banking with Al-Huda Bank will impose
minimal additional compliance costs for covered financial institutions, which would most
commonly involve merely adding Al-Huda Bank to existing sanctions and money

Reuters, Iraq bans 8 local banks from US dollar transactions (Feb. 4, 2024), available at
https://www.reuters.com/business/finance/iraq-bans-8-local-banks-us-dollar-transactions-2024-02-04/.
laundering screening tools. FinCEN assesses that given the risks posed by Al-Huda
Bank’s facilitation of money laundering, the additional burden on covered financial
institutions in preventing the opening of correspondent accounts with Al-Huda Bank, as
well as conducting due diligence on foreign correspondent account holders and notifying
them of the prohibition, will be minimal and not undue.
C. The extent to which the action or the timing of the action would have a
significant adverse systemic impact on the international payment,
clearance, and settlement system, or on legitimate business activities of
Al-Huda Bank
FinCEN assesses that imposing the final rule will have minimal impact upon the
international payment, clearance, and settlement system. As a comparatively small bank,
responsible for a nominal amount of transaction volume in the region, Al-Huda Bank is
not a systemically important financial institution in Iraq, regionally, or globally. FinCEN
views that prohibiting Al-Huda Bank’s access to U.S.-Iraq correspondent banking
channels should not affect overall cross-border transaction volumes.
Further, a prohibition under special measure five will not prevent Al-Huda Bank
from conducting legitimate business activities in other foreign currencies. In addition to
the six correspondent accounts used to access USD noted above, Al-Huda Bank currently
holds two Euro accounts and two United Arab Emirates dirham accounts.14 Provided that
its legitimate activities do not involve a correspondent account maintained in the United
States, and so long as Al-Huda Bank maintains non-USD correspondent relationships in
the region, the bank could continue to engage in those activities.
D. The effect of the action on United States national security and foreign
policy
As described in the NPRM, evidence available to FinCEN has demonstrated that
Al-Huda Bank served as a significant conduit for the financing of FTOs in violation of
U.S. and international sanctions. Imposing a prohibition under special measure five will:

BankCheck, Al-Huda Bank – Iraq (accessed May 28, 2024), available at https://bankcheck.app.

(1) limit Al-Huda Bank’s ability to facilitate illicit finance within an international
network of front companies and sanctions evasion infrastructure supporting these FTOs,
by removing its access to correspondent accounts in the United States; and (2) raise
awareness of the way illicit actors exploit weaknesses in vulnerable jurisdictions to
circumvent sanctions and finance terrorism.
E. Consideration of alternative special measures
In assessing the appropriate special measure to impose, FinCEN considered
alternatives to a prohibition on the opening or maintaining in the United States of
correspondent accounts, including the imposition of one or more of the first four special
measures, or imposing conditions on the opening or maintaining of correspondent
accounts under special measure five. Having considered these alternatives and for the
reasons set out below, FinCEN assesses that none of the other special measures available
under section 311 would appropriately address the risks posed by Al-Huda Bank and the
urgent need to prevent it from accessing USD through correspondent banking entirely.
With the knowledge of Al-Huda Bank’s chairman, Al-Huda Bank’s abuse of the
dollar auction was obfuscated through the application of numerous money laundering
typologies, including the use of fraudulent documentation, fake deposits, identity
documents of the deceased, fake companies, and counterfeit IQD, which were used to
purchase USD and support terrorist groups and militias. Taken as a whole, Al-Huda
Bank’s illicit activities present a heightened risk of obscured transaction counterparty
identification that would be undetectable by covered financial institutions. Indeed, a key
feature of the facilitation of funding for Iranian and Iran-aligned FTOs through Al-Huda
Bank is the use of fake companies to obscure the true beneficial owners and ultimate
destinations of funds involved in the transactions. Moreover, this behavior provides
opportunities for obscuring the identities of transaction counterparties to correspondent
banking relationship providers.

Because of the nature, extent, and purpose of the obfuscation engaged in by AlHuda Bank, any special measure intended to mandate additional information collection
would likely be ineffective and insufficient to determine the true identity of illicit finance
actors. For example, the provision under special measure one, that “the identity and
address of the participants in a transaction or relationship, including the identity of the
originator of any funds transfer” be collected in records and reports, could be
circumvented by the operations of shell companies, wherein the reported identity of the
originator serves to obscure the true beneficial owner or originator. This would
accordingly be ineffective in preventing illicit transactions. Al-Huda Bank’s record of
such circumvention suggests special measure one would not adequately protect the U.S.
financial system from the threats posed by the bank.
Further, the requirements under special measures three and four, that domestic
financial institutions obtain “with respect to each customer (and each such
representative), information that is substantially comparable to that which the depository
institution obtains in the ordinary course of business with respect to its customers
residing in the United States”, are also likely to be ineffective. First, Al-Huda Bank’s use
of nested correspondent account access through layers of payment systems would render
these alternative measures ineffective. Only significant effort and expense by U.S.
institutions could fill this gap, which would impose a disproportionate compliance burden
and with no guarantee that the money laundering threat would be addressed through
customer due diligence research.
FinCEN also considered special measure two, which may require domestic
financial institutions to “obtain and retain information concerning the beneficial
ownership of any account opened or maintained in the United States by a foreign
person.” The agency determined this special measure to be largely irrelevant since the

concerns involving Al-Huda Bank do not involve the opening or maintaining of accounts
in the U.S. by foreign persons.
FinCEN similarly assesses that merely imposing conditions under special measure
five would be inadequate to address the risks posed by Al-Huda Bank’s activities.
Special measure five also enables FinCEN to impose conditions as an alternative to a
prohibition on the opening or maintaining of correspondent accounts. Given Al-Huda
Bank’s consistent and longstanding ties to terrorist organizations since its inception, and
its track record of obfuscating transactions and account holders, FinCEN determined that
imposing any condition would not be an effective measure to safeguard the U.S. financial
system. FinCEN assesses that the billions of dollars supplied to terrorist groups through
Al-Huda Bank’s exploitation of its access to USD, and the exposure of U.S. financial
institutions to Al-Huda Bank’s illicit activity outweigh the value in providing conditioned
access to the U.S. financial system for any purportedly legitimate business activity.
Conditions on the opening or maintaining of correspondent accounts would likely be
insufficient to prevent illicit financial flows through the U.S. financial system, given AlHuda Bank’s use of fraudulent documentation and front companies to obscure its
financing of terrorist groups in order to access USD. Given Al-Huda Bank’s deliberate
use of these money laundering typologies, FinCEN cannot craft sufficient conditions to
enable covered financial institutions to open or maintain correspondent accounts for AlHuda Bank without introducing severe risk to those financial institutions in processing
transactions that ultimately finance terrorism.
FinCEN, thus, assesses that any condition or additional recordkeeping or
reporting requirement would be an ineffective measure to safeguard the U.S. financial
system. Such measures would not prevent Al-Huda Bank from accessing the
correspondent accounts of U.S. financial institutions, thus leaving the U.S. financial
system vulnerable to processing illicit transfers that are likely to finance terrorist groups,

posing a significant national security and money laundering risk. In addition, no
recordkeeping or reporting requirements or conditions would be sufficient to guard
against the risks posed by a bank that processes transactions that are designed to obscure
the transactions’ true nature and are ultimately for the benefit of terrorist groups. For
these reasons, and after thorough consideration of alternate measures, FinCEN has
determined that a prohibition on opening or maintaining correspondent banking
relationships is the only special measure out of the special measures available under
section 311 that can adequately protect the U.S. financial system from the illicit finance
risk posed by Al-Huda Bank.
IV.

Section-by-Section Analysis
A. 1010.663(a)—Definitions
1. Definition of Al-Huda Bank
The final rule defines the term “Al-Huda Bank” to mean all subsidiaries,

branches, and offices of Al-Huda Bank operating as a bank in any jurisdiction. FinCEN
is not currently aware of any subsidiary banks or branches outside of Iraq.
2. Definition of Correspondent Account
The final rule defines the term “correspondent account” to have the same meaning
as the definition contained in 31 CFR 1010.605(c)(1)(ii). In the case of a U.S. depository
institution, this broad definition includes most types of banking relationships between a
U.S. depository institution and a foreign bank that are established to provide regular
services, dealings, and other financial transactions, including a demand deposit, savings
deposit, or other transaction or asset account, and a credit account or other extension of
credit. FinCEN is using the same definition of “account” for purposes of this final rule as
is established for depository institutions in the final rule implementing the provisions of
section 312 of the USA PATRIOT Act, requiring enhanced due diligence for

correspondent accounts maintained for certain foreign banks.15 Under this definition,
“payable-through accounts” are a type of correspondent account.
In the case of securities broker-dealers, futures commission merchants,
introducing brokers in commodities, and investment companies that are open-end
companies (mutual funds), FinCEN is also using the same definition of “account” for
purposes of this final rule as was established for these entities in the final rule
implementing the provisions of section 312 of the USA PATRIOT Act, requiring due
diligence for correspondent accounts maintained for certain foreign banks.16
3. Definition of Covered Financial Institution
In a change from the proposed rule,17 and consistent with prior section 311 actions
imposing special measure five, the final rule defines the term “covered financial
institution” by reference to 31 CFR 1010.605(e)(1), the same definition used in the BSA
rule (31 CFR 1010.610) requiring the establishment of due diligence programs for
correspondent accounts for financial institutions. In general, this definition includes the
following:
•

a bank;

•

a broker or dealer in securities;

•

a futures commission merchant or an introducing broker in commodities; and

•

a mutual fund.
4. Definition of Foreign Banking Institution
The final rule defines the term “foreign banking institution” to mean a bank

organized under foreign law, or an agency, branch, or office located outside the United
States of a bank. The term does not include an agent, agency, branch, or office within the
See 31 CFR 1010.605(c)(2)(i).
See 31 CFR 1010.605(c)(2)(ii)-(iv).
17 When defining a covered financial institution, the proposed regulatory text incorrectly referenced 31
CFR 1010.605(e)(2), instead of 31 CFR 1010.605(e)(1). In addition, although the regulatory impact
analysis properly considered those financial institutions listed in 31 CFR 1010.605(e)(1), it incorrectly cited
31 CFR 1010.100(t) (as did the section-by-section analysis).
15
United States of a bank organized under foreign law. This is consistent with the
definition of “foreign bank” under 31 CFR 1010.100(u). This final rule interprets AlHuda Bank to be a foreign banking institution.
5. Definition of Subsidiary
The final rule defines the term “subsidiary” to mean a company of which more
than 50 percent of the voting stock or analogous equity interest is owned by another
company.
B. 1010.663(b)—Prohibition on Accounts and Due Diligence Requirements for
Covered Financial Institutions
1. Prohibition on Opening or Maintaining Correspondent Accounts
Section 1010.663(b)(1) of the final rule prohibits covered financial institutions
from opening or maintaining in the United States a correspondent account for, or on
behalf of, Al-Huda Bank.
2. Prohibition on Use of Correspondent Accounts Involving Al-Huda Bank
Section 1010.663(b)(2) of the final rule requires covered financial institutions to
take reasonable steps to not process a transaction for the correspondent account of a
foreign banking institution in the United States if such a transaction involves Al-Huda
Bank. Such reasonable steps are described in 1010.663(b)(3), which sets forth the special
due diligence requirements a covered financial institution is required to take when it
knows or has reason to believe that a transaction involves Al-Huda Bank.
3. Special Due Diligence for Correspondent Accounts
As a corollary to the prohibition set forth in sections 1010.663(b)(1) and (b)(2),
section 1010.663(b)(3) of the final rule requires covered financial institutions to apply
special due diligence to all of their foreign correspondent accounts that is reasonably
designed to guard against such accounts being used to process transactions involving AlHuda Bank. As part of that special due diligence, covered financial institutions are
required to notify those foreign correspondent account holders that the covered financial

institutions know or have reason to believe provide services to Al-Huda Bank, that such
correspondents may not provide Al-Huda Bank with access to the correspondent account
maintained at the covered financial institution. A covered financial institution may
satisfy this notification requirement using the following notice:
Notice: Pursuant to U.S. regulations issued under Section 311 of the
USA PATRIOT Act, see 31 CFR 1010.663, we are prohibited from
opening or maintaining in the United States a correspondent account
for, or on behalf of, Al-Huda Bank. The regulations also require us
to notify you that you may not provide Al-Huda Bank, including any
of its subsidiaries, branches, and offices access to the correspondent
account you hold at our financial institution. If we become aware
that the correspondent account you hold at our financial institution
has processed any transactions involving Al-Huda Bank, including
any of its subsidiaries, branches, and offices, we will be required to
take appropriate steps to prevent such access, including terminating
your account.
The purpose of the notice requirement is to aid cooperation with correspondent
account holders in preventing transactions involving Al-Huda Bank from accessing the
U.S. financial system. FinCEN does not require or expect a covered financial institution
to obtain a certification from any of its correspondent account holders that access will not
be provided to comply with this notice requirement.
Methods of compliance with the notice requirement could include, for example,
transmitting a notice by mail, fax, or e-mail. The notice should be transmitted whenever a
covered financial institution knows or has reason to believe that a foreign correspondent
account holder provides services to Al-Huda Bank.
Special due diligence also includes implementing risk-based procedures designed
to identify any use of correspondent accounts to process transactions involving Al-Huda
Bank. A covered financial institution is expected to apply an appropriate screening
mechanism to identify a funds transfer order that on its face lists Al-Huda Bank as the
financial institution of the originator or beneficiary, or otherwise references Al-Huda
Bank in a manner detectable under the financial institution’s normal screening
mechanisms. An appropriate screening mechanism could be one of the tools used by a

covered financial institution to comply with various legal requirements, such as
commercially available software programs used to comply with the economic sanctions
programs administered by OFAC.
4. Recordkeeping and Reporting
Section 1010.663(b)(4) of the final rule clarifies that the rule does not impose any
reporting requirement upon any covered financial institution that is not otherwise
required by applicable law or regulation. A covered financial institution must, however,
document its compliance with the notification requirement described above.
V.

Regulatory Impact Analysis
FinCEN has analyzed this final rule under Executive Orders 12866, 13563, and

14094, the Regulatory Flexibility Act,18 the Unfunded Mandates Reform Act,19 and the
Paperwork Reduction Act.20
As discussed above, the intended effects of the imposition of special measure five
to Al-Huda Bank are twofold. The rule is expected to: (1) combat and deter money
laundering in facilitation of terrorist financing associated with Al-Huda Bank, and
(2) prevent Al-Huda Bank from using the U.S. financial system to enable its illicit
finance behavior. In the analysis below, FinCEN discusses the economic effects that are
expected to accompany adoption of the final rule and assess such expectations in more
granular detail. This discussion includes a detailed explanation of certain ways
FinCEN’s conclusions may be sensitive to methodological choices and underlying
assumptions made in drawing inferences from available data.
A. Executive Orders
Executive Orders 12866, 13563, and 14094 direct agencies to assess costs and
benefits of available regulatory alternatives and, if regulation is necessary, to select

5 U.S.C. 603.
2 U.S.C. 1532, Public Law 104–4 (Mar. 22, 1995).
20 44 U.S.C. 3507(a)(1)(D).
18
regulatory approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
It has been determined that this final rule is not a significant regulatory action
under section 3(f) of Executive Order 12866, as amended by Executive Order 14094.
Accordingly, a regulatory impact analysis is not required.
B. Regulatory Flexibility Act
When an agency issues a final rule, the Regulatory Flexibility Act (RFA) requires
the agency to “prepare and make available for public comment an initial regulatory
flexibility analysis” (IRFA) that will “describe the impact of the proposed rule on small
entities.”21 However, Section 605 of the RFA allows an agency to certify a rule, in lieu
of preparing an analysis, if the final rule is not expected to have a significant economic
impact on a substantial number of small entities. This final rule applies to all covered
financial institutions and affects a substantial number of small entities. However, for the
reasons described below, FinCEN assesses that these changes do not have a significant
economic impact on such entities.
In addition to prohibiting covered financial institutions from opening or
maintaining in the United States a correspondent account for, or on behalf of, Al-Huda
Bank, this final rule requires that covered financial institutions take reasonable measures
to detect use of their correspondent accounts to process transactions involving Al-Huda
Bank. All U.S. persons, including U.S. financial institutions, currently must comply with
OFAC sanctions, and U.S. financial institutions generally have suspicious activity
reporting requirements and systems in place to screen transactions to comply with OFAC
sanctions and section 311 special measures administered by FinCEN. The systems that

5 U.S.C. 603(a).

U.S. financial institutions have in place to comply with these requirements can easily be
modified to adapt to this final rule. Thus, the special due diligence that is required under
the final rule—i.e., preventing the processing of transactions involving Al-Huda Bank
and the transmittal of notification to certain correspondent account holders—does not
impose a significant additional economic burden upon small U.S. financial institutions.
For these reasons, FinCEN certifies that the requirements contained in this rulemaking do
not have a significant economic impact on a substantial number of small entities.
C. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 199522 (Unfunded
Mandates Reform Act), requires that an agency prepare a budgetary impact statement
before promulgating a rule that may result in expenditure by the state, local, and tribal
governments, in the aggregate, or by the private sector, of $100 million or more in any
one year, adjusted for inflation.23 If a budgetary impact statement is required, section 202
of the Unfunded Mandates Reform Act also requires an agency to identify and consider a
reasonable number of regulatory alternatives before promulgating a rule.24
FinCEN has determined that this final rule will not result in expenditures by state,
local, and tribal governments, in the aggregate, or by the private sector, of an annual $100
million or more, adjusted for inflation ($184.7 million).25 Accordingly, FinCEN has not
prepared a budgetary impact statement or specifically addressed the regulatory
alternatives considered.
D. Paperwork Reduction Act

2 U.S.C. 1532, Public Law 104–4 (Mar. 22, 1995).
Id.
24 Id.
25 The Unfunded Mandates Reform Act requires an assessment of mandates that will result in an annual
expenditure of $100 million or more, adjusted for inflation. The U.S. Bureau of Economic Analysis reports
the annual value of the gross domestic product (GDP) deflator in the first quarter of 1995, the year of the
Unfunded Mandates Reform Act, as 66.452, and as 122.762 in the third quarter of 2023, the most recent
available. See U.S. Bureau of Economic Analysis, “Table 1.1.9. Implicit Price Deflators for Gross
Domestic Product” (accessed Dec. 14, 2023) available at https://www.bea.gov/itable/. Thus, the inflation
adjusted estimate for $100 million is 122.762/66.452 × 100 = $184.7 million.
22
The recordkeeping and reporting requirements, referred to by the Office of
Management and Budget (OMB) as a collection of information, contained in this final
rule were submitted by FinCEN to the OMB for review in accordance with the
Paperwork Reduction Act of 1995 (PRA) and were assigned OMB Control Number
1506-0079.26 Under the PRA, an agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays a valid control
number assigned by the OMB.
The notification requirement in section 1010.663(b)(3)(i)(A) is intended to aid
cooperation from foreign correspondent account holders in preventing transactions
involving Al-Huda Bank from being processed by the U.S. financial system. The
information required to be maintained by section 1010.663(b)(4)(i) will be used by
federal agencies and certain self-regulatory organizations to verify compliance by
covered financial institutions with the notification requirements of section
663(b)(3)(i)(A). The collection of information is mandatory.
Frequency: As required.
Description of Affected Financial Institutions: Banks, broker-dealers in securities,
futures commission merchants, introducing brokers in commodities, and mutual funds.

Estimated Number of Affected Financial Institutions: Approximately 15,000.27

44 U.S.C. 3507(a)(1)(D).
This estimate is informed by public and non-public data sources regarding both an expected maximum
number of entities that may be affected and the number of active, or currently reporting, registered financial
institutions.
26
Table 1. Estimates of Affected Financial Institutions by Type
FINANCIAL INSTITUTION TYPE
NUMBER OF ENTITIES
28
Banks
9,20929
30
Broker-Dealers in securities
3,47731
Mutual Funds32
1,49533
34
Futures Commission Merchants
6235
Introducing Brokers in Commodities36
93737
Estimated Average Annual Burden in Hours per Affected Financial Institution:
The estimated average annual burden associated with the collection of information in this
final rule is one hour per affected financial institution.
Estimated Total Annual Burden: Approximately 15,000 hours.
VI.

Regulatory Text
List of Subjects in 31 CFR Part 1010
Administrative practice and procedure, Banks, Banking, Brokers, Crime, Foreign

banking, Terrorism.
Authority and Issuance
For the reasons set forth in the preamble, 31 CFR part 1010 is amended as
follows:
Part 1010--GENERAL PROVISIONS

See 31 CFR 1010.605(e)(1)(i).
Bank data is as of December 14, 2023, from Federal Deposit Insurance Corporation BankFind. See
Federal Deposit Insurance Corporation, BankFind, available at https://banks.data.fdic.gov/bankfindsuite/bankfind. Credit union data is as of December 31, 2023, from the National Credit Union
Administration Quarterly Data Summary Reports. See National Credit Union Administration, Quarterly
Data Summary Reports, available at https://ncua.gov/analysis/credit-union-corporate-call-reportdata/quarterly-data-summary-reports.
30 31 CFR 1010.605(e)(1)(ii).
31 According to the Securities and Exchange Commission (SEC), there are 3,477 broker-dealers in
securities as of December 2023. See SEC, Company Information About Active Broker-Dealers, available
at https://www.sec.gov/help/foiadocsbdfoia.
32 31 CFR 1010.605(e)(1)(iv).
33 According to the SEC, as of the third quarter of 2023, there are 1,495 open-end registered investment
companies that report on Form N-CEN. See SEC, Form N-CEN Data Sets, available at
https://www.sec.gov/dera/data/form-ncen-data-sets.
34 31 CFR 1010.605(e)(1)(iii).
35 According to the Commodity Futures Trading Commission (CFTC), there are 62 futures commission
merchants as of October 31, 2023. See CFTC, Financial Data for FCMs, available at
https://www.cftc.gov/MarketReports/financialfcmdata/index.htm.
36 31 CFR 1010.605(e)(1)(iii).
37 According to National Futures Association, there are 937 introducing brokers in commodities as of
November 30, 2023.
28
1. The authority citation for part 1010 continues to read as follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314, 5316-5336; title
III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec. 2006, Pub. L. 114-41, 129 Stat. 458459; sec. 701 Pub. L. 114-74, 129 Stat. 599; sec. 6403, Pub. L. 116-283, 134 Stat.
3388.
2. Add § 1010.663 to read as follows:
§ 1010.663 Special measures regarding Al-Huda Bank.
(a) Definitions. For purposes of this section, the following terms have the
following meanings.
(1) Al-Huda Bank. The term “Al-Huda Bank” means all subsidiaries, branches,
and offices of Al-Huda Bank operating as a bank in any jurisdiction.
(2) Correspondent account. The term “correspondent account” has the same
meaning as provided in § 1010.605(c)(1)(ii).
(3) Covered financial institution. The term “covered financial institution” has the
same meaning as provided in § 1010.605(e)(1).
(4) Foreign banking institution. The term “foreign banking institution” means a
bank organized under foreign law, or an agency, branch, or office located outside the
United States of a bank. The term does not include an agent, agency, branch, or office
within the United States of a bank organized under foreign law.
(5) Subsidiary. The term “subsidiary” means a company of which more than 50
percent of the voting stock or analogous equity interest is owned by another company.
(b) Prohibition on accounts and due diligence requirements for covered financial
institutions--(1) Prohibition on opening or maintaining correspondent accounts for AlHuda Bank. A covered financial institution shall not open or maintain in the United
States a correspondent account for, or on behalf of, Al-Huda Bank.

(2) Prohibition on processing transactions involving Al-Huda Bank. A covered
financial institution shall take reasonable steps not to process a transaction for the
correspondent account in the United States of a foreign banking institution if such a
transaction involves Al-Huda Bank.
(3) Special due diligence of correspondent accounts to prohibit transactions. (i) A
covered financial institution shall apply special due diligence to its foreign correspondent
accounts that is reasonably designed to guard against their use to process transactions
involving Al-Huda Bank. At a minimum, that special due diligence must include:
(A) Notifying those foreign correspondent account holders that the covered
financial institution knows or has reason to believe provide services to Al-Huda Bank
that such correspondents may not provide Al-Huda Bank with access to the
correspondent account maintained at the covered financial institution; and
(B) Taking reasonable steps to identify any use of its foreign correspondent
accounts by Al-Huda Bank, to the extent that such use can be determined from
transactional records maintained in the covered financial institution’s normal course of
business.
(ii) A covered financial institution shall take a risk-based approach when deciding
what, if any, other due diligence measures it reasonably must adopt to guard against the
use of its foreign correspondent accounts to process transactions involving Al-Huda
Bank.
(iii) A covered financial institution that knows or has reason to believe that a
foreign bank’s correspondent account has been or is being used to process transactions
involving Al-Huda Bank shall take all appropriate steps to further investigate and prevent
such access, including the notification of its correspondent account holder under
paragraph (b)(3)(i)(A) of this section and, where necessary, termination of the
correspondent account.

(4) Recordkeeping and reporting. (i) A covered financial institution is required to
document its compliance with the notification requirement set forth in paragraph
(b)(3)(i)(A) of this section.
(ii) Nothing in this paragraph (b) shall require a covered financial institution to
report any information not otherwise required to be reported by law or regulation.

Andrea M. Gacki,
Director
Financial Crimes Enforcement Network
[FR Doc. 2024-14415 Filed: 7/2/2024 8:45 am; Publication Date: 7/3/2024]