The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a final rule under section 311 of the USA PATRIOT Act, severing Al-Huda Bank from the United States financial system. This measure prohibits domestic financial institutions and agencies from opening or maintaining a correspondent account for or on behalf of Al-Huda Bank, an Iraqi bank identified as a conduit for terrorist financing.

"As Iraq continues to make progress in its efforts to address illicit finance-related vulnerabilities in its financial system, we remain focused on preventing Iran and its proxies from exploiting these gaps to facilitate their destabilizing terrorist activities," stated Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. "Today’s final rule severs this key channel for money laundering and terrorist financing, ensuring both the integrity of the Iraqi and international financial systems as well as the continued development of legitimate business and trade."

On January 31, 2024, FinCEN issued a finding and notice of proposed rulemaking (NPRM) identifying Al-Huda Bank as a foreign financial institution of primary money laundering concern. According to the finding, Al-Huda Bank has exploited its access to U.S. dollars over several years to support designated foreign terrorist organizations such as Iran's Islamic Revolutionary Guard Corps (IRGC) and IRGC-Quds Force, along with Iran-aligned Iraqi militias Kata’ib Hizballah and Asa’ib Ahl al-Haq. The chairman of Al-Huda Bank is implicated in these illicit financial activities, including money laundering through front companies that conceal the true nature of transactions, ultimately facilitating terrorism financing.

FinCEN's action aims to protect the United States financial system from Al-Huda Bank’s illicit activity. Under this final rule, covered financial institutions are now prohibited from opening or maintaining correspondent accounts for or on behalf of Al-Huda Bank. They are also required to take reasonable steps not to process transactions involving Al-Huda Bank through any correspondent account maintained by a foreign banking institution in the United States. Additionally, covered financial institutions must apply special due diligence measures designed to prevent their use in processing transactions involving Al-Huda Bank.

The final rule has been submitted to the Federal Register.

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