The Debit Card Scheme Bankrolling Iran’s Proxy Forces in Iraq

Reader’s note: As of publishing, a ceasefire between Israel and the Islamic Republic of Iran has gone into effect. Tehran has vowed to rebuild its nuclear and ballistic missile capabilities. As long as the regime holds power with these ambitions, it will remain critical to ensure Iran does not have the financial means to make good on that promise.

Since the start of 2023, Iraqi militias, including the Popular Mobilization Forces (PMF) – an umbrella organization of predominately Shia militia groups funded by the Iraqi government and largely aligned with Iran – have exploited prepaid debit cards with little regulatory oversight to generate billions for their terror activities.

Iraqi banks partnered with Visa and Mastercard began issuing prepaid debit cards in Iraqi dinars in early 2023. These card issuers, however – many with a history of corruption and ties to Iraqi militias – failed to properly screen clients or safeguard against money laundering. For example, Mastercard, after investigating one of its Iraqi partners Yana Banking Services, reportedly found no evidence that Yana had screened customers for U.S. sanctions compliance and found the bank had ineffective money laundering guardrails. As a result of poor oversight, militia-aligned customers acquired thousands of prepaid cards and smuggled them to the UAE, Turkey and Jordan.

After these prepaid cards reached foreign destinations, cardholders used ATMs to convert dinars into U.S. dollars (USD) at Iraq’s official exchange rate. This rate offers substantially cheaper prices for USD than unofficial exchange rates in Iraq, sometimes by as much as 21%. Converted USD was then transferred back to Iraq and converted into dinars at higher unofficial rates, allowing cardholders to profit the difference. Militias would also persuade foreign merchants to charge fake transactions on the cards and exchange the charges for USD in return for a kickback. As recently as earlier this year, this arbitrage scheme generated between $400 million and $1.1 billion every month for Tehran-aligned militias.

Iraq’s most widely held card, Qi Card, saw its transaction total grow from $10 million per month in early 2023 to $500 million by 2025. The Qi card is used to distribute salaries to Iraqi government employees, including more than 200,000 PMF members on the government’s payroll. Qi Card’s exploitation by PMF has financially supported its terror operations – with deadly consequences for U.S. troops. In January 2024, PMF faction Kata’ib Hezbollah killed three U.S. services members in a drone attack, one of several attacks the group has directed at American forces stationed in the region.

American lawmakers have correctly identified the threat to U.S. security posed by a poorly regulated Iraqi financial sector. On February 4, 2025, U.S. President Donald Trump issued a National Security Presidential Memorandum to restore maximum economic pressure on the Islamic Republic of Iran. The memo laid the foundations to address Tehran’s financial partnership with its neighbor Iraq:

The Secretary of State shall… take immediate steps, in coordination with the Secretary of the Treasury and other relevant agencies, to ensure that the Iraqi financial system is not utilized by Iran for sanctions evasion or circumvention…

The Trump administration subsequently declined to renew a sanctions waiver in March allowing Iraq to pay Iran for gas and electricity imports. The waiver, which was renewed multiple times under the previous administration, was altered in July 2023 to allow the transfer of $10 billion to Iran via non-Iraqi bank accounts.

Members of Congress have also taken notice of Iran’s use of the Iraqi financial sector to support its terror proxies. Representatives Joe Wilson (R-SC) and Greg Steube (R-FL) championed wide-reaching sanctions against Iraqi banks, urging the State Department to sanction Qi Card and its state-owned charter bank, Al-Rafidain, for their payroll processing of PMF militia members. Wilson and Steube identified 18 other financial institutions and nine individuals, including Iraqi finance minister Taif Sami Mohammed to be sanctioned for laundering money on behalf of Tehran.

American financial services firms have taken notice as well. In March 2025, Mastercard blocked over 100,000 Iraqi-issued debit cards and blacklisted 4000 Emirati merchants, while Visa blocked 70,000 cards and banned over 5000 fraudulent vendors in April 2025. Both companies have also cracked down on the licenses that enabled Iraqi banks to issue prepaid cards. The U.S. Treasury, for its part, blacklisted multiple Iraqi card issuers in January suspected of ties to the PMF and other Tehran-backed militias.

Severing Iraq’s financial sector from Iran supports the Trump administration’s maximum pressure campaign, especially as Tehran attempts to reconstitute its military and nuclear weapons program following Israeli and American airstrikes. In line with that effort, it is crucial for the U.S. administration to investigate Iraqi financial institutions that helped Iranian proxies evade U.S. sanctions, and levy additional sanctions on those banks and their operators. Meanwhile, Mastercard and Visa – and all other American financial services – must work swiftly and diligently to cut all ties with Iraqi institutions identified by Wilson and Steube.