Shell Companies Identification Guide 2026

NO: [Number] DATE: [Date] Central Bank of Iraq Head Office: Al-Rasheed St. Baghdad - Iraq Tel: 8165171 Telephone Exchange With 4 Lines P.O. Box: 64 Fax: 009641 81 66802 E-Mail: cbi@cbi.iq

Republic Of Iraq CENTRAL BANK OF IRAQ Compliance Office

SHELL COMPANY / SHELL COMPANIES Identification Guide 2026

Page 1 of 14 This guide outlines the identification process for shell companies, establishing clear criteria and procedures. It aligns with FATF and MENA-FATF recommendations to strengthen the AML/CFT framework. The guide mandates a risk-based approach, requiring financial institutions and designated non-financial businesses and professions (DNFBPs) to apply enhanced due diligence (EDD) where appropriate. It further specifies the reporting obligations for suspicious transactions, including Suspicious Transaction Reports (STR) and Suspicious Activity Reports (SAR).

Page 2 of 14 The guide emphasizes the Risk-Based Approach, ensuring that resources are allocated efficiently based on the level of risk posed by shell companies. It details the use of EDD for high-risk entities and mandates timely filing of STR/SAR reports. The process involves continuous monitoring, record-keeping, and internal controls to mitigate money laundering and terrorist financing risks.

Page 3 of 14 RACI Model: Responsible, Accountable, Consulted, Informed. This framework clarifies roles and responsibilities in the identification process. It ensures that each step is assigned to a specific role, preventing gaps or overlaps in compliance duties.

Page 4 of 14 AML/CFT Activities: KYC/CDD, EDD. The guide integrates these activities to ensure comprehensive monitoring of shell companies. It outlines the procedures for verifying identity, understanding the nature of business, and assessing risk profiles.

Page 5 of 14 Red Flags Guide: Identifies key indicators such as rapid fund movement, complex ownership structures, lack of physical presence, nominee directors, and transactions with high-risk jurisdictions. These flags serve as practical triggers for further investigation.

Page 6 of 14 The guide provides a detailed checklist for compliance officers, covering incorporation documents, registered addresses, beneficial ownership registers, and transaction patterns. It ensures that all critical aspects of a shell company's profile are evaluated systematically.

Page 7 of 14 Application of RACI to red flags ensures clear accountability. The guide specifies how different departments and roles interact when a red flag is identified, from initial detection to final resolution.

Page 8 of 14 Detailed red flags include: rapid movement of funds, complex corporate structures, lack of substantive business activities, use of nominee shareholders or directors, transactions with high-risk countries, and mismatched transaction patterns. Each flag is accompanied by practical examples and recommended actions.

Page 9 of 14 The guide emphasizes the importance of continuous monitoring and periodic reviews. It requires institutions to update their risk assessments regularly and adjust their EDD measures accordingly.

Page 10 of 14 Record-keeping and documentation are critical. The guide mandates that all identification steps, risk assessments, and red flag evaluations be properly documented and retained for the required period.

Page 11 of 14 The checklist provides a step-by-step procedure for identifying shell companies. It covers initial screening, detailed verification, ongoing monitoring, and reporting obligations.

Page 12 of 14 The guide aligns with international standards and local regulations, ensuring consistency and comparability in the identification process. It supports regulatory examinations and audits by providing clear evidence of compliance.

Page 13 of 14 Implementation requires training, system upgrades, and process adjustments. The guide offers practical recommendations for integrating the identification framework into existing AML/CFT programs.

Page 14 of 14 Conclusion: The guide provides a comprehensive, practical framework for effectively identifying and managing shell company risks. It ensures regulatory compliance, enhances risk management, and supports the integrity of Iraq's financial system.