Shafaq News
Iraq’s decision to treat
social media influencers as high-risk financial clients was meant to protect
the banking system from money laundering and fictitious contracts. But after
the Central Bank of Iraq directed banks and e-payment firms to intensify checks
on creators—an approach affecting more than 11,000 accounts—critics warn the
policy could backfire: pushing small creators and the businesses that rely on
them toward cash deals, proxy accounts, and other informal channels that are
harder to track and tax.
The policy’s impact is already
visible at the individual level. Adnan Ibrahim does not reject regulation. As a
content creator, he understands why Iraq’s financial authorities are uneasy
about large, poorly documented digital incomes flowing into personal bank
accounts. Oversight, he says, is necessary. The problem lies in how it was
applied.
“The procedures are needed to
regulate the digital advertising market and protect the national economy,”
Ibrahim told Shafaq News. But their rollout, he warned, “came in a strict
manner without phases, which will push some out of this market,” particularly
smaller creators.
His concern captures the
central tension now facing Iraq’s digital economy: whether financial compliance
imposed without differentiation can succeed—or whether it risks driving the
very activity it seeks to regulate out of sight.
More than a month after the
Central Bank of Iraq (CBI) ordered licensed banks and e-payment companies to
classify social media influencers as high-risk clients, more than 11,000
content creators remain under enhanced scrutiny normally reserved for politically
exposed persons and their relatives. The decision has unsettled Iraq’s
fast-growing creator economy, caught between legitimate anti-money-laundering
(AML) priorities and the reality of a labor market where digital platforms have
become a primary source of income for young Iraqis.
At its core, the issue is not
cultural or moral. It is economic and structural: can Iraq formalize a digital
economy that it does not fully control without suffocating an industry that
emerged organically from necessity?
What the Rules Actually Do
Under the CBI directive, all
banks and financial institutions must classify social media celebrities and
influencers as “high-risk and multi-risk clients.” The designation carries
sweeping compliance requirements. Banks are instructed to verify advertising
contracts, audit sponsorship deals, reconcile platform earnings with bank
activity, and link accounts directly to verified social media profiles. Any
change in usernames or accounts must be reported immediately.
The directive seeks to impose
traceability on a sector long operated outside formal commercial frameworks.
Yet the compliance burden—documentation, licensing, account verification—comes
with real costs that do not scale evenly across the market.
Why the Policy Exists
CBI media team member Alaa
Fahd framed the measures as a defensive necessity. In a Facebook post, he
described influencers as a “source of new threats” to the financial sector,
citing risks tied to money laundering, terrorism financing, fictitious contracts,
and unexplained transfers. The rules, he stressed, are “not restrictions but a
shield to protect the national economy.”
The concern is amplified by
Iraq’s digital reach which account about 34.3 million social media users in
2024—around 74% of the population.
According to the Digital Media Center, TikTok alone accounts for roughly
31.9 million users, or nearly 88% of Iraq’s internet users, making it the
dominant platform for monetized content.
From the regulator’s
perspective, unmonitored digital income flows represent a systemic
vulnerability, particularly in a country still working to align with
international AML standards highlighted in Iraq’s 2024 Financial Action Task
Force (FATF) mutual evaluation.
Where Compliance Meets Reality
The problem emerges where
uniform regulation meets unequal economic capacity.
Alongside banking scrutiny,
the Communications and Media Commission introduced licensing fees tied to
follower counts. Influencers with more than five million followers must pay one
million dinars (about $700) annually, while those with 100,000 to 500,000
followers owe between 250,000 (about $175) and 350,000 dinars (about $245).
For top-tier influencers,
these costs are manageable. For smaller creators, they can exceed monthly
earnings. Ibrahim warned that treating a creator earning $300 a month the same
as one earning $10,000 ignores market realities and risks excluding precisely
those the digital economy absorbed when traditional employment failed.
This is the policy’s central
flaw: scale blindness. Uniform risk treatment produces unequal outcomes.
Legal Grounding — and Its
Limits
Legal expert Qatada Salih
Finjan said the CBI’s actions rest on firm legal foundations, citing Central
Bank of Iraq Law No. 56 of 2004 and the Anti-Money Laundering and Terrorism
Financing Law No. 39 of 2015.
Under these laws, banks are
obligated to scrutinize suspicious transactions and may demand documentation
proving the source and purpose of funds. They may also refuse transactions if
risks cannot be mitigated.
However, Finjan stressed that
refusal becomes “unlawful if it is arbitrary or discriminatory.” In such cases,
banks face accountability before the Central Bank or the judiciary. The law
permits enhanced scrutiny—but it does not resolve questions of proportionality
or economic impact.
Formalization vs. Informality
Economist Mustafa Akram
Hantoush described the measures as largely positive in principle, arguing that
channeling influencer income through regulated banks allows authorities to
track profits, identify funding sources, and apply taxation.
Yet he framed the issue as a
sequencing problem. Kuwait and the UAE, he noted, introduced similar controls
alongside clear licensing frameworks and incentives that encouraged compliance.
Iraq, by contrast, imposed obligations before building support structures.
If compliance costs exceed
income, the economic response is predictable: exit. Formalization fails not
because rules exist, but because they are unaffordable.
The Shadow Economy Risk
Several creators reported that
heightened scrutiny has already encouraged workarounds. These include increased
cash transactions, reliance on proxy accounts registered under relatives’
names, and exploration of cryptocurrency payments beyond domestic oversight.
When the CBI ordered financial
institutions to halt transfers linked to TikTok agents, some users lost access
to earned funds. “The app is locked right now, and there is nothing we can do,”
media analyst Shadi Faisal said, citing losses of around $4,500.
These shifts do not reduce
financial risk. They relocate it.
Collateral Damage Beyond
Influencers
The impact extends to small
businesses and startups. “TikTok has become a primary livelihood for thousands
of small businesses,” said Revan Al-Tamimi, an Iraqi content-creation company
owner. Restricting access to platforms and payments, she warned, deprives
low-income entrepreneurs of a vital marketing channel.
What begins as influencer
regulation quickly becomes a broader digital-economy issue.
Context, Not the Centerpiece
The financial measures
coincide with intensified content policing. Since January 2023, the Interior
Ministry has pursued what it calls “offensive content,” leading to arrests,
convictions, and platform restrictions. High-profile cases, including the sentencing—and
later assassination—of influencer Om Fahad, shocked the country.
While related, these efforts
operate on a separate legal track. Their relevance here lies in cumulative
pressure, not intent.
Regulatory Uncertainty and
Compliance Risk
Beyond cost and capacity,
uncertainty in enforcement may further weaken the Central Bank’s objectives.
Rights groups warn that some measures rely on broadly defined legal provisions,
leaving creators unclear about the boundaries between acceptable content,
regulatory compliance, and potential liability. In a sector already marked by
unstable income, that ambiguity alters economic behavior.
Mustafa Saadun of the Iraqi
Observatory for Human Rights said that vague enforcement standards can expose
individuals to investigation based on subjective interpretation rather than
clear financial violations. The result, he warned, is not improved compliance
but heightened risk aversion among small creators.
Activist Ahmed Zidan noted
that uneven enforcement compounds the problem. When modest earners face
intensive scrutiny while better-connected figures appear insulated, confidence
in the regulatory framework erodes. For smaller creators, absorbing legal uncertainty
becomes as costly as meeting financial requirements.
From a regulatory perspective,
this dynamic is counterproductive. Unpredictable enforcement discourages
engagement with formal banking channels and accelerates the shift toward cash
payments, proxy accounts, or external platforms. Instead of improving transparency,
uncertainty becomes another driver pushing digital income flows out of
sight—undercutting the very AML goals the policy seeks to advance.
The Backfire Risk
Iraq’s creator economy filled
gaps left by traditional employment in a country with a median age of about 21.
Digital platforms offered accessible paths to income with minimal capital.
The question is not whether
regulation is needed. It is whether Iraq’s approach builds a sustainable
framework or drives talent underground—or abroad. The UAE attracts creators
despite strict rules by offering legal clarity and infrastructure. Iraq’s model,
critics say, imposes obligations without support.
Treating modest influencer
earnings with the same scrutiny as politically exposed wealth may satisfy legal
requirements, but risks undermining effectiveness. If digital talent migrates
to Dubai, Beirut, or Amman, Iraq loses tax revenue, innovation, and cultural
influence.
For influencers, the challenge
lies in execution—and in recognizing that how Iraq regulates this space will
shape not only its financial system, but the economic future of an entire
generation.
Written and edited by Shafaq
News staff.
