Iraq’s influencers: How CBI rules could push a booming digital economy underground
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.
