Iraqi Welfare Fraud in Texas, Florida, California, Minnesota, and Michigan Empowers Iran
In Minnesota, Michigan, Texas, Florida, and California, militia-linked intermediaries oversee substantial pools of card users, who receive financial commissions for liquidating the funds.
Washington must recognize that Iraqi fraud now extends deep into the United States, allowing Iranian forces to operate with plausible deniability.
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How Iraqi Welfare Fraud Empowers Iran in the Heart of America
What Began as Domestic Payroll Corruption Has Become a Parallel Financial System to Expand Iran’s Proxy Networks Abroad
When former Prime Minister Haider Al-Abadi first exposed the extent of ghost soldiers inflating Iraqi military payrolls, observers focused on domestic corruption, missing the systemic metastasis that would follow. While analysts discussed embezzlement schemes involving fake welfare beneficiaries and phantom bureaucrats, a more dangerous transnational apparatus was taking shape, with a cross-border illicit financial and intelligence operation bleeding Iraqi state funds into the U.S. and Western diaspora communities, serving the strategic imperatives of the Iranian regime.
What began as a localized crisis of domestic payroll corruption has mutated into a parallel financial system, weaponizing state embezzlement to sustain and expand Iran-backed proxy networks abroad through a dedicated web of sympathetic beneficiaries. The system centers on purported Iraqi government employees, using false names and identity cards, whose salaries the Iraqi government deposits into Iraqi bank accounts linked to Iraqi payment cards. Iraqis and Arabs in the diaspora then use the cards, including in the United States. In Minnesota, Michigan, Texas, Florida, and California, militia-linked intermediaries oversee substantial pools of card users, who receive financial commissions for liquidating the funds. The resulting financial obligations then clear through informal militia-affiliated money-transfer firms, known as “Black Hawala,” operating in Basra, Iraq, and Amman, Jordan.
By routing funds this way, the perpetrators bypass conventional international wire monitoring and evade regulatory scrutiny through outsourcing thousands in spending across multiple jurisdictions. Further, the systematic value transfer from the Iraqi fiscal system into the U.S. economy allows harvesting dollars, capitalizing on exchange rate differentials, and obfuscating audit trail to separate beneficiaries from the accounts that originate the funds.
Rather than disrupting the illicit operations, the Central Bank of Iraq’s June 1, 2025, directive mandating that cross-border payments route through U.S. correspondent banks has forced these syndicates to adapt, leveraging entrenched control over critical state apparatuses at the Ministry of Interior, the Central Bank of Iraq, and compliant private financial institutions, underscoring the resilience and flexibility of this illicit financial pipeline.
This pattern is evident with beneficiaries from the Rafha Camp, which housed Iraqi refugees near no-man’s land in Saudi Arabia between 1991 and 2009. Originally enacted to compensate Iraqi dissidents who fled Iraq, many of them members of pro-Iranian political movements, the Iraqi law guarantees lifetime monthly salaries along with sweeping travel and educational privileges to refugees resettled across the United States, Canada, Australia, and Europe. Over the last decade, this framework expanded to include spouses and children born after the resettlement.
Network brokers exploited this expansion by utilizing fraudulent marriage certificates from Islamic centers certified by Iraqi diplomatic missions, and later through engineered witness testimonies to attach new ideological loyalists to the beneficiary roles, including non-Iraqis. What was framed as humanitarian restitution became a sustained, Iraqi state-funded pipeline that anchors a network of Iranian regime sympathizers inside Western societies. Brokers connect individuals across jurisdictions, arrange access to financial channels and mechanisms for illicit documentation to exploit social systems, and identify individuals willing to assume more active roles.
The strategic value of this architecture lies in its ability to convert financial relationships into operational capacity by creating a low-cost platform to influence and mobilize when necessary. Regular Iranian proxy-funded benefits can sustain long-term relationships within diaspora communities to allow recruitment, intimidate opponents, and conduct money laundering and intelligence collection.
Iranian strategists appear to have activated this network during the 2020 Black Lives Matter protests to intensify unrest and influence the Arab diaspora to support more radical candidates in U.S. elections. Tehran later mobilized the same networks to promote Hamas narratives during the Gaza war and to collect information on Jewish communities.
Washington must recognize that Iraqi fraud now extends deep into the United States, allowing Iranian forces to operate with plausible deniability. The objective is not to treat all Rafha beneficiaries and cardholders as suspect, but to dismantle the specific mechanisms that Iranian intelligence uses to coopt Iraq’s payroll fraud and welfare systems.
This article oringally appeared in the Middle East Forum
AUTHOR
Ali Almrayatee
Ali Almrayatee is a former combat interpreter for the U.S. Armed Forces during Operation Iraqi Freedom. He later worked as a senior security advisor to the Iraqi Parliament, contributing to the rescue of U.S. hostages in 2016 and the battle against ISIS, and as a counterterrorism intelligence asset for U.S. government agencies. He served as a diplomat in Iraq and Turkey, focusing on international security, extremism, hybrid warfare, and geopolitical affairs.
©2026 Udi Geva. All rights reserved.
