ERBIL, Kurdistan Region of Iraq – Iraq’s state-owned Rafidain Bank has struck a partnership deal with the American K2 Integrity company in the fields of consultation and oversight, with combating "terrorist financing" being one of the services provided, the Iraqi embassy in the US reported on Friday.

The deal comes amid allegations that the Iraqi bank offered financial services to the Houthis in Yemen, a militant group officially designated by the US as a terrorist organization. FOX Business said on Thursday that they had received exclusive information that the US Treasury Department in April had warned Iraqi officials that the Rafidain Bank processed payments for Houthi militants at its branch in Sanaa.

“A new strategic step enhancing Iraq’s financial standing globally #RafidainBank signs in Washington a professional partnership agreement with @K2Integrity of the United States, a world leader in financial & regulatory consulting, pursuant to Iraqi Cabinet Resolution No.23274 of 2023,” said the Iraqi embassy in the US in an X post on Friday.

"Under the agreement, K2 Integrity will provide high-level services that include: Combating money laundering and terrorist financing… Implementing compliance systems in line with international standards… [and] enhancing the regulatory infrastructure of Iraqi banks,” said the embassy.

The Iraqi foreign ministry on X wrote that the agreement "represents a qualitative leap in the course of banking reform, strengthening international confidence in #Iraqibanks and opening wider horizons for cooperation with correspondent banks around the world."

FOX Business reported on Thursday that a deputy secretary of the US Treasury, Dr. Michael Faulkender, met with Iraqi Foreign Minister Fuad Hussein on April 29 and "warned Hussein that the Iraqi state-controlled bank Rafidain needs to stop conducting business with the Iranian regime-backed Houthi organization."

According to the minutes of the meeting obtained by FOX Business, the Iraqi foreign minister "emphasized that there is no possibility of the Houthis accessing the Iraqi financial system and pledged to personally verify this matter."

Dr. Sadeq Ali Hasan, a spokesperson of the Iraqi embassy in Washington DC responded by saying that the allegations were “categorically false,” adding that the Rafidain bank’s Sanaa branch “has been fully non-operational since 2017,” according to the US outlet's report.

US Congressman Joe Wilson on Friday said he will "work to cut funding to Iraq" and urged the US Treasury to sanction the Iraqi state-owned Rafidain Bank after the FOX Business report.

"Iraq’s state owned Rafidain bank is processing payments for the Houthis, a terrorist organization!" Wilson wrote on X. "We have a name describing these types of counties [sic] - state sponsors of terrorism."

Wilson has previously urged the US Treasury Department to impose sanctions on the Iraqi state-owned bank, citing claims that Rafidain is facilitating large-scale transfers of money to Iran.

“Max pressure on Iran means max pressure on Iraq.” Wilson wrote in a post on X in February, calling to the Treasury Department to “Start with Rafidain Bank… and stop letting Iraqi militias and the Iranian regime smuggle $500-600M a month from Iraq’s biggest bank. Trump will fix it.”

Iraq’s proximity and close ties to Iran have posed difficulties in striking a balance between its relations with the US and Iran, with Baghdad facing mounting pressure from Washington to limit its ties to Tehran.