Iraq has banned eight local commercial banks from engaging in U.S. dollar transactions, taking action to reduce fraud, money laundering and other illegal uses of U.S. currency days after a visit by a top U.S. Treasury official. The banks are banned from accessing the Iraqi central bank's daily dollar auction, a main source of hard currency in the import-dependent country that has become a focal point of a U.S. crackdown on currency smuggling to neighbouring Iran. A rare ally of both the United States and Iran with more than $100 billion in reserves held in the U.S., Iraq relies heavily on Washington's goodwill to ensure that its access to oil revenues and finances are not blocked.