Kazem 'Kaz' Hamad was arrested for drug trafficking on behalf of Australian law enforcement authorities, according to a statement from the Iraq's National Centre for International Judicial Cooperation.
The accused is "one of the most dangerous wanted men in the world", the statement says.
Hamad is believed to be the leader directing the family's organised crime operations from the Middle East.
The syndicate is believed to be behind several high profile firebombings, as they fight for control over the importation and distribution of illegal tobacco in Victoria.
Victoria Police established Taskforce Lunar in October 2023, after an increase in organised crime activity linked to the illicit tobacco trade.
The statement issued on Tuesday refers to Hamad as "Kadhim Malik Hamad Rabah al-Hajami".
"The accused individual…was arrested in co-ordination with the General Directorate of Narcotics and Psychotropic Substances Affairs at the Ministry of Interior, after obtaining the necessary approvals from the Supreme Judicial Council to conduct investigations against him," the statement reads.
"The proceedings were initiated by the First Karkh Investigation Court, which specialises in drug cases."
The statement says Hamad is allegedly responsible for "importing large quantities of drugs into Iraq and Australia, as well as smuggling heroin".
"He is also involved with the most prominent organised crime gangs in Australia – Sydney, responsible for shootings, murders, kidnappings, violent assaults, extortion, and drug imports," it says.
Iraqi authorities say they believe he is involved with outlaw gangs that have extensive influence within Australia and the Middle East.
"(They) are responsible for carrying out murders, shootings, money laundering, fraud, assaults, arson, and drug trafficking on a global level."
The Australian Federal Police have been contacted for comment.
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