First, kick the notion that people in a part of the world are all linked to terrorism, somehow. It's completely baseless, racist, and xenophobic.
You're getting legitimate business/services from a person in another part of the world. However you pay them is up to your business terms, and your contract (make sure you have a contract, especially if you are dealing with someone in another country).
However, something of note is that Iraq used to be subjected to complete and total trade sanctions by the US; this was lifted in 2003 and no longer applies, except for the arms embargo. Nothing is preventing you from hiring out Iraqi citizens for freelance work.
In short, continue on, business as usual. The fact that you'll be in frequent communication with a part of the world that is the target of various military/intelligence operations may mean that you have a small chance of being questioned, but that's why you have a contract for work, invoices, and a complete paper trail (the same as any other work).