The Banking Executive Magazine - December 2025 Issue

PSD 2025 unmonitored,” he warned, illicit flows will find a way, and public confidence in financial systems will be undermined. This reality points to a simple truth: ensuring the lasting drying up of ter- rorist financing and other illicit flows requires comprehensive banking sec- tor reforms, not just better compli- ance. “Reform is not only about compliance; it is about building the structures, systems, and governance that enable banks to drive integra- tion, modernization, and growth across our economies,” Fattouh said. In other words, the fight against fi- nancial crime is intertwined with broader economic and institutional development. On this front, the UAB has been at the forefront of modern- ization efforts, working closely with regulators, central banks, and finan- cial institutions to upgrade banking practices, enhance compliance cul- tures, and promote greater financial inclusion across MENA. Dr. Fattouh provided an objective assessment of several country situations to illustrate the region’s diverse challenges and the UAB’s role in addressing them. In Iraq, UAB has consistently offered support to strengthen the banking sector, yet progress has been limited by the absence of a unified, effective counterpart on the ground (beyond the central bank) to implement re- forms. There remains a big gap be- tween a few well-established Iraqi banks that are relatively compliant and profitable, and a long list of weaker institutions – many evolved from money exchange houses – that still face serious compliance and reg- ulatory deficiencies. This imbalance is unsustainable: as Dr. Fattouh noted, Iraq cannot achieve a durable economic recovery without decisive banking reform. The foundations for such reform exist, but the commit- ment to carry them out must become “stronger, firmer, and more deter- mined”. In Syria, following the recent lifting of certain international sanctions, a major opportunity for financial sector progress has opened – but the road is steep. Years of conflict and isola- tion left Syria’s banking system with weak regulations and a loss of public trust. To address these, UAB has pro- posed a phased roadmap for Syrian banking rehabilitation: start with re- structuring troubled banks and build- ing basic compliance infrastructure, then institute robust governance and transparency measures, undertake extensive training and capacity- building (especially for staff who op- erated during the sanctions era), and finally pursue sustainable growth through innovation and new interna- tional partnerships. This systematic approach aims to gradually reinte- grate Syria’s banks into the global fold. Regarding Lebanon, Dr. Fattouh de- ferred detail to the conference’s Lebanese speaker (Dr. Mazen Soueid, Chairman, Banking Control Commission, Lebanon) but high- lighted one positive trend: even as Lebanon copes with severe eco- nomic strain, there has been a grad- ual shift away from cash reliance, with increasing use of electronic pay- ments (debit and credit cards) by the public – an encouraging sign of progress in modernizing the financial culture. In Yemen (specifically Aden), he mentioned the resilience of banks that, despite extreme conditions, have improved their compliance and AML/CFT practices. UAB has been proud to support these efforts, in- cluding helping establish a new Yemeni Banks Association (whose president was present at the confer- ence) – a development Dr. Fattouh described as a model of resilience for the region. On a less positive front, Dr. Fattouh acknowledged that in Sudan, al- though sanctions were lifted in re- cent years, the outbreak of war in 2023 tragically reversed much of the hard-won progress in its banking sec- tor. Zooming out, Dr. Fattouh drew atten- tion to important regulatory develop- ments across MENA. In the Gulf Cooperation Council (GCC) coun- tries, he noted, the large scale of the banking sector and its extensive international ties force banks to maintain strong correspondent rela- tionships and uphold the highest standards of AML/CFT compliance, technology infrastructure, and trans- parency. Several jurisdictions have made significant reforms: for exam- ple, the United Arab Emirates and Jordan both implemented major legal and regulatory enhancements, enabling them to exit the FATF “grey list” of jurisdictions under increased monitoring. These successes have further bolstered the strength and credibility of their financial systems, and UAB has closely monitored such advancements (indeed, these topics were slated for discussion in the con- ference’s Session II). Among the most pressing themes in Dr. Fattouh’s speech was the ongoing challenge of correspondent banking access and de-risking. He recalled that in 2015, the first joint IMF–UAB survey on de-risking revealed severe impacts on MENA banks: nearly 40% of banks in 17 countries had seen correspondent accounts closed or restrictions tightened, resulting in costlier and less accessible remit- tances and trade finance for the re- gion. A full decade later, in 2025, de-risking remains a major concern. Global regulatory pressure has not abated, and banks across MENA still struggle at times to maintain their correspondent relationships. The dif- ference today, Dr. Fattouh observed, is the emergence of alternative chan- nels for cross-border payments and transfers. “In 2015 there were limited alternatives,” but now technologies like blockchain-based solutions, fin- tech and money service businesses, and digital payment platforms offer new avenues. However, these alter- natives are not yet fully regulated and could introduce serious risks if left unchecked. It is therefore essen- tial, he argued, that such emerging the BANKING EXECUTIVE 32 ISSUE 204 DECEMBER 2025