The Banking Executive Magazine - December 2025 Issue

PSD 2025 Another key topic in Session I was the compliance challenges facing Arab banks, especially those operat- ing in or with high-risk jurisdictions. The discussion touched on the cur- rent state of regulatory compliance in countries like Iraq and Syria – recog- nizing both progress and ongoing difficulties – and provided an update on global sanctions regimes affecting the region. Panelists noted that banks in conflict-affected or post-conflict markets often confront unique obsta- cles: infrastructural gaps, weaker oversight environments, and the legacy of past sanctions or isolation. Sharing insights from both U.S. and regional perspectives, the speakers underscored the need for tailored ca- pacity-building in such contexts. They highlighted that modernizing AML/CFT programs is not a one-size- fits-all endeavor; it requires sensitiv- ity to local conditions even as banks strive to meet international stan- dards. Concluding the session, there was a general consensus that contin- uous improvement and moderniza- tion of compliance programs – through innovation, staff training, and regulatory engagement – is in- dispensable for banks to remain re- silient and confidently integrated into the global financial system. SESSION II: SAFEGUARDING CORRESPONDENT BANKING ACCESS – RISING COMPLIANCE EXPECTATIONS AND EMERGING CHALLENGES The second session tackled the deli- cate balance between stringent com- pliance demands and the need to maintain healthy correspondent banking relationships. Moderated by Mr. Chahdan Jebeyli, Senior Interna- tional Adviser for Legal and Compli- ance at the Union of Arab Banks and the Association of Banks in Lebanon, the panel brought together leading experts who deal first-hand with cor- respondent banking and financial crime risks. The distinguished speak- ers included Mr. Rashid Naseem, Di- rector of Risk Management and Head of Specialized Risk Management, Markets Group, Federal Reserve Bank of New York; Mrs. Myriam Khairallah, Expert at the 1267/1988 Monitoring Team, United Nations Security Council; Mrs. Sarah K. Runge, Executive Managing Director, K2 Integrity and former U.S. Treasury FATF Lead; Mr. David Wildner, Global Head of AML and Deputy Global Head of FCC, BNY Mellon; Mr. Arz El Murr, Senior Financial Sector Expert, International Monetary Fund (IMF), USA; and Mr. Michael Matossian, Global Head of Group Regulatory Compliance, Arab Bank Group. A core theme was meeting evolving correspondent bank requirements through transparency and dialogue. Correspondent banking – the lifeblood of cross-border payments – has come under intensified scrutiny in recent years, with correspondents (often large U.S. or European banks) expecting higher standards of due diligence, customer transparency, and risk management from their re- spondent bank partners. The panel stressed that banks in the MENA re- gion must actively engage with their foreign correspondents, clearly demonstrate their compliance up- grades, and share information to build mutual trust. Open lines of communication can help prevent misunderstandings and preempt the kind of risk concerns that lead to “de-risking” decisions. Importantly, regulators have a role to play in fa- cilitating this ongoing dialogue and encouraging proportionate ap- proaches so that entire jurisdictions or sectors are not unfairly cut off from the international system. To further address de-risking pres- sures, the discussion explored prac- tical steps banks and authorities are taking. One positive development noted was the wave of regulatory re- forms in MENA aimed at strengthen- ing corporate governance and enforcement within local banks. For instance, as mentioned in the open- ing speeches, countries like the UAE and Jordan have implemented robust improvements to their AML/CFT legal frameworks and supervisory regimes – moves which have been recognized internationally (e.g., by removal from FATF watch-lists). Such progress, panelists argued, can help reassure global partners that MENA banks are committed to upholding international standards. Nonetheless, participants acknowledged that risk perceptions can lag behind reality, and so continuous engagement and evidence of improvement are needed to truly ease correspondent concerns. The session also explored into infor- mal finance and non-bank financial channels as emerging challenges in- tertwined with the correspondent banking issue. Banks often face heightened scrutiny in part because of risks in the surrounding financial ecosystem – particularly in predomi- nantly cash economies. The panel pointed to the prevalence of cash- based transactions and informal money transfer networks in several MENA markets as a “compliance risk multiplier”. When large portions of the economy operate outside the banking sector’s view, it raises over- all risk and can deter correspondents. Similarly, the rise of money service providers (MSPs) and shadow bank- ing systems presents a double-edged sword. On one hand, these alterna- tives (including fintech remittance providers, currency exchangers, and other non-bank entities) can help fill payment needs, especially where banks have retrenched. On the other hand, if not properly regulated, they can become conduits for illicit fi- nance or sanctions evasion, further worrying correspondent banks. The experts echoed Dr. Fattouh’s earlier remarks: while such alternative channels are growing, it is crucial to bring them into the regulatory fold. Clear regulatory frameworks and su- pervision for MSPs, fintechs, and in- formal value transfer systems will help ensure that innovation does not come at the cost of financial integrity. Indeed, the panel noted that a failure to control risks in these areas could ultimately harm banks by prompting the BANKING EXECUTIVE 36 ISSUE 204 DECEMBER 2025