UAB Magazine Issue October 2026

88 Study Union of Arab Banks - October - 2026 important elements of an effective sanctions compliance programme: management commitment, risk assessment, internal controls, testing and auditing, and training. These principles offer a useful starting point for Arab banks, although the legal obligations applicable to each institution will depend on its circumstances. First, banks should assess their exposure by considering their customers, geographic markets, products, currencies, and correspondent relationships. This allows them to focus resources where the risks are greatest. Second, they should improve the quality of customer and transaction information. Incomplete ownership records or insufficient knowledge of a customer’s business can make it difficult to identify who ultimately benefits from a payment. Third, compliance systems should be regularly reviewed and tested. Screening software must be supported by clear procedures for investigating alerts, making decisions, documenting findings, and reporting concerns where required. Fourth, banks should maintain open and professional communication with correspondent institutions. Timely responses to information requests and clear explanations of internal controls can help reduce uncertainty and build trust. Finally, senior management should ensure that commercial objectives do not override legal obligations. A profitable transaction is not worth the risk if the institution cannot establish its legitimacy or manage the associated exposure. The role of regional cooperation Arab banks do not have to face these challenges alone. Central banks, financial intelligence units, regulators, and regional banking associations can all contribute to a stronger response. The exchange of information about emerging risks, common training programmes, and practical guidance can help banks identify suspicious activity more effectively. Such cooperation is especially valuable for smaller institutions that may lack the resources to maintain large specialist teams. The Union of Arab Banks can play a constructive role by bringing together member banks, regulators, and international partners to discuss regulatory developments and share practical experience. The aim should be to improve compliance standards while preserving the ability of Arab banks to finance legitimate trade and economic activity. This balance is important as poor controls can expose banks to serious risks, but indiscriminate withdrawal from higher-risk markets can also have damaging consequences for businesses, households, and financial inclusion. Effective compliance should be based on the actual risks and applicable legal requirements, rather than assumptions about entire countries or customer groups. Conclusion: Compliance as a competitive advantage U.S. regulatory priorities and secondary sanctions are changing the environment in which Arab banks operate internationally. The implications extend beyond the compliance department to correspondent banking, trade finance, customer relationships, and the ability of businesses to move money across borders. The answer is not to withdraw automatically from every difficult market, nor to assume that existing controls are sufficient. Arab banks need a practical approach built on reliable information, effective governance, sound judgement, and regular communication with international partners. Banks that invest in these capabilities will be better prepared to protect their international relationships and support legitimate economic activity. Those that treat compliance as a formal exercise may discover that a weakness in one transaction can create problems across their wider business. Ultimately, the challenge for Arab banking is to protect the integrity of the financial system without losing sight of its essential purpose: financing trade, supporting investment, facilitating payments, and contributing to economic development. In today's international banking environment, strong compliance is not merely a regulatory obligation. It is an important part of maintaining trust, competitiveness, and long-term resilience. General Secretariat – Research Department