UAB Magazine Issue October 2026

91 Study Union of Arab Banks - October - 2026 These distinctions matter in practice. A transaction involving a high-risk country is not automatically prohibited, and a bank should not treat every regulatory warning as a binding prohibition. The correct response depends on the relevant legal authority, the parties involved, and the facts of the transaction. Financial networks are receiving greater attention Sanctions evasion rarely depends on a single transaction. It may involve several companies, intermediaries, exchange houses, shipping firms, and financial institutions operating across different jurisdictions. The purpose may be to conceal the real beneficiary, disguise the origin of funds, or make a restricted transaction appear legitimate. The U.S. authorities are increasingly concerned with these wider networks, not simply the names appearing on payment instructions. This is particularly relevant to Arab banks because the region plays an important role in international trade, energy markets, foreign exchange, and commercial links between Asia, Europe, and Africa. A recent example illustrates the potential consequences. On 28 August 2026, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) proposed a special measure under Section 311 of the USA PATRIOTAct concerning Banque Misr UAE, following its assessment that the institution was a primary money laundering concern. FinCEN’s proposal cited alleged links to transactions associated with Iranian shadow- banking networks. The proposal concerns Banque Misr UAE specifically and does not extend to the bank’s operations in other countries. Although this is a proposed anti-money laundering measure rather than a secondary-sanctions designation, it illustrates how regulatory action affecting correspondent banking can have significant implications for an institution's access to international financial services. For other banks, the lesson is straightforward: knowing the customer is necessary, but it may not be sufficient. Banks also need to understand the purpose of significant transactions, the parties ultimately benefiting from them, and whether the activity makes commercial sense. This does not mean that banks should automatically reject transactions involving particular countries or sectors. It means that they must be able to identify suspicious patterns, investigate concerns, and explain their decisions. Correspondent banking: The cost of losing access Correspondent banking is one of the main channels through which sanctions-related problems can affect an institution’s wider business. Arab banks rely on international correspondents to process payments, settle dollar transactions, support trade finance, and serve corporate customers operating in foreign markets. Thus, losing an important correspondent relationship can disrupt these activities. Payments may become slower or more expensive, trade transactions may be delayed, and customers may move their business elsewhere. Other international banks may also reconsider their relationships with an affected institution because they are concerned about regulatory exposure or reputational damage. The problem is not limited to banks that are formally sanctioned. It is important to distinguish restrictions required by law or imposed by regulatory action from decisions taken by individual banks as part of their own risk-management policies. Although both can affect access to international financial services, their legal basis and implications are not necessarily the same. This practice, known as de-risking, can affect entire markets or categories of customers rather than individual transactions. For smaller banks and institutions operating in fragile economies, the consequences can be particularly severe. Finding an alternative correspondent may take time, require substantial investment, or prove difficult altogether.