ANI
27 Feb 2020, 20:07 GMT+10
New York [USA], Feb 27 (ANI): The Financial Action Task Force's (FATF's) announcement that Pakistan will remain on its list of jurisdictions under increased monitoring is credit negative for the country's banks, Moody's Investors Service said its latest credit outlook report released on Thursday.
The FATF, an inter-governmental body tasked with setting global framework requirements around anti-money-laundering, counter-terrorist financing and other related threats to the international financial system, said last week that Pakistan will remain on its list of jurisdictions under increased monitoring, along with 17 other countries, after failing to complete a June 2018 action plan by the assigned deadlines.
Pakistan, which has been presenting its progress to FATF every four months since the agreement of the action plan, will remain on the list until at least June when the next evaluation will take place.
"The announcement is credit negative for Pakistani banks because it raises questions about potential additional restrictions relating to banks' foreign-currency clearing services as well as their foreign operations. Banks' profitability risks being constrained as a result of increased compliance and operational costs," said Moody's.
The FATF has warned that it will urge member countries to increase their attention when conducting business transactions with Pakistan if the country's government, regulatory body and other stakeholders of the financial system fail to complete the action plan, which emphasises combating terrorist financing by June 2020.
Should they fail to do so, international financial institutions could curtail their interactions with Pakistani banks and other financial companies, including terminating correspondent banking relationships. This in turn will further constrain banks' ability to generate business and result in higher compliance costs.
Improving but still-weak, compliance with global anti-money-laundering and combating terrorist financing standards -- both by Pakistani banks and the country's authorities -- means that banks still risk losing access to foreign-currency clearing services.
Access to foreign-currency clearing transactions, typically conducted through international correspondent banking relationships, is crucial for Pakistani banks because it allows them to process cross-border payments for clients.
Clearing in US dollars is particularly important given Pakistan's high import and export economic activity as well as the fact that a large proportion of international payments are made in this currency.
This risk has so far not crystallised in the jurisdictions that have been placed on the increased monitoring list, said Moody's.
A number of domestic banks with foreign operations have been subject to investigations relating to anti-money-laundering or counter-terrorist financing issues that have resulted in penalties, higher compliance costs and in some cases the removal of overseas licences.
(ANI)Get a daily dose of New York Telegraph news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to New York Telegraph.
More InformationWASHINGTON, D.C.: Filmmaker Peter Jackson's lifelong fascination with the extinct giant New Zealand flightless bird called the moa...
NEW DELHI, India: India has submitted a revised proposal to the World Trade Organization (WTO) in Geneva to implement retaliatory tariffs...
SAN FRANCISCO, California: Nvidia, the Silicon Valley chipmaker at the heart of the artificial intelligence boom, this week briefly...
REDMOND, Washington: Artificial intelligence is transforming Microsoft's bottom line. The company saved over US$500 million last year...
WASHINGTON, D.C.: A federal rule designed to make it easier for Americans to cancel subscriptions has been blocked by a U.S. appeals...
BASTROP, Texas: In a surprising turn at Elon Musk's X platform, CEO Linda Yaccarino announced she is stepping down, just months after...
NEW YORK CITY, New York: Former British prime minister Rishi Sunak will return to Goldman Sachs in an advisory role, the Wall Street...
WASHINGTON, D.C.: Travelers at U.S. airports will no longer need to remove their shoes during security screenings, Department of Homeland...
NEW YORK CITY, New York: Financial markets kicked off the week on a cautious note as President Donald Trump rolled out a fresh round...
(Photo credit: Scott Kinser-Imagn Images) Idan Toklomati scored early and Kerwin Vargas tallied late as Charlotte FC came away with...
(Photo credit: Kevin Sousa-Imagn Images) Emmanuel Latte Lath scored on a penalty kick in the 11th minute of second-half stoppage...
(Photo credit: Kyle Ross-Imagn Images) Indiana Vassilev and Bruno Damiani each scored first-half goals for the Philadelphia Union,...