Money & Banking

Pakistani banks may lose business if terror is not combated, says Moody’s

PTI Karachi | Updated on February 28, 2020

Credit rating agency Moody’s has warned Pakistani banks that they may lose international business and pay more for global transactions if the government does not implement the FATF action plan on anti-money laundering and counter terror financing by the June deadline.

Moody’s Investors Service said the announcement is credit negative for Pakistani banks because there are potential additional restrictions for the banks’ foreign-currency clearing services as well as foreign operations.

The Paris-Based Financial Action Task Force (FATF), which is the global watchdog of international financial transactions, gave Pakistan an extension for completing the June 2018 action plan on anti-money laundering and combating financing of terrorism till June 2020 or risk being placed on its black-list. At present, Pakistan is on the Grey List.

The FATF, at its February meet, warned that it will urge member countries to scrutinise their business transactions with Pakistan if the country fails to complete the action plan regarding terror financing.

Moody’s further said if Pakistan fails to fully enforce the FATF action plan, international financial institutions could curtail their dealings with Pakistani banks, including termination of correspondent banking relationships. “This, in turn, would further constrain the banks’ ability to generate business and result in higher compliance costs,” Moody’s added.

Published on February 28, 2020

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