“Tunisia’s addition last week to the European Commission’s list of countries with weak anti-money laundering and counter-terrorist financing frameworks adds to the challenges faced by the country’s banking sector,” Fitch Ratings reports.
“EU banks that want to continue providing correspondent banking and other banking relationships in Tunisia will now have to carry out increased checks on all financial operations involving Tunisian financial institutions and their customers. As a result, some EU banks may choose to de-risk by cutting their ties to Tunisian financial institutions instead,” the
It, however pointed out, that Tunisian banks are not heavily reliant on international banks for funding, and correspondent banking provided by international banks is limited. Nevertheless, the European Commission’s announcement could lead to further drying up of scarce sources of euro funding in a country whose banking sector already faces tight liquidity constraints, mainly in dinar but also in foreign currency (FC).”
International banks often step up their internal underwriting and know-your-customer processes for banks where potential deficiencies in anti-money laundering and counter-terrorist financing frameworks have been flagged.
Tunisian banks tend to have net short FC positions, but open FC positions and access to FC are closely monitored by the Central Bank of Tunisia (BCT).
Banks must enter into agreements with the BCT to swap all excess FC liquidity into dinars, with fixed rate and date repurchase clauses, Fitch specified.