While Western financial institutions continue to address the challenges of keeping terrorist funding out of their organizations, the U.S. government is putting pressure on other countries to step up their controls and preventative measures.

Certainly, the institutions subject to BSA/AML and OFAC regulations don't have the authority to affect geopolitical relationships, but they do have an obligation to monitor and address these types of situations in their risk scoring, transaction monitoring and sanctions screening programs.

The second order effect of a "gray-listed" or sanctioned* Pakistan is a potential reassessment of the entire South Asian Association for Regional Cooperation (SAARC) for risk levels by financial institutions. Likely, the surrounding nations will face increased jurisdictional scrutiny as Pakistani entities continue to move funds throughout the region. AML and sanctions program leaders will be faced with making important risk and business (de-banking) decisions if Pakistan's relationship with the U.S. continues to deteriorate.

* The Office of Foreign Assets Control (OFAC) does not maintain a specific list of countries that U.S. persons cannot do business with. U.S. sanctions programs vary in scope.