December 18, 2025 | Global Legal Intelligence
Yesterday we looked at how AI regulation is breaking down in big economies. Today’s tale shows a big difference. Even as technological governance falls apart, financial regulation keeps the world working together in amazing ways.
Last week, there were a number of events that supported this pattern. The Basel-IOSCO review does not change the global derivatives margin regulations. The implementation of US sanctions changes to multi-dimensional accountability. The EU adds AI governance to its banking monitoring. The UAE strengthens its central authority to better control its finances.
The message is obvious for Indian banks and businesses that do business around the world. With strong global coordination, the expectations for financial compliance are getting stronger. This is very different from the regulatory fragmentation that tech companies have to deal with.
The Global Derivatives Framework Stays the Same
The Basel Committee on Banking Supervision and IOSCO put out their joint evaluation of the regulations for margins on derivatives that aren’t cleared through a central authority. The evaluation shows that these worldwide standards are doing their job well. The review looked at how margins work in different parts of the world. Regulators discovered that most people followed the rules for initial margin and variable margin. The framework’s main goal of lowering systemic risk is met.
The report says that there shouldn’t be any big modifications to the rules. Instead, the focus is on “increased supervision and continued monitoring.” That means more exchange of information and more careful checking by the rules.
What Regulatory Stability Means for Banks in India
The evaluation basically locks in the current margin requirements for the foreseeable future. Indian banks and NBFCs that deal with US or EU derivatives can expect the rules to stay the same.
- Strategic Planning: This allows you to organize your strategy around rules that stay the same. Instead of getting ready for big changes in the law, companies can deploy their resources on making collateral work better.
- Detailed Inquiries: The focus on “enhanced supervisory cooperation” shows that regulators will share more information. Expect to get more detailed inquiries for information about derivatives exposures with counterparties in other countries.
- RBI Guidance: When looking at how Indian banks handle cross-border margins, RBI may use these global findings as a guide. This could change what regulators in the US expect from margin model sophistication and documentation norms.
- Multi-Jurisdictional Oversight: Indian financial groups should expect to be watched closely by regulators. Problems with how margins are calculated or how collateral is managed could cause action to be taken in more than one place at the same time.
The most important strategic point is that risk management across the whole organization must match the highest standards in every place you do business. Weak controls in one place put the whole group at risk by exchanging supervisory information.
New Phase for US Sanctions Enforcement
Last week, many briefings from law firms showed a worrying trend in enforcement. US sanctions compliance is changing from fines to legal liability that can come from many places.
Now, the government works together to coordinate OFAC administrative actions with DOJ criminal investigations and allow private lawsuits to follow. One failure in sanctions control leads to a chain of exposures.
- OFAC: Typically imposes civil (administrative) monetary penalties on banks and other financial institutions for sanctions violations.
- DOJ: Can pursue related criminal cases.
- SEC: May separately bring securities‑fraud actions where sanctions risks or violations were misrepresented or concealed from investors.
- Shareholder Derivative Suits: Shareholders can file suits alleging that directors and officers hid or failed to disclose sanctions‑related risks.
The Private Litigation Part
There is an obvious pattern forming. OFAC says it has reached a settlement with a bank for breaking sanctions. Within weeks, shareholders sue the bank, saying it hid the danger of sanctions from investors.
These private lawsuits make the timeframes for liability longer than those of administrative settlements. They add to damages that go beyond regulatory fines. They hurt their reputation, which hurts their ability to raise money from abroad and work with banks that send money to other countries. Plaintiffs’ lawyers are using government sanctions findings more and more to start class lawsuits.
Important Effects on Indian Banks and Other Financial Institutions
Indian banks making USD payments have a higher risk at the board level. Also, companies who do business with Russia, Iran, or China face comparable problems.
The change from administrative fines to multi-layered accountability means that if sanctions are not monitored properly that can create problems for the C-suite and directors. This goes beyond what the compliance department is worried about.
The most important weakness for Indian groups is that sanctions controls are not the same in all places. Weak screening by a subsidiary can “export” risk into USD payment flows. This sets off coordinated action against the parent.
Key Steps for Institutions:
- Put in place group-wide sanctions policies that are identical for everyone.
- Establish central monitoring; fragmented compliance among different companies within the group is no longer appropriate.
- Enhanced due diligence is required for all dealings with countries on the sanctions list. Sticking to standard KYC processes no longer protects.
- Institutions likely need specialist sanctions intelligence and continual customer screening with the ability to respond quickly.
Risky Strategic Opportunities
There’s a competitive side to this. Indian banks that are good at following sanctions might stand out in international markets. They may look more reliable to global banks that want South Asian partners for trade finance and correspondent banking. Strong controls can help them beat weaker competitors.
The U.S. Treasury often updates sanctions near the end of December. New names on the sanctions list can affect technology, financial services, and commodity trading. Before the year ends, OFAC may also release fresh compliance guidance. Watch for new expectations on screening, documentation, and verifying beneficial ownership.
The EU Adds AI to Its Frameworks for Banking Risk
The European Banking Authority (EBA) put out information to make it clear how the AI Act and banking rules work together. The approach shows a big change.
AI models are no longer just technical risk for Banks. AI tools are part of their risk management for conduct and prudence. If AI is utilized for credit decisions, AML screening, and payments, then verify that compliance is not missed. Systems must meet both the technical requirements of the AI Act and the standards set by banking supervisors. Banks can’t divide AI compliance into several technological governance organizations.
The ECON committee of the European Parliament stressed proportionality. Smaller organizations that don’t use AI as much have less paperwork. But proportionality doesn’t get rid of basic requirements for openness, human oversight, and risk management.
What AI Governance in Banking Means for India
Indian banks having branches or subsidiaries in the EU need to follow stricter rules for governance. It is necessary to enhance compliance for:
- Credit risk models
- Systems for monitoring AML transactions
- Methods for finding payments fraud
The EBA method might change how the RBI thinks. If RBI adopts similar integration concepts, Indian banks should expect AI-specific expectations to be built into existing rules. AI governance requirements could be part of operational risk, IRAC rules, and AML/CFT duties.
The UAE Strengthens Its Financial Rules
Last week, the UAE passed Federal Decree-Law No. 6 of 2025. The Central Bank is now in charge of all banking, insurance, and financial services rules. This gets rid of the prior regulatory fragmentation. The Central Bank gets more power to check things, a bigger toolbox for punishment, and better ways to work with other countries.
The penalties for doing financial business without a license went up a lot. This shows that there is no tolerance for shadow banking and uncontrolled fintech.
Implications for Indian Banks and Financial Institutions
Indian banks and insurance companies having regional headquarters in the UAE will need to enhance their compliance and licensing checks.
- Identify Gaps: Review current practices against Central Bank expectations regarding governance, capital adequacy, and AML/CFT.
- Group Functions: This calls for enhanced group compliance functions and improved parent-subsidiary governance.
- Market Positioning: While entry costs are higher, the UAE looks better as a clean, well-regulated hub. For Indian banks seeking global credibility, this framework is appealing despite the compliance costs.
The Divergence Pattern
This week’s changes show that countries are still working together to keep the economy stable. Basel and IOSCO work together on derivatives; US and EU agree on sanctions; and regional centers like the UAE are using global standards.
This is very different from the fragmentation in technology regulation. The reason? International organizations like the Basel Committee, IOSCO, FATF, and IMF have decades of coordination. There is no Basel Committee equivalent for AI governance or data protection yet.
Result: Financial institutions face coordinated global obligations, while tech companies navigate broken, uneven, and conflicting national frameworks.
What Indian Companies Should Do
- For banks and financial institutions: Realize that global coordination will keep getting stronger. Invest in compliance systems that satisfy the highest requirements in every jurisdiction.
- Governance: Present this shift to the board immediately. Set up unified, group-wide programs with central monitoring.
- AI Integration: Incorporate AI governance into your prudential risk frameworks today, before the RBI mandates it. Look to EU standards as a roadmap.
- UAE Operations: Conduct thorough gap evaluations and improve parent-subsidiary working rules.
Looking Ahead to the Week
- US Treasury: Look for updates on December sanctions designations and fresh OFAC advice.
- European Banking Authority: Monitor how EU member states implement AI-banking integration guidelines.
- UAE Central Bank: Expect full rules for the new consolidated framework in Q1 2026.
- RBI Signals: Watch the December 2025 financial stability report for mentions of global margin rules or AI governance.
The rules for financial regulation are getting stricter but remain coordinated. Use such collaboration to your advantage by proactively aligning with global standards.
This Analysis Is About: This weekly global legal intelligence looks at worldwide events that affect business between India and other countries. It covers strategic analysis for decision-makers dealing with complicated worldwide legal issues.
Disclaimer: This analysis gives general facts and strategic points of view. It is not legal advice. Get precise advice on law and compliance from an independent lawyer.
Tomorrow: We examine international dispute mechanisms proving resilient despite geopolitical stress—and how regional hub competition reshapes cross-border operations.