Discussing about FATF's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) standards and financial inclusion

Hi, a little question:

Do you think FATF's AML/CFT standards would hinder financial inclusion?

My answer is as follows:

According to the Financial Action Task Force (FATF), financial inclusion consists of providing access to a sufficient range of safe, convenient and affordable financial services to de disadvantaged and other vulnerable groups in any country, including low income, rural and undocumented persons, who have been underserved or excluded from the formal financial sector (Dang, n.d., 3). This concept has a strong correlation to poverty because access to financial services contributes to human and economic development. In such sense, financial inclusion and effective AML/CFT are complementary to ensure the safety, integrity, and soundness of the financial system and the protection of depositors (Abdullahi, 2012).


In practice, the rapid growth of financial technology is transforming the financial services industry in developing countries, facilitating the access of low-income rural households (who often lack detailed documentation) to e-banking accounts, and improving the access to long-time excluded sectors to digital banking through mobile phones. Here, AML/CFT regulations are crucial for reducing the risk of fraud while lowering significant transaction costs (Bankers Association of the Phillippines, 2017).


Mobile money services can be particularly vulnerable to money laundering and terrorist financing (ML/FT), being a situation that obliges to adopt an extensive risk-based approach in the AML/CTF compliance program. But its implementation cannot undermine the equally important compromise of the financial sector to promote financial inclusion. These two are purposes that must be endured equally and synergically, resulting in another goal: to achieve financial integrity, for the benefit of all stakeholders.


Sources:


Abdullahi, S. (2012, April). Promoting Financial Inclusion for Effective Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT). Crime Law and Social Change. 57 (3), p. 305 - 323. Retrieved from: https://www.researchgate.net/publication/257552634_Promoting_Financial_Inclusion_for_Effective_Anti-Money_Laundering_and_Counter_Financing_of_Terrorism_AMLCFT



Dang, H. (n.d.) Financial Inclusion, Developing Economies, and effective Implementation of the Risk-Based Approach in AML/CTF: The Need for Legislative and Regulatory Leadership to Motivate Private Sector Commitment and the Role of Audit. ACAMS. Retrieved from: https://www.acams.org/aml-white-paper-financial-inclusion/



(2017, March 18). Balance Anti-Money Laundering Rules With Financial Inclusion. Bankers Association of the Phillippines. Retrieved from: https://bap.org.ph/financial-inclusion/balance-anti-money-laundering-rules-financial-inclusion/