Aligning anti‐money laundering, combating of financing of terror and financial inclusion

TLDR

The questions are relevant to all stakeholders in financial regulation. The paper aims to identify key questions for the FATF to guide alignment of anti‑money laundering, counter‑terror financing, and financial inclusion objectives, informing current FATF discussions. The authors review FATF research and documents to identify questions for guidance on aligning financial integrity with financial inclusion. The FATF’s risk‑based approach can promote financial inclusion, but it has not clarified what constitutes “risk” or “low risk”, nor whether current inclusion models adequately limit money‑laundering and terror‑financing risks, necessitating clearer guidance.

Abstract

Purpose The purpose of this paper is to identify key questions that should be addressed to enable the Financial Action Task Force (FATF) to provide guidance regarding the alignment of anti‐money laundering, combating of financing of terror and financial inclusion objectives. Design/methodology/approach The paper draws on relevant research and documents of the FATF to identify questions that are relevant to consider when it formulates guidance regarding the alignment between financial integrity and financial inclusion objectives. Findings The FATF advises that its risk‐based approach enables countries and institutions to further financial inclusion. It is, however, not clear what the FATF means when its uses the terms “risk” and “low risk”. It is also unclear whether current proposals for financial inclusion regulatory models will necessarily limit money laundering as well as terror financing risks to levels that can be described as “low”. The FATF will need to clarify its own thinking regarding low money laundering and low terror financing risk before it will be able to provide clear guidance to national regulators and financial institutions. Originality/value This paper was drafted to inform current FATF discussions regarding guidance on financial inclusion. The questions are relevant to all stakeholders in financial regulation.