FATF updates Guidance on financial inclusion and releases Guidance on national money laundering and terrorist financing risk assessment

Following the revision of its Recommendations in February 2012, FATF adopted it’s the Guidance on financial inclusion in February 2013. The Guidance paper aims to provide support to countries and their financial institutions in designing AML/CFT measures that meet the national goal of financial inclusion, without compromising the measures that exist for the purpose of combating crime.

In the Guidance, FATF emphasizes that applying an overly cautious approach to AML/CFT safeguards can have the unintended consequence of excluding legitimate businesses and consumers from the financial system. AML/CFT controls should not inhibit access to formal financial services for financially excluded and underserved groups, including low income, rural sector and undocumented groups. The document provides great clarity and guidance on the FATF Recommendations that are relevant when promoting financial inclusion and shows how the Recommendations can be read and interpreted to support financial access.

This project was conducted in partnership with the World Bank and the Asia/Pacific Group on Money Laundering (APG), and in consultation with several private sector representatives, including the GSMA. The first version of the FATF Guidance paper on financial inclusion was published in February 2011. The main change in this second version is that it reflects evolution of the FATF Recommendations which in the 2012 edition reinforce the role of the risk-based approach (RBA), as a general and underlying principle of all AML/CFT systems. FATF – and the GSMA – believe that the development of risk-sensitive AML/CFT frameworks will be a key step for countries that wish to build a more inclusive formal financial system, and give access to appropriate financial services to a larger proportion of the population, including the most vulnerable and unserved groups.

In March 2013 FATF adopted its new guidance to assist in the conduct of risk assessment at the country or national level. In fact, the 2012 FATF Recommendations require that countries identify, assess and understand the money laundering and terrorist financing risks facing them and adapt their AML/CFT system accordingly. The assessments carried out at the national level may form the basis for determining whether to apply enhanced or specific measures, simplified measures, or exemptions from AML/CFT requirements. The Guidance provides an interesting example: in Switzerland a multistakeholder task force has played a key role in the identification of low-risk products for which the exemptions could apply. In Guidance paper on financial inclusion, in the section related to the risk assessment methodologies, FATF refers also to the GSMA Methodology for Assessing Money Laundering and Terrorist Financing Risk, which offers a systematic approach for assessing the risks of mobile money. Effective solutions to manage and mitigate the ML/FT risks while enabling digital financial inclusion are also pointed out in the policy paper the MMU has recently released.

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