Author:Louis De Koker
Position:La Trobe University School of Law, Melbourne, Australia
ML/FT risk and nancial inclusion of the poor: increase the focus on actual
usage of formal nancial services
In the past 10 years, FATF has done much to improve its understanding of the complex
interplay between nancialintegrity objectives and nancial inclusion. This work, however,
has not extended to analyze and assessthe integrity risks related to nancial exclusion. This
leaves FATFs risk-basedapproach to ML/FT unbalanced, focused mainly on criminal risks
to the formal nancial system andsomewhat blind to the integrity risks of exclusion thatill-
considered though FATF-compliantAML/CFT strategies may hold.
Financial exclusion, the shadow economy and tax evasion were not integrated into
the FATF strategy until rather late. In the mid-2000s, FATF stakeholders still refused
to acknowledge that AML/CFT compliance with FATFs standards could hamper the
implementation of policies to increase access by the poor to the nancial system. It
required intensive effort and lobbying by a group of South African development
economists and AML/CFT experts to secure funding for a ve-country study on the
impact of AML/CFT measures on nancial inclusion. The study was deemed too
sensitive for funding by major FATF stakeholders, who were concerned that nancial
inclusion would undermine AML/CFT measures. With FIRST Initiative funding and
the personal support by a number of experts, the study was eventually launched.When
its ndings were circulated in 2007 and nally published in 2008, evidence was
available that changed FATFs approach (Bester et al., 2008;Isern and De Koker, 2009).
This study found that (t)he pursuit of nancial inclusion and the pursuit of an effective
AML/CFT regime are complementary and not conicting nancial sector policy
objectives. In 2009, the president of FATF embraced the ndings and language of the
report when he held in Lesotho addressing the ESAAMLG Ministers that Financial
inclusion and an effective nancial integrity regime can and should be
complementary national policy objectives(Vlaanderen, 2009).
FATF has since adopted a 2011 guidancepaper on nancial inclusion, which was revised
in 2013 and enhanced by a supplement on simplied due diligence in 2017. The current
mutual evaluation methodology also enables assessors of the effectiveness of a countrys
AML/CFT system to consider aspects of its nancial inclusion policies, where they deem
that relevant.
The reasons why FATF embraced nancial inclusion are alluded in a few documents
and speeches. In essence, nancial inclusion is viewed as a means to limit untraceable,
informal cash transactions that compromise the ability of countries to track money
laundering and terrorist nancing. As expressed by the then Princess Máxima of The
Netherlands in a 2010 address to FATF:
[Financial inclusion] helps regulators and supervisors monitor and trace the movement and
sources of money. It helps law enforcement by diminishing the anonymity of informal
transactions. In short, nancial inclusion contributes to nancial integrity (Princess, 2010).
These objectives are important to FATF. It has been actively providing guidance and
countering large-scale de-risking account closures to ensure that the implementation of its
standards do not hamper the provision of nancialservices to the poor and marginalized. It
is submitted, however, that a focus on the provision of services and account opening only
will not achieve the integrity resultsthat FATF desires.
Journalof Money Laundering
Vol.21 No. 3, 2018
pp. 250-252
© Emerald Publishing Limited
DOI 10.1108/JMLC-05-2018-0038

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