Anti-Money Laundering and Combating the Financing of Terrorism Policy Guidance
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the development of a common understanding of the risk-based approach; outline the high-level principles involved in applying the risk-based approach, and indicate good practice in the design and implementation of an effective risk-based approach. They set out key elements of an effective risk-based approach and identify the types of issues that both public authorities and financial institutions may wish to consider when using a risk-based model (FATF 2007, para. 1.3). The FATF should issue regulatory and supervisory guidance that goes beyond assessing potential integrity risks in new payment methods that support increased financial inclusion. In this regard, a separate guidance note for m-money models is advisable. Be sensitive and responsive to inappropriate compliance procedures. The FATF recommendations set minimum standards of action against ML and TF. The mutual evaluation process is designed to identify a failure to meet these standards. It is not designed to note and evaluate steps taken that exceed the minimum standards. A country that designs and implements an inappropriately strict and rigid AML/CFT compliance framework may exceed the FATF standards, but undermine financial inclusion. The FATF president for 2009–10, Paul Vlaanderen, accepted the relationship between financial inclusion and the task force’s financial integrity objectives: if AML/CFT controls are implemented in a manner that unnecessarily undermines financial inclusion, the controls also undermine the FATF’s broader integrity objectives. Therefore, the FATF must consider ways to monitor the impact of a country’s AML/CFT controls on financial inclusion and must provide guidance on appropriate supportive and corrective actions. The authors believe, for example, that the impact of a too-stringent compliance framework should be considered as part of the mutual evaluation methodology. It is important that supervisors and policy makers are guided to be sensitive to such unintended consequences of inappropriate AML/CFT controls (Chatain et al. 2009).
Notes 1. For a discussion of the multiple components of AML/CFT regulation, see Schott (2006). 2. The range of elements were analyzed during the Global Leadership Seminar on Regulating Branchless Banking, held in Windsor, United Kingdom, on March 8, 2010. The seminar was hosted by the Consultative Group to Assist the Poor, the U.K. Department for International Development, and the Alliance for Financial Inclusion.