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INCLUSIVE FINANCIAL INTEGRITY: A TOOLKIT FOR POLICYMAKERS

Financial integrity generally refers to the soundness of a financial system in dealing with risks and threats to its safety.

This toolkit provides practical guidance on aligning financial inclusion and Anti-Money Laundering and Countering the Financing of Terrorism (AML-CFT) outcomes in the formulation of policy and regulation, with a focus on effective implementation. The toolkit was developed with reference to FATF Recommendations and related risk-based approach guidance.

FRAMEWORK PROCESSES National Risk Assessment (NRA) Strategy; governance; plan; commitee

Technical effective

Examples of dimensions included in the definition of “financial inclusion” in selected National Financial Inclusion Strategy:

ACCESS

(Brazil, Burundi, Mozambique, Pakistan, Paraguay, Nigeria)

USAGE

(Burundi, El Salvador, Mozambique, Pakistan, Paraguay, Tanzania)

CONVENIENCE

(Brazil, Burundi, Indonesia, Jordan, Mozambique, Paraguay, Nigeria)

CONSUMER PROTECTION (Burundi, Indonesia, Pakistan, Turkey)

AFFORDABILITY

(Burundi, Fiji, Jordan, Nigeria, Paraguay, Zimbabwe)

Key financial sector risks: MONEY LAUNDERING (ML) RISK

The risk that a country, financial institution or business unit could be used for ML. TOOLKIT

TERRORIST FINANCING (TF) RISK

The risk that a country, financial institution or business unit could be used for TF.

COMPLIANCE RISK

Risk that arises due to nonadherence to regulatory requirements, breaching of laws, guidelines, industry standards, internal policies and procedures including best practices.

RISK OF FINANCIAL EXCLUSION

Risk of excluding customers due to lack of robust AML-CFT information is that people can be deprived of financial services and this can lead to large unregulated informal sectors.

ILLICIT FINANCIAL FLOWS RISK

Illicit financial flows are defined as the illegal cross-border movement of funds and resources.

The National Risk Assessment (NRA) process:

Briefings and coordination meetings – working groups and committees are formed Agree on purpose of the NRA Decide on NRA tool to be used based on country-specific objectives for the NRA Collect data from relevant institutions Assess data according to the following three stages: identification, analysis and evaluation Review findings and present proposed action plan to the stakeholders

Common challenges faced when conducting NRAs that leads to unavailable and poor quality of data:

DATA CONFIDENTIALITY CONCERNS

LIMITED STAKEHOLDER COMMITMENT

INABILITY TO DEMONSTRATE A CLEAR UNDERSTANDING OF RISK

TIME CONSTRAINTS

LOW AML-CFT LITERACY AND LIMITED UNDERSTANDING OF THE RISK-BASED APPROACH (RBA)

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