Financial inclusion key to ensuring effective AML/CFT regulations, highlights BNM-AFI member training in Kuala Lumpur

Bank Negara Malaysia (BNM) and the Alliance for Financial Inclusion (AFI) are organizing a week long member training on Balancing Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) and Financial Inclusion from 12-16 November, 2018 in Kuala Lumpur, Malaysia.

“Financial inclusion is essential in ensuring AML/CFT efforts in countries are effective; risk assessment has to be continuously conducted,” emphasized Abd. Rahman Abu Bakar, Director of Financial Intelligence and Enforcement, BNM during his opening remarks.

Kennedy Komba, AFI Director of Strategy and Financial Inclusion Policy, highlighted in his welcome remarks that “at AFI, we have been having discussions on issues of balancing AML/CFT with financial inclusion for the past few years in the Proportionate Application of Global Standards (GSP) Working Group and other AFI events.” He further added, “but with changes in the social, financial and political scenario round the world, the issues relating to the impact of money laundering and financing of terrorism to financial inclusion has greatly enhanced in the recent times.”

Welcoming 38 participants from 30 countries, and 32 AFI member institutions, the five-day Capacity Building program focused on enhancing member capacity to develop and implement effective frameworks for robust and proportionate AML/CFT regimes that will take the global financial inclusion agenda forward.

Standard Settings Bodies (SSBs) and regulators around the globe now recognize the risks of financial exclusion. Transactions outside the ambit of formal financial services have a higher risk of Money Laundering (ML) and Financing of Terrorism (FT). Thus, scaling up financial inclusion has become a critical agenda for all members in the AFI network. The Balancing AML/CFT and Financial Inclusion member training builds on AFI’s strategic partnerships with the FATF-Style Regional Bodies (FSRBs) with whom AFI has acquired Observer Status. Specifically, the Asia-Pacific Money Laundering Group (APG) and Eastern and South Africa Anti-Money Laundering Group (ESAAMLG), whose representatives will be attending as key resource persons throughout the week.

“De-risking is a prominent issue in the regions our members represent. It enhances the risk of exclusion to the efforts of combating ML and FT by forcing individuals and entities to go back to the unregulated financial channels and also retards the progress made in scaling up financial inclusion in these emerging economies,” said Kennedy Komba. Through the training, participants will learn how regulatory frameworks can help include financial institutions rather than exclude them from the formal financial system.

Regulation of innovative technologies is another focus area driven by rising demand from AFI members. “Digitizing financial products and services is recognized to be the way forward to achieve financial inclusion goals. However, mass scale digitization brings with it, diverse risks. How do we as regulators leverage technology to address the risks of both financial exclusion and inclusion? We urge members to harness technology to enhance regulatory supervision and oversight and to address regulatory challenges,” emphasized Kennedy Komba.

“Risk assessment enables us to leverage technology and innovation, turn its bad side into opportunity. For example the use of digital ID and electronic platform for on-boarding process while the use of mobile banking, e-payment facilities to reach remote community,” highlighted Abd. Rahman Abu Bakar at the opening of the training.

Throughout the week, the training will cover cross-cutting policy topics including data gathering and analysis for the National Risk Assessment (NRA); integrating NRA into the National Financial Inclusion Strategy (NFIS); leveraging FinTech solutions such as Know-Your-Customer (KYC) innovations (digital ID, RegTech) to address de-risking; and gender considerations in balancing AML/CFT and financial inclusion.