Bringing Smart Policies to Life
The basics: AML/CFT for financial inclusion
Last update: 2010
AML/CFT: Definition
“International effort to bring integrity to
financial systems, protecting them from
criminal abuse.”
• Anti-Money Laundering (AML) Combating the Financing
of Terrorism (CFT) standards set by the Financial
Access Task Force (FATF)
• System integrity is a key ingredient to overall market
stability and sustainability
AML/CFT: A barrier?
• Inappropriate implementation of
AML/CFT regulations can play a role in
excluding low income people from access
to formal financial services
• Main challenge is typically the Know Your
Customer (KYC) requirements
• But adherence to standards appropriately
applied can help create confidence and
sustainability in the system
AML/CFT: Regulators role
• Adopt laws that criminalize laundering
the proceeds of crime and the provision
of financial support to terrorists
• Provide clear instructions to entities,
including on KYC requirements
• Ensure appropriate oversight of financial
institutions – and other private sector
actors – during implementation
AML/CFT: Industry role
• Identify customers, verify identities using
reliable, independent source documents, data
or other information about the person
• Obtain information on the purpose and nature
of the financial relationship or transactions
• Maintain comprehensive records of customer
information and transactions
• Monitor customer transactions and alert
authorities to suspicious transactions
Policy Question:
Appropriate response
• How to tailor AML/CFT measures to the
domestic environment?
• Is it possible to take a service-based
approach rather than an institution-based
approach to regulate new offerings?
• How to ensure AML/CFT controls are
proportionate to the prevailing or likely
risks of crime?
Policy Question: Capacity
• How to create AML/CFT obligations that
match public and private institutional
abilities to meet, implement and
supervise?
• How to phase in AML/CFT controls over
time as capacity is built but in a way that
does not hinder market development?
Policy Question: Capacity
• Can KYC function be outsourced by
regulated institutions to other regulated
institution or to authorized 3rd party
agen, especially in areas with no bank
office?
KYC and mobile phone services
FATF and WB advise:
• International AML standards already address
mobile financial services vulnerabilities
• No need for new standards
• Offer great flexibility for low-risk transactions
They claim current regulations often do not:
• Address full spectrum of entities (MNO’s)
• Provide clarity on licensing process
• Take advantage of the flexibility available
Example: KYC in Philippines
• Regulators recognize any of
18 different documents as
acceptable forms of ID
• Philippines customers using
G-Cash must register via
their mobile phone or
internet. They cannot
withdraw or deposit until
they undergo face-to-face
Customer Due Diligence
(CDD) at an accredited shop,
partner or bank.
Example: Record Keeping
in Malaysia
• FATF recommends mobile
operators and other
payment system providers
keep CDRs similar to banks
• Maxis keeps records of
transactions for active
customers on an ongoing
basis. If the account is
terminated they archive the
info for seven years.
Example: Reporting obligations
Hong Kong and Macao
• MNO’s are considered
reporting entities under the
AML/CFT regime – same as
financial institutions
• MNO’s report suspicious
transactions to authorities,
including the channel used
and whether it was mobile
Thank you!
© Alliance for Financial Inclusion 2010
info@afi-global.org
www.afi-global.org