Financial inclusion and financial integrity: complementary policy objectives

 

Windsor III Leadership Seminar on Financial Inclusion

8 March 2010 

Keynote speech by the FATF President

Introduction

Thank you for inviting me to this Leadership Seminar on financial inclusion. The panel discussion this afternoon was very useful and I hope that it results in a meaningful contribution to the discussions on how to align issues related to branchless banking with financial integrity concerns.

In my capacity as the President of the Financial Action Task Force (FATF) I would like to tell you something about the history of the FATF and how it developed into the organisation it is today, about FATF in practice. I also like to address the pursuit of financial inclusion in conjunction with the pursuit of an effective Anti Money Laundering/Terrorist financing regime. And I can already reveal that in my view these objectives are complementary and there are no conflicting financial sector policy objectives.

History and mandate

Let’s start with the history and mandate of the FATF. The FATF was created in 1989 by the G7 with the goal to combat money laundering from drugs crimes. In the aftermath of 9/11 it was decided to add terrorist financing to the mandate of the FATF. This is the second pillar of the FATF mandate.

This mandate is established by the ministers of the FATF members and the current mandate is valid from 2008 -2012. And in this mandate a third pillar was added to the FATF mandate: other emerging threats.

This widened the mandate of the FATF slightly, and as of today there are two emerging threats that are areas of focus:

  • Proliferation finance (decided by the ministers in 2008)
  • Corruption (decided by G20 leaders in September 2009)

FATF Family

The FATF family is a global network with shared objectives and instruments.

In 1989 there were 16 members in the FATF and today there are 35.

Apart from this development, and equally important, another 145 jurisdictions worldwide have committed over the past 20 years to the principles and goals of FATF and organised themselves into 8 sister organisations or FATF style regional bodies, the so-called FSRBs.

The result of these efforts is that in 20 years the group of FATF committed jurisdictions, the FATF family, has grown from 16 to over 180! This is an unprecedented achievement in international financial cooperation. 

FATF in practice

Today the FATF has become the globally acknowledged standard setter on anti money laundering and the fight against terrorist financing. That standard, laid down in 40 + 9 Recommendations, is the world’s benchmark in this field of expertise and is recognised by international bodies such as the World Bank, the International Monetary Fund and the United Nations.

On top of this, the FATF assesses the compliance with the standards through a sophisticated and intensive peer review process.

And finally – if necessary - the FATF can call for the application of countermeasures if jurisdictions fail to commit and comply with the FATF standards. 

FATF and G20

More than two weeks ago the FATF published – at the request of the G20 leaders - a list of high risk and uncooperative jurisdictions. High risk, because these jurisdictions pose a threat to the integrity of the global financial system. Uncooperative, because these jurisdictions fail to commit to or implement the standards and fail to engage with the FATF.

The jurisdictions on this list were identified - in close cooperation with the whole FATF family (including FSRBs) - through a carefully designed and objective process. This process is a dynamic one. If jurisdictions engage with the FATF and take the necessary steps to address the high risks identified they will be taken from the list. The other side of the coin is that the procedures allow that countries that are newly identified as being of high risk (using among others the objective results from the evaluations) will enter the process.

Future work of the FATF

Currently, the FATF is preparing for a new round of Mutual Evaluations, (the fourth). The key guiding principles in this round will be transparency and efficiency. Transparency relates to issues as Customer Due Diligence (KYC), beneficial ownership and tax as a predicate offence for Money Laundering. Efficiency relates to more cooperation between the different actors in the AML/CFT chain.

Financial inclusion may also be addressed - among many other issues - in that context.

FATF and financial inclusion

Financial inclusion and financial integrity are complementary policy objectives.

FATF has a clear interest in financial inclusion as the majority of its constituency is consisting of jurisdictions that can be qualified as emerging markets, developing countries (OECD DAC list), or Low Capacity Countries. Questions related to financial inclusion are of particular relevance in these jurisdictions. FATF’s interest in financial inclusion focuses on the development of a sound, global financial markets, covering large parts of the populations of the jurisdictions that have committed to its standards and principles. Without the pursuit of financial inclusion, the amount of cash in economies may remain high, which is to the detriment of sound and effective AML/CFT regimes. Financial exclusion results in limited access to the formal financial services. Potential clients will turn to informal financial services, resulting in a larger unmonitored financial service sector, with all its potentially undesirable consequences.

The FATF standards contain some flexibility which allows jurisdictions to implement the standards in a way that takes the local circumstances into account, while remaining in compliance with the FATF Standards. I encourage jurisdictions to explore the options the FATF is already offering. Overtime it is likely that good practices en models will emerge that will bridge the present gap between financial inclusion objectives and sound AML/CFT regimes. There are already promising examples developing, some of which I fact did already pass the test of a FATF Mutual Evaluation!

AML/CFT measures should and in my view can be reconciled with financial inclusion and thus contribute to a sustainable development of international financial markets.

 

 

 

Countries list

  • Afghanistan
  • Albania
  • Algeria
  • Andorra
  • Angola
  • Anguilla
  • Antigua and Barbuda
  • Argentina
  • Armenia
  • Aruba
  • Australia
  • Austria
  • Azerbaijan
  • Bahamas
  • Bahrain
  • Bangladesh
  • Barbados
  • Belarus
  • Belgium
  • Belize
  • Benin
  • Bermuda
  • Bhutan
  • Bolivia
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Brunei Darussalam
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Cape Verde
  • Cayman Islands
  • Central African Republic
  • Chad
  • Chile
  • China (People’s Republic of)
  • Chinese Taipei
  • Colombia
  • Comoros
  • Congo
  • Cook Islands
  • Costa Rica
  • Croatia
  • Cuba
  • Cyprus
  • Czech Republic
  • Côte d'Ivoire
  • Democratic People's Republic of Korea
  • Democratic Republic of the Congo
  • Denmark
  • Djibouti
  • Dominica
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Equatorial Guinea
  • Eritrea
  • Estonia
  • Ethiopia
  • European Union
  • Faeroe Islands
  • Fiji
  • Finland
  • Former Yugoslav Republic of Macedonia (FYROM)
  • France
  • French Guiana
  • Gabon
  • Gambia
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Greenland
  • Grenada
  • Guatemala
  • Guernsey
  • Guinea
  • Guinea-Bissau
  • Guyana
  • Haiti
  • Honduras
  • Hong Kong, China
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iraq
  • Ireland
  • Islamic Republic of Iran
  • Isle of Man
  • Israel
  • Italy
  • Jamaica
  • Japan
  • Jersey
  • Jordan
  • Kazakhstan
  • Kenya
  • Kiribati
  • Korea
  • Kuwait
  • Kyrgyzstan
  • Lao People's Democratic Republic
  • Latvia
  • Lebanon
  • Lesotho
  • Liberia
  • Libya
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Macao (China)
  • Madagascar
  • Malawi
  • Malaysia
  • Maldives
  • Mali
  • Malta
  • Marshall Islands
  • Mauritania
  • Mauritius
  • Mayotte
  • Mexico
  • Micronesia (Federated States of)
  • Moldova
  • Monaco
  • Mongolia
  • Montenegro
  • Montserrat
  • Morocco
  • Mozambique
  • Myanmar
  • Namibia
  • Nauru
  • Nepal
  • Netherlands
  • Netherlands Antilles
  • New Zealand
  • Nicaragua
  • Niger
  • Nigeria
  • Niue
  • Norway
  • Oman
  • Pakistan
  • Palau
  • Palestinian Administered Areas
  • Panama
  • Papua New Guinea
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Qatar
  • Romania
  • Russian Federation
  • Rwanda
  • Saint Helena
  • Saint Kitts and Nevis
  • Saint Lucia
  • Saint Vincent and the Grenadines
  • Samoa
  • San Marino
  • Sao Tome and Principe
  • Saudi Arabia
  • Senegal
  • Serbia
  • Serbia and Montenegro (pre-June 2006)
  • Seychelles
  • Sierra Leone
  • Singapore
  • Slovak Republic
  • Slovenia
  • Solomon Islands
  • Somalia
  • South Africa
  • South Sudan
  • Spain
  • Sri Lanka
  • Sudan
  • Suriname
  • Swaziland
  • Sweden
  • Switzerland
  • Syrian Arab Republic
  • Tajikistan
  • Tanzania
  • Thailand
  • Timor-Leste
  • Togo
  • Tokelau
  • Tonga
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Turks and Caicos Islands
  • Tuvalu
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • United States
  • United States Virgin Islands
  • Uruguay
  • Uzbekistan
  • Vanuatu
  • Venezuela
  • Vietnam
  • Virgin Islands (UK)
  • Wallis and Futuna Islands
  • Western Sahara
  • Yemen
  • Zambia
  • Zimbabwe