A global forum hosted by Superintendencia de Banca, Seguros y AFP del Perú (SBS Peru) held in Lima explored financial integrity in relation to financial inclusion. AFI members also conducted the Financial Integrity Working Group’s (FINTWG) second meeting in conjunction with the conference. Under the theme “Ensuring Integrity While Promoting Financial Access” the conference took place from 12-13 May with the FINTWG meeting being held on 11 May.

Opening the forum was the Superintendent of SBS Peru and AFI Steering Committee Member, Mr. Felipe Tam Fox. This was followed by a panel of regulators who spoke about lessons learned and innovative policy solutions from countries where Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) standards had posed challenges to financial inclusion initiatives. Other sessions explored supervision of agent banking and relevant guidance for regulators, and risk assessments relating to Know Your Customer (KYC) and record keeping. Essential to the implementation of AML/CFT, private sector actors also articulated their challenges, clearly signaling their need for public sector co-ordination and co-operation. The World Bank also presented its perspective with a presentation on the launch of its new publication on mobile money and financial crimes.

The forum reinforced the fact that AML/CFT standards are not an impediment to financial inclusion, rather, both are mutually re-enforcing. What emerged strongly from the discussions is that in an attempt to implement standards, defining risk was key to a proportional approach. Risk tolerance is still a concept that needs to be explored with the differentiation of low and high risk customers or services being the greatest challenge. In fact, there is no singular solution, and regulators cannot define risk categories that apply to all business models and services. In reality, this determination depends a great deal on local conditions and national circumstances.

For the private sector, most crucial are clearer regulations as opposed to more regulations. At the account opening stage, the use of proper identification is an essential part of KYC to determine a customer’s level of risk. To accomplish this proper identity documents must be used or appropriate alternatives, but the authorities need to explore and provide greater clarity on these documents. After the account is open, the ongoing task of monitoring and reporting suspicious transactions is the main way to mitigate risks.

The Financial Action Task Force (FATF) is the most relevant global standard setting body concerning AML/CFT, and the forum concluded that it was now an opportune time to reach out to FATF to express the views and concerns of developing countries. This is due to the fact that FATF is in the process of revisiting their 40+9 Standards and issuing a guidance paper on financial inclusion. This is where AFI’s FINTWG can play a crucial role in this advocacy.

At the FINTWG meeting, the working group planned on creating a number of deliverables in support of financial integrity and inclusion. In the short term, the working group will commence a stocktaking exercise of AFI members over important challenges and measures regarding AML/CFT. In the long term, plans are in place to construct a methodology to assess and define country level risk and thresholds.

AFI members recognize that it is critical to deliberate on how financial integrity measures and financial inclusion can complement each other. To move the financial inclusion agenda forward, progress on financial integrity must be accomplished along with inclusion.