Financial Inclusion, Developing Economies and Effective Implementation of the Risk-Based Approach in AML/CTF: The Need for Legislative and Regulatory Leadership to Motivate Private Sector Commitment and the Role of Audit

Author: Hue Dang, CAMS-Audit

Financial inclusion is an oft-discussed issue in the context of income inequality, especially for developing economies that are either poorly-defined or lacking in clear government policy objectives. The purpose of this white paper is to clarify the definition of financial inclusion and discuss the essential roles that both the government and private sector must undertake to meet the financial inclusion objective. From the government sector viewpoint, this paper will discuss the key elements of the risk-based approach in anti-money laundering/counter-terrorist financing (AML/CTF) compliance essential to encourage financial inclusion adoption and illustrate the crucial role of national policy, coupled with clear regulatory guidelines to motivate private sector commitment to this policy issue.  At the same time, the paper also explores the business rationale for the banking sector to adopt financial inclusion, including the various new products/services pre-approved and simplified customer due diligence (CDD) requirements by the regulator.  Most notably, the paper highlights the essential role of audit in insuring that the banking sector does indeed understand and adopt the parameters of financial inclusion as laid out by the government of the jurisdiction in which the bank operates.

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