AML/CFT: Balancing Access with Security Conference on Access to Finance Washington, DC 30-31 May 2006 Jennifer Isern, CGAP - PowerPoint PPT Presentation

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AML/CFT: Balancing Access with Security Conference on Access to Finance Washington, DC 30-31 May 2006 Jennifer Isern, CGAP

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Title: AML/CFT: Balancing Access with Security Conference on Access to Finance Washington, DC 30-31 May 2006 Jennifer Isern, CGAP


1
AML/CFT Balancing Access with Security
Conference on Access to Finance Washington,
DC30-31 May 2006Jennifer Isern, CGAP
2

AML is not a new concern
  • In the 1980-90s
  • Primarily for banks
  • Lower political, regulatory and industry priority
  • Customer ID main focus
  • Since the late 1990s
  • Increased priority
  • More active FATF
  • EU Directives and US Patriot Act
  • CFT concerns especially post 9/11
  • Includes banks, other FSPs, accountants, casinos,
    real estate agents, etc.
  • Customer ID plus account monitoring main focus

3
AML/CFT Requirements
  • Customer identification and verification
  • Plus
  • Checking watch list of sanctions, PEPs, etc
  • Account monitoring
  • Suspicious activity reporting to FIUs
  • Employee training
  • Internal controls

4
Reason for concern?
  • FATF recommendations adaptable to country
    context however
  • Fear factor reducing banks risk appetite?
  • Costs of compliance
  • Availability of customer IDs
  • Weak national ID systems
  • Lack of official documents
  • No proof of physical address or no permanent
    residence
  • Client information changes over time

5
Risk-Based Approach
  • Endorsed by FATF Recommendation 5
  • Financial Institutions may determine the extent
    of CDD measures on a risk sensitive basis
  • Depending on the type of customer, business
    relationship or transaction
  • For higher risk categories? enhanced due
    diligence.
  • Where low risks, countries may decide that
    financial institutions can apply reduced or
    simplified measures.

6
Examples of Country Adaptation
  • South Africa
  • Flexible approach to ID and verification
  • Compliance exemption for small balances and small
    transactions
  • United Kingdom
  • Dialogue Government, industry, law enforcement
    and consumer groups
  • Wider range of documents for proof of address
  • Government and industry issued guidance on
    compliance

7
Recommendations
  • Gradual implementation of regulations
  • Risk-based approach
  • AML/CFT risks vary by country, institutional
    type, and financial services provided.
  • Appropriate Exemption
  • Reduce requirements for transactions below a
    specified threshold
  • Consider exempting non-depository institutions
    offering low-risk financial products and with no
    link to the payments system.
  • WB and CGAP, 2005

8
Building Financial Systemsfor the Poor
Thank you
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