BALANCING ANTI-MONEY LAUNDERING MEASURES AND FINANCIAL INCLUSION

What is it about?

This Article offers a critical analysis of the anti-money laundering and financial inclusion measures of the United Kingdom and Nigeria as provided in the United Kingdom’s Payment Accounts Regulations 2015 and the Central Bank of Nigeria’s (Anti-Money Laundering and Combating the Financing of Terrorism in Banks and Other Financial Institutions in Nigeria) Regulations, 2013. The paper will provide recommendations on how the measures could be strengthened. This is the only article to adopt this kind of approach.

Featured Image

Why is it important?

Promoting formal financial systems and services is therefore central to any effective and comprehensive AML/CFT regime. Financial inclusion and an effective AML/CFT regime can and should be complementary national policy objectives with mutually supportive policy goals. Accordingly, international AML/CFT Standards have flexibility, enabling jurisdictions to craft effective and appropriate controls taking into account the relevance of expanding access to financial services as well as the diverse levels and types of risks posed by different products and supply channels. The challenge is finding the right level of protection for a particular financial environment. The following research question explores how the right balance can be found: How can countries design AML/CFT measures that meet the goal of financial inclusion without compromising the measures that exist for combating money laundering, terrorist financing and other illicit transactions through the financial system? The Financial Action Task Force (FATF) Recommendations contain language that permits countries to some degree to adopt a risk-based approach to combating money laundering and terrorist financing. That language also authorises countries to permit financial institutions to use a risk-based approach to discharge certain of their AML/CFT obligations. By adopting such an approach, competent authorities and financial institutions are able to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the risks identified. This allows resources to be allocated efficiently. This paper critically examines the anti-money laundering measures of the United Kingdom and Nigeria, to determine what the best approach is. The best approach is likely the one that strikes a fair balance between protecting the financial system against money laundering and promoting financial inclusion.