2 October 2017
Sasana Kijang, Kuala Lumpur

BNM – AFI Member Training on Anti-Money Laundering and Countering Financing of Terrorism Considerations and Approaches for Financial Inclusion

Opening remarks by Norbert Mumba, Deputy Executive Director, Alliance for Financial Inclusion (AFI)

Kristina Rai, Human Capital Development Centre, BNM

Participants from AFI member institutions

Colleagues from BNM 

AFI team

Welcome to the AFI-BNM training on Anti-Money Laundering and Countering Financing of Terrorism Considerations and Approaches for Financial Inclusion. This is the fourth and final Member Training being held in partnership with BNM in 2017. We sincerely appreciate BNM’s continued support in co-hosting the trainings. A special welcome to those attending an AFI event or an AFI training for the first time, hope you will benefit from this interaction.

We have with us for this training 38 participants from 34 countries [1] and 36 institutions expressing the diversity and richness of AFI programmes. In 2017, AFI has conducted over 20 capacity building events, which includes Member Trainings, Joint Learning Programmes, Training under the Public Private Dialogue, Peer Advisory Initiatives – each of them attended by diverse and experienced participants.

As it has happened earlier, we were overwhelmed by the number of applications received but we had to limit participation to preserve the quality of participation. Given the model of peer learning the learning should not be limited in this room but needs to be shared and implemented.

We took a leap in our CB initiatives by launching our first online course on “Certified Expert in Financial Inclusion Policy”, in partnership with Frankfurt School of Finance and Management. Registration for the second intake starts from 1 December 2017. My colleague, Madhurantika, from AFI’s Capacity Building Unit, can provide you further details on the registration and discounted rates that are available for you.

Coming to the topic of this training, we have had sessions on Anti-Money Laundering and Countering Financing of Terrorism Considerations (AML/CFT) and Approaches for Financial Inclusion Issues in our previous trainings. But given the increasing issues around AML/CFT leading to an increased role for regulators, this is the first time we are running a complete 5-day training on the topic.

The overall objective of this training is to ensure that AFI members – financial regulators and policymakers – are equipped with practical knowledge and tools to develop clear regulatory frameworks that addresses the issue of achieving an optimal balance between the goal of financial inclusion and the requirement for financial integrity and ultimately financial stability. The focus always must be on responsible financial inclusion, not only financial inclusion.

The goals of financial inclusion and AML/CFT are highly complementary, since high levels of financial exclusion presents a higher risk of money laundering and terrorist financing activities operating unseen in the unregulated grey economy. This has been clearly recognized by the Financial Action Task Force (FATF) and other global standard setting bodies (SSBs), which have allowed some flexibility in the standards to take account of financial inclusion objectives. To develop a robust financial system and ensure financial integrity, it is therefore important that the AML/CFT regulations are not rigid and disproportionate to push financial players out of the system. Nevertheless, tension can arise when implementing AML-CFT regulations in practice, since overly conservative regulation at the national level, or over compliance with regulations by financial institutions, is common for fear of being penalized by assessors or regulators or law enforcement. The key to resolving this seeming contradiction is to effectively implement proportionality in regulation and policy making, and this can only be achieved through a process of national dialogue involving all key players.

The practice of de-risking by financial institution which has accelerated in recent years is further exacerbating the difficulty in finding an optimal balance, by reducing available options and adding to cost for consumers, particularly regarding cross-border payments. De-risking may create and add to risk for the financial system and adversely affect consumers especially the vulnerable. So, it is important that the regulatory frameworks help in including the diverse financial sector players into the system rather than exclude them. The financial system should be able to provide alternative measures to assist management of risk rather than financial institutions seeing to avoid risk altogether by withdrawing services from some sectors and jurisdictions.

Another new challenge is that technological innovations are increasing very rapidly. While they bring with them huge potential for enhancing financial inclusion, they also need to be effectively regulated and supervised to ensure they do not expose the financial system to new financial integrity, or financial stability risks. A key role for financial regulators is to keep in sight the need for effective regulatory and oversight regimes over emerging technologies, to both manage the risk and at the same time ensure that innovative growth is not stifled by lack of an enabling ecosystem. Technological developments in fields such as RegTech and biometrics may also of course provide some of the solutions for strengthened regulatory compliance and implementation of proportionality.

Conclude with thanks to participants, BNM and AFI members.

Thank you and wish you an interactive week.