The Financial Action Taskforce has published a consultation paper on revisions to its anti-money laundering and counterterrorism financing standards relating to financial inclusion. The consultation is part of FATF's program of work to address the unintended consequences of AML/CFT measures.
The revisions focus on recommendation 1 (assessing ML/TF risks and applying a risk-based approach) and its Interpretive Note, with corresponding changes to recommendations 10 (customer due-diligence) and 15 (new technologies) and related Glossary definitions. The proposed revisions aim to better promote financial inclusion through increased focus on proportionality and simplified measures in the risk-based approach, and to give countries, supervisors, and financial institutions greater confidence and assurance when implementing simplified measures.
In particular, FATF is seeking views on the following revisions: (i) replacing the term "commensurate" with "proportionate" in recommendation 1, in order to clarify how these concepts should be applied in the context of a risk-based approach; (ii) amending supervisors' requirements to "review and take into account the risk mitigation measures undertaken by financial institutions/designated non-financial business and professions", to avoid overcompliance resulting from an only partial understanding of the risks, and also to consider proportionality in the engagements with them; (iii) replacing "countries may decide to allow simplified measures" with "countries should allow and encourage simplified measures", to place an explicit requirement on countries to be more active in creating an enabling environment for implementation of simplified measures; and (iv) adding a qualification to "non-face-to-face customer-identification and transactions" ("unless appropriate risk mitigation measures have been implemented") to reflect technological advancements in digital identity systems that may reduce the risks associated with non-face-to-face interactions, and recognize that in many countries this has become the normal mode of interaction with financial institutions. Annex A to the consultation paper contains the draft text of the proposed revisions. The deadline for comments is December 6, 2024.
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