Focus Note: Global Trends in Anti Money Laundering

January 8, 2021
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A successful innovation in addressing the provision of basic financial services and at relatively low cost serving financial inclusion goals is known Digital Financial Services (DFS).  It mimics the basic transactional – and mostly non-credit - capabilities of bank accounts, but is provided by banks as well as non-banks such as mobile network operators (MNOs) and third parties known as Digital Financial Services Providers (DFSPs). Access to DFS is (primarily) via low-cost mobile phones,  and is sometimes also termed ‘mobile money’ and ‘mobile financial services’ (MFS). 

Sign-up for a DFS account usually requires provision of an acceptable form of identity to an ‘agent’ of the DFSP. These agents are sometimes called ‘human ATMs’ to recognize their critical role in providing (and accepting) digital ‘mobile money’ to and from customers by exchanging cash. This facility is often known as ‘cash in/cash out’ (CICO).  

AML/CFT requirements for DFS to detect and counter money laundering (ML) and terrorist financing (TF)  may be part of what has historically been referred to as Know Your Customer (KYC)  but which is now known as procedures for customer identification and verification (CIV).   These CIV procedures are in turn usually part of what is known as customer due diligence (CDD)  requirements. CIV and CDD are procedures, principles and processes that stem from efforts by national regulators and supranational Standard Setting Bodies (SSBs) such as the Financial Action Task Force (FATF)  to prevent and identify ML and TF. 

Local regulators will set these AML/CFT policies and principles that what are generally known as ‘reporting institutions’ – such as banks and DFSPs - must follow when dealing with customers and risk fines and other limitations on their activities if they do not. 

This focus note traces the evolution of the AML approaches and ability for companies to comply with AML rules, using a comparative approach between developed and developing world economies. 

It also addresses emerging AML-related issues surrounding the evolution of crypto-currencies as mainstream financial and monetary instruments and products.

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