FATF ¦ Guidance on Financial Inclusion and AML and TF Measures
FATF provides Guidance on Financial Inclusion and Anti-Money Laundering and Terrorist Financing Measures
The Financial Action Task Force (FATF) issued updated guidance in June 2025 to help countries develop anti-money laundering (AML) and counter-terrorist financing (CFT) measures that support financial inclusion without compromising the fight against financial crime. This guidance builds on previous versions and incorporates recent revisions to FATF recommendations, emphasizing the importance of a risk-based approach (RBA) to balance financial integrity and inclusion objectives.
The Importance of Financial Inclusion for Financial Integrity
Financial inclusion means providing individuals and businesses access to regulated, safe, affordable, and appropriate financial services. It is critical because excluding people from formal financial systems often forces them to use unregulated channels or cash, which increases the risks of money laundering and terrorist financing. Vulnerable groups such as low-income households, rural populations, displaced persons, and undocumented migrants are frequently unserved or underserved by formal financial services. Enabling these groups to access regulated financial products not only improves their economic well-being but also enhances the transparency and effectiveness of AML/CFT efforts.
The Risk-Based Approach as a Foundation
Central to the FATF’s guidance is the risk-based approach, which requires countries and regulated entities to assess money laundering and terrorist financing risks carefully and apply measures that are proportionate to those risks. Where risks are higher, enhanced due diligence is necessary. Conversely, where risks are lower, simplified measures should be allowed and actively encouraged. This proportionality helps avoid a one-size-fits-all approach that can impose unnecessary barriers on legitimate customers and hinder financial inclusion. The guidance stresses the need for granular risk assessments that consider diverse factors including customer types, products, services, transaction channels, and the broader economic environment.
Overcoming Barriers to Financial Inclusion
Many individuals face obstacles to accessing financial services, including lack of official identification documents, high costs of services, geographic distance from financial institutions, regulatory restrictions, and limited digital literacy or access to technology. The FATF guidance encourages countries to adopt flexible solutions such as accepting alternative forms of identity verification — including digital IDs and biometric data — implementing tiered customer due diligence that allows basic accounts with limited functionalities, and simplifying onboarding processes based on assessed risk. Digital public infrastructure and digitization of government payments are also highlighted as effective means to promote inclusion while maintaining AML/CFT safeguards.
Addressing the Challenge of De-Risking
De-risking occurs when financial institutions terminate or restrict relationships with certain customers or sectors to avoid perceived risks rather than managing those risks appropriately. This practice can severely impact vulnerable groups such as refugees, non-profit organizations, certain industries, and regions with higher perceived risks. FATF firmly states that wholesale de-risking is inconsistent with the risk-based approach and undermines both financial inclusion and AML/CFT effectiveness. Countries are urged to identify the causes of de-risking and take regulatory, supervisory, and capacity-building actions to mitigate it.
Supervisory Role in Promoting Proportionate Measures
Supervisors play a crucial role in implementing the risk-based approach by setting clear expectations, providing guidance, conducting risk-based oversight, and engaging with regulated entities. They should ensure that regulatory frameworks allow for simplified due diligence in lower-risk scenarios and actively encourage its use. Supervisors must foster shared understanding of risks between authorities and the private sector through communication of typologies, risk assessments, training, and collaborative forums. Proper supervision helps regulated entities confidently apply proportionate measures without fear of enforcement for reasonable risk acceptance decisions.
Practical Implementation: Tiered Due Diligence and Simplified Measures
The guidance describes practical tools such as tiered customer due diligence where customers can open basic accounts with simplified verification upfront but may be required to provide additional information or enhanced monitoring as their usage or risk profile grows. Simplified customer due diligence (SDD) includes reducing the amount or timing of information collected, accepting alternative identity documents, verifying identities after account opening under controlled conditions, and tailoring monitoring intensity according to risk. These approaches allow financial institutions to serve previously excluded populations safely.
Digital Financial Inclusion
Digital financial services have dramatically increased access for underserved populations through mobile money accounts, e-wallets, digital IDs, biometric verification, and branchless banking via agent networks. The guidance highlights the importance of secure digital identity systems as a reliable means of customer verification that supports remote onboarding while maintaining AML/CFT controls. Building adequate infrastructure such as real-time verification systems is essential to mitigate risks like identity fraud. Regulatory frameworks should be adapted to enable these technologies while safeguarding privacy and security.
Dive deeper
- FATF ¦ Guidance on Financial Inclusion and Anti-Money Laundering and Terrorist Financing Measures ¦ Link