Digital Financial is very pleased to have the opportunity to participate in FATF’s consultations with the private sector on the proposed guidance on proliferation financing. Our Managing Partner, Lisa Skinner hopes to bring attention to the disproportionate burden which may be placed on small, low-risk institutions such as credit unions and community-based banks, especially those in small and complex jurisdictions such as the Caribbean.
August 31, 2020
Public consultation on the Financial Action Task Force’s Recommendation 1 and its Interpretive Note
Thank you for the opportunity to comment on the proposed changes. The boutique consultancy I lead is currently engaged with indigenous banks andcredit unions in the Caribbean and many of our associates have extensive experience in deploying digital financial services to support very small business and the financial underserved.
I would like to express concern that that there appears to be no plan for a mechanism to assess the impact the proposed regulations would have on the spectrum of smaller financial institutions and non-profit organizations that are key supporters of very small business, women, young people, and the financially underserved.
The proposal calls for countries to support institutions and implement a proportional approach (Recommendation 7) but seems to be lacking a mechanism to assess the impact of regulatory changes on financial inclusion and the Sustainable Development Goals. Important questions/considerations would include: How many regulated institutions will be affected? What types of information will they need to consider? What kinds of expertise will they need to assess the vulnerability of their customers and products? How long should be spent on each assessment (on average)? How often will each assessment need to be revised in view of geopolitical developments? How should institutions access and process such information?
The current AML/CFT assessment provisions regarding proportional burden vs risk—which are almost identical to those in this proposal—do not seem to have been sufficient to prevent microfinance, small community, and member-based institutions from being obliged to assign levels of resources asymmetrical to the risk their operations represent.
Small providers and low-value customers of financial services look to international standard setting bodies such as FAFT to enable a safe and level playing field where the disadvantaged do not suffer for the actions of the unscrupulous. I respectfully ask that you consider this need as you move forward.