Financial Crime World

Financial Inclusion: A Key Factor in Combating Money Laundering and Terrorist Financing

=====================================

Financial products and services play a vital role in enabling financial inclusion, particularly for low-income individuals who often struggle to access mainstream financial systems. However, the provision of these services must be done through financial institutions that are subject to proper supervision and regulation.

The Importance of a Risk-Based Approach

The Financial Action Task Force (FATF) emphasizes the importance of a risk-based approach (RBA) to money services business (MSB). This approach can help foster greater financial inclusion while minimizing the risks associated with money laundering and terrorist financing. On the other hand, an indiscriminate termination or restriction of MSBs without proper risk assessment and mitigation measures could lead to increased financial exclusion.

What are Money Services Businesses?

Money services businesses (MSBs) refer to financial services that involve:

  • The acceptance of cash, cheques, or other monetary instruments
  • The payment of a corresponding sum in cash or another form

These transactions can involve one or more intermediaries and may include new payment methods. In Dominica, MSBs are defined as businesses that provide transmission of money or monetary value, cheque cashing, currency exchange, issuance of money orders or traveller’s cheques, payday advances, or other services specified by the Minister.

Licensing and Regulation

To operate an MSB in Dominica, a company must be established and licensed by the Financial Services Unit (FSU). MSBs have a duty of vigilance to perform several key functions, including:

  • Determining the true identity of customers
  • Recognizing and reporting suspicious transactions
  • Keeping records for a prescribed period
  • Establishing internal controls
  • Training key staff

Failure to comply with these requirements can result in criminal prosecution.

Consequences of Failure

The consequences of failure in vigilance are severe and may include:

  • Commercial losses
  • Reputational damage
  • Criminal liability for MSB operators and their senior officers

It is essential that MSBs prioritize vigilance to ensure the integrity of their operations and the financial system as a whole.

Promoting Financial Inclusion while Minimizing Risks

By implementing effective AML/CFT policies and supervisory frameworks for MSBs, we can promote greater financial inclusion while minimizing the risks associated with money laundering and terrorist financing. This approach will help ensure a safer and more secure financial environment for all stakeholders.