Anti-Money Laundering, Know Your Customer, and Curbing the Financing of Terrorism

The report analyzes how international anti-money laundering (AML) and countering the financing of terrorism (CFT) standards, primarily those from the FATF, affect financial inclusion. It highlights the trend of 'de-risking'—where banks wholesale cut off high-risk markets like Somalia—as an unintended consequence of these regulations. The author argues for a shift toward a Risk-Based Approach (RBA) and the adoption of biometric digital identities to ensure the 'unbanked' do not become 'unbankable'.

• The dominance of the US Dollar as the world's reserve currency grants US regulatory authorities extensive jurisdiction over any bank settling transactions in US Dollars, leading to multi-billion dollar fines and causing significant concern within the global banking community.
• Banks have responded to strict AML/CFT regulations by 'de-risking', which involves the wholesale closure of correspondent bank accounts and withdrawal from markets in emerging countries, particularly in Africa, Latin America, and the Caribbean.
• The FATF has explicitly stated that de-risking through the wholesale cutting loose of entire customer classes is not in line with its standards, advocating instead for a Risk-Based Approach (RBA) where measures are commensurate with identified risks.
• In Somalia, the remittance crisis is driven by two root causes: the lack of capacity in the Central Bank of Somalia to provide robust regulatory supervision and the absence of formal identity documents for customers.
• National digital identity initiatives vary in success: India's Aadhaar system has registered over one billion people to streamline customer due diligence, while Nigeria's NIMC card has reached only an estimated 3% to 4% of the population.
• Terrorist financing via prepaid debit cards has led to pressure, particularly from France, to reduce Risk-Based Approach (RBA) customer due diligence thresholds to zero, potentially hindering financial inclusion.
• Biometrics are expected to significantly impact global financial services in the coming years to secure 'cash out' transactions and verify cardholders, with implementations already seen in Pakistan, Peru, and South Africa.

APA

FSD Africa (2017). Anti-Money Laundering, Know Your Customer, and Curbing the Financing of Terrorism. https://fsdafrica.org/wp-content/uploads/2025/05/17-03-30-AML-Report-1.pdf

Chicago

FSD Africa. Anti-Money Laundering, Know Your Customer, and Curbing the Financing of Terrorism. 2017. https://fsdafrica.org/wp-content/uploads/2025/05/17-03-30-AML-Report-1.pdf.

Wikipedia

{{cite report |author=FSD Africa |title=Anti-Money Laundering, Know Your Customer, and Curbing the Financing of Terrorism |date=April 2017 |url=https://fsdafrica.org/wp-content/uploads/2025/05/17-03-30-AML-Report-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fsdafrica2017antimoney, author = {{FSD Africa}}, title = {{Anti-Money Laundering, Know Your Customer, and Curbing the Financing of Terrorism}}, institution = {FSD Africa}, year = {2017}, month = apr, url = {https://fsdafrica.org/wp-content/uploads/2025/05/17-03-30-AML-Report-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }