A growing number of viable solutions fostering financial inclusion
Hawala, an alternative money transfer system, has been around for a long time, offering solutions to underbanked populations and partially compensates for the shortage of traditional banking services.(“ Hawaladars,” or informal money changers / brokers / agents, offer numerous services, including credit services.) 12 This alternative system talks loudly in many parts of the world; in principle, all underbanked regions use hawala.
Recently, new technologies have also made it possible to provide solutions to promote financial inclusion for populations lacking access to banking services.
Fintech companies can be an option, providing a solution for people without access to the traditional banking system and payment methods that require opening a bank account. Prepaid cards, for example, do not require you to open a bank account.
This is also the case for money services companies, such as money transfer companies( Western Union or MoneyGram), which provide cash access in the most remote corners of the planet. These money transfer companies are nothing more than formal companies using the same principles as hawala. People who receive a transfer from a money transfer company can withdraw cash even without having a bank account, and this cash can be withdrawn in shops or any other location approved by the money transfer company. This is how a resident of a remote African village with no nearby banking institution and no bank account can receive funds sent to them by a family member working in Europe.
Conclusion
De-risking is a threat to financial inclusion. Financial inclusion and profits are often not compatible ― and a company’ s primary objective is to make a profit.
When given the choice, companies, after assessing their risks and determining their risk appetite, tend to prefer de-risking. The mere idea of having to implement numerous costly compliance solutions to reduce regulatory risks leads them to choose the most advantageous and least risky products, customers and geographic areas. In other words, they opt for products that generate the most revenue and carry the least risk of loss.
However, the leeway given to companies tends to be limited. They find themselves squeezed between opposing legal obligations: international sanctions that encourage financial exclusion and AML / counter-terrorist financing( CTF) obligations that seem to pull in the opposite direction. The fight against money laundering and terrorist financing tends to promote financial inclusion in order to maintain control over activities. For AML / CTF, the bigger the battlefield, the better, so financial inclusion is a must, whereas international sanctions tend to provoke financial exclusion in order to weaken countries and populations without resorting to war( and financial exclusion is a must)― two different objectives. It is up to the company to navigate.
Nathalie Bosse, CAMS, CGSS, T & C director, nathalie. bosse @ mailo. com,
1
“ Glossary: social inclusion and equity,” Unesco World Heritage Convention, https:// whc. unesco. org / en / glossary / 365 /
2
“ High-Level Synopsis of the Stocktake of the Unintended Consequences of the FATF Standards,” Financial Action Task Force, October 27, 2021, https:// www. fatf-gafi. org / content / dam / fatf-gafi / reports / Unintended- Consequences. pdf
3
“ Report:‘ De-risking’ within MONEYVAL states and territories,” Council of Europe, April 2015, https:// rm. coe. int / report-de-risking-withinmoneyval-states-and-territories / 168071510a
4
“ Afghanistan: World Bank, ARTF Support Access to Finance for Small Businesses, Women’ s Economic Inclusion with $ 16M Grant,” World Bank Group, April 3, 2024, https:// www. worldbank. org / en / news / press-release / 2024 / 04 / 03 / afghanistanworld-bank-artf-support-access-to-financefor-small-businesses-women-s-economicinclusion-with-16m-grant
5
“ EU sanctions against Iran,” European Council, July 15, 2024, https:// www. consilium. europa. eu / fr / policies / sanctions-against-iran /
6
“ Directive 2014 / 92 / EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features,” European Union, July 23, 2014, https:// eur-lex. europa. eu / legal-content / EN / TXT / PDF /? uri = CELEX: 32014L0092
7
“ Report:‘ De-risking’ within MONEYVAL states and territories,” Council of Europe, April 2015, https:// rm. coe. int / report-de-risking-withinmoneyval-states-and-territories / 168071510a
8
“ Financial inclusion,” FinDev Gateway, https:// www. findevgateway. org / fr / inclusion-financiere
9
“ High-Level Synopsis of the Stocktake of the Unintended Consequences of the FATF Standards,” Financial Action Task Force, October 27, 2021, https:// www. fatf-gafi. org / content / dam / fatf-gafi / reports / Unintended- Consequences. pdf
10
Ibid.
11
“ Enhancing Financial Inclusion With a Risk-Based Approach’,” ACAMS, https:// www. acams. org / en / training / certificates / enhancing-financial-inclusion # faqs-739af089
12
“ The Hawala System: Its operations and misuse,” United Nations Office on Drugs and Crime, 2023, https:// www. unodc. org / documents / data-and-analysis / AOTP / Hawala _ Digital. pdf
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