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> Posted by Ignacio Mas and Claire Alexandre
A policymaker’s dilemma: how to pursue a policy of access to a bank account for everyone, while at the same time erecting regulatory barriers to the opening of those accounts to prevent their misuse. It’s like pushing the accelerator and putting on the brakes at the same time. This is not to belittle law enforcement concerns, chiefly the need to prevent or detect money laundering. But as we argued in a previous blog post, neither financial inclusion nor law enforcement are well served by keeping the bulk of the population away from modern digital — and hence, inherently more traceable — payment systems.
These objectives can be easily reconciled by making account opening trivially easy at first, and tightening the requirements for documentation and record-keeping progressively as the accounts become larger and more active. With this approach, everyone wins. New-to-banking customers can learn about how to use the account before they are asked to submit to onerous Know Your Customer (KYC) obligations. Banks don’t need to put in place costly KYC processes for customers that are not yet profitable. And law enforcement agencies can get relevant information on accounts commensurate with the risks involved. Read the rest of this entry »
> Posted by Claire Alexandre and Ignacio Mas, Bill & Melinda Gates Foundation
It is commonly perceived that there is tension between the goals of financial inclusion and those of law enforcement. Many people point at the enhanced money laundering and terrorist financing risks which would arise if two to ten times more people were able to do financially what you and I can already do. (A little help on the math: That’s what it means to achieve universal financial inclusion in developing countries that currently have coverage rates in the 10-50 percent range.)
Enlightened policy makers on both sides talk about the need to be reasonable, to find the right balance between these two objectives through risk-based regulations.
This plea for balance is nice, and it’s nicer still to see more and more policy makers striving to be aware of the multiple agendas. But the trade-off isn’t between these two objectives, it’s elsewhere. Read the rest of this entry »
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