Financial Inclusion and Financial Integrity: Aligned Incentives?

SummaryThe Financial Action Task Force embraces financial inclusion as complementary to anti-money laundering and counter-terrorist financing, as it enhances transparency. This support is based on the premise that the increased use of formal financial services leads to a reduction of usage of informal services. We present evidence on eight African countries that both are not negatively associated. Moreover, informal employment and cash preference reduce the inclination to use mobile financial services. If an increase in transparency acts as disincentive to use formal services, the alignment of financial inclusion and integrity will fail.

► Globally financial inclusion and anti-money laundering are viewed as complementary.
► Many new users of formal financial services also use informal financial services.
► In given cases transparency can feature in the client trade-off.
► The alignment can fail where clients are concerned about increased transparency.