FATF Renews Its Guidance on Financial Inclusion and AML Measures

The Financial Action Task Force (FATF) has published its updated guidance on financial inclusion and AML measures. This is a major update to the FATF guidance that was last published in 2017.

The revised 2025 guidance fundamentally strengthens the Risk-Based Approach (RBA) to address the “unintended consequences” of de-risking and financial exclusion, which can push legitimate users to unregulated channels.

This update is primarily driven by a change in FATF recommendation 1 (R.1). The Previous wording of R1 suggested countries “may decide to allow” simplified measures in lower-risk situations.

This was replaced with a more forceful, directive language that they “should allow and encourage” them. These changes were drafted as an outcome of the FATF plenary session held in Paris on 25 October 2024.

Critics often argue that the overly cautious and rigid approach in AML/CFT laws and regulations leads to financial exclusion. However, this new update appears to tackle this issue, a point highlighted by FATF president, Elisa de Anda Madrazo.

She also pointed out that Financial inclusion also addresses a clear injustice in our society that mostly affects people in disadvantaged and vulnerable communities.

“In most cases, these people do not represent a higher risk but are deprived of financial services due to cost issues or not having formal documentation,” she further added.

Another key change in the updated guidance is eased criteria for regulators to grant AML/CFT exemptions.

Previously permitted only in “proven” low-risk situations, the standard has been relaxed to “assessed” low risk. This provides authorities with flexibility to exempt specific low-risk activities based on a careful risk assessment rather than overly documented proof.

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• Key Outcomes from the FATF Plenary held on 23-25 October 2024
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The guidance reiterates that “wholesale de-risking”, a practice of denying services rather than managing risks, is against the fundamental objective of a risk-based approach.

It emphasizes that sectors such as Money or Value Transfer Services (MVTS), Non-Profit Organisations (NPOs), and correspondent banking are not high-risk by default, and should be assessed on a case-by-case basis.

Finally, FATF’s new guidance embraces digital transformation by clarifying that non-face-to-face relationships are only potentially higher-risk if appropriate mitigation is absent.

It endorses reliable digital identity verification (e.g., liveness checks, cross-checks of data) as a way to facilitate secure remote onboarding and expand financial access.

For financial institutions, this serves as a clear signal to re-evaluate risk assessments, confidently apply simplified due diligence (SDD), manage rather than avoid risk, and adopt secure digital tools to both enhance compliance and reach new customers.