Policymakers view financial inclusion and financial integrity as mutually reinforcing policy goals. Since 2011, about 2 billion people have gained access to formal financial services. But how has increased financial inclusion served financial integrity objectives?
The FATF, integrity, and inclusion
The Financial Action Task Force (FATF) is the global standard setter for anti-money laundering and combating the financing of terrorism and proliferation (AML/CFT). Standards set by FATF are collectively referred to as “financial integrity” measures. They safeguard financial systems from criminal abuse by requiring customers to be identified, verified, and risk profiled, and by ensuring that transactions are monitored, enabling financial service providers to report suspicious activities to national financial intelligence units, where information becomes available to law enforcement.
In the years following the 9/11 attacks in the U.S., mass access to financial services was often seen as a vulnerability that could overwhelm financial integrity controls. There was a focus on stronger entry barriers and a preference to retain the traditional exclusivity of financial services. A 2008 CGAP-supported study challenged this view. It argued that financial inclusion and financial integrity are complementary because inclusion reduces reliance on cash and informal channels and steers more activity into regulated institutions where customers and transactions are monitored. Digital financial services (DFS), for example, generate audit trails that cash cannot provide. Institutions subject to AML/CFT obligations monitor activity and support law enforcement to act more effectively against money laundering and the financing of terrorism and proliferation (ML/TF/PF). Effective AML/CFT/CPF measures, on the other hand, help to sustain trust in regulated services.
This perspective gained traction among FATF stakeholders, with FATF adopting it in 2009, reflecting it in its 2011 financial inclusion guidance, and embedding it in the 2012 revised standards. The standards were further strengthened in 2025 to better support inclusion, accompanied by revised financial inclusion guidance.
The logic is straightforward, and the potential integrity benefits are significant. The UN FACTI Panel has estimated that curbing illicit financial flows could release hundreds of billions annually for Sustainable Development Goal financing. Empirical research remains limited but broadly supportive of the logic. Studies examining the relationship between financial inclusion and informality suggest that greater inclusion is associated with reductions in shadow economic activity. In low-income countries, improved access to formal services correlates with measurable declines in informality, indicating that accessible formal finance draws activity into monitored channels.
Alignment in practice
Alignment between inclusion and integrity occurs primarily at a systemic level. As access barriers are lowered, individuals who previously operated in cash can participate in the digital economy and in transactions subject to AML/CFT safeguards. Integrity frameworks, in turn, extend over a broader range of transactions, strengthening surveillance and detection capacities that may result in more effective combating of ML/TF/PF.
Alignment between inclusion and integrity occurs primarily at a systemic level.
Although the theoretical case for complementarity is well developed, empirical evidence remains narrow. Much research focuses on digital payments rather than savings or credit, and evidence on links between inclusion and specific financial crimes beyond corruption is sparse. Continued investment in regulatory capacity, supervision, and user literacy is therefore essential.
Pursuing inclusion and integrity together requires careful calibration. Outcomes depend heavily on system design, regulatory quality, and compliance. When digital systems lack adequate oversight, or regulation lags technology, new vulnerabilities arise. The transparency of digital transactions supports crime detection only when monitoring, supervision, and enforcement are effective.
Excessively stringent AML/CFT requirements can exclude legitimate customers who lack formal identification. In Sub-Saharan Africa, where many economies are largely informal, and documentation rates are low, rigid know-your-customer (KYC) requirements have limited account opening for precisely the populations inclusion efforts seek to serve.
FATF’s risk-based approach offers a framework for balance by recognizing that not all customers and transactions present equal risk. It allows simplified due diligence for lower risk situations while reserving enhanced scrutiny for higher risk cases. Proportionality is central to the approach, and the dual focus requires intentional design and oversight from providers, regulators, and policymakers. Design choices matter: transparent transaction records, robust consumer protection, customer verification, and proportionate AML/CFT controls enable confident transactions while maintaining market integrity. Sufficient crime-related financial and digital literacy is also important, as systems cannot protect users without their collaboration.
FATF’s risk-based approach offers a framework for balance by recognizing that not all customers and transactions present equal risk.
However, alignment is not automatic – it must be designed into systems. Some individuals resist formal services because they prefer the opacity of informal transactions. Where transparency is perceived as a cost, for example, due to concerns about taxation, privacy, or surveillance, financial inclusion may encounter resistance. Building trust requires accessible products, consumer and citizen protections, and clear and trusted public and corporate governance. De-risking remains a concern. Some institutions, wary of penalties, exit entire customer segments rather than applying a more granular risk-based approach. This can push legitimate users back into unregulated channels. Rapid growth in customer volumes without parallel growth in compliance capacity can also increase integrity risks even as inclusion indicators improve.
Financial integrity and crime
Financial integrity measures are designed to protect national and global financial systems from abuse related to ML/TF/PF. The FATF standards are therefore not primarily designed to protect individual customers from fraud and other crimes. Good ML/FT/PF measures do provide some individual protection against crime, but such protection is incidental. Inclusion may also shift or displace crime risks.
Where financial inclusion improves economic well-being, crimes driven by economic desperation may decline. A 2025 study examining the relationship between financial inclusion and property crime across 75 countries from 2004 to 2019 found that greater financial inclusion reduces property crime (especially burglary). The influence of financial inclusion on property crime was stronger in countries with higher income inequality and unemployment. Studies on fintech use and local theft and robberies in China have similarly found that the development of digital finance is associated with lower levels of theft and associated local crimes. DFS may therefore reduce exposure to cash-focused offences such as robbery. On the other hand, they expose users to cybercrime and scams.
Evidence from India showed that making social security payments digital reduced bribe demands, while a 2021 Kenya study found a 3.1% decline in bribes with mobile money adoption, because digital transactions leave detailed records that deter corrupt actors. Broader studies confirmed these encouraging trends in Africa. Inevitably, however, some bribes are paid digitally and may involve larger amounts. Financial inclusion can, therefore, impact specific types of crime. Alone, it may, however, not reduce overall crime and corruption in a country – it tends to shift crime risks rather than eliminate overall crime. FATF’s integrity measures, while providing some protection, do not fully shield users from crime risks and these displaced threats. Although with the current global surge in fraud, FATF supports the use of AML/CFT measures to combat cyber-enabled fraud and may provide more guidance in this regard.
Pursuing twin goals of inclusion and integrity
Whether FATF standards can fully achieve their high-level systemic integrity objective remains uncertain. After more than three decades, effective implementation levels globally remain low. As a result, the overall systemic impact of compliance cannot be measured yet. Large volumes of illicit funds still flow through formal financial services, trade channels, and virtual assets. Assets seized represent only a small share of global criminal proceeds. Three decades of investment have not yet been sufficient to yield convincing improvements in crime and governance. The current FATF mutual evaluation cycle, therefore, focuses on effectiveness rather than technical compliance with FATF standards.
Financial inclusion and financial integrity, however, reinforce one another. They can also enhance the protection of financial consumers against crime. Positive outcomes depend on system design, regulatory quality, compliance effectiveness, and the pace at which regulation and oversight adapt to changes in technology, crime patterns, and consumer behaviour. Therefore, policymakers should pursue inclusion and integrity together through proportionate, risk-based approaches that enhance security and anti-crime measures without creating unnecessary barriers.
