The Wolfsberg Group (“the Group”) appreciates the opportunity to provide comments on the draft Financial Action Task Force (“FATF”) amendments to Recommendations 1, 10, and 15, and the relevant Interpretative Notes. The Group agrees with the FATF’s goal to create an anti-money laundering/countering the financing of terrorism (“AML/CFT”) regulatory environment that reinforces the risk-based approach while also supporting financial inclusion. Requiring excessive AML/CFT measures that do not respond to the identified risks is inefficient and ineffective, while the unintended consequences of restricting under-served communities’ access to financial services decreases the reach and effectiveness of AML/CFT regimes. As noted in the Group’s original Statement on Effectiveness, an effective AML/CFT programme will “have the benefit of reducing friction on customers and helping governments with their objective of financial inclusion”. The Group has reviewed the proposed changes to the FATF Standards and recommends edits that would, in our view, help deliver the FATF’s objectives. The Group sees the proposed changes, set out in more detail in Annex 1, as critical to creating an environment where competent authorities support financial institutions (FIs) in applying a risk-based approach. To that end, the Group strongly supports the inclusion of the term “proportionate” as a clear reminder of the importance of implementing a genuine risk-based approach at a national level. The challenge we see under the existing proposal is the suggestion that financial inclusion can be solely addressed through simplified measures (including simplified due diligence). While the Group is wholly aligned with the view that lower risk situations should warrant less stringent AML/CFT measures (including, when appropriate, simplified due diligence), it is often the case that when FIs provide services to customers who would otherwise be excluded from the financial system, FIs undertake “alternative measures”, not “simplified measures”, focused on addressing the unique risks represented by the customer in a distinct manner. We provide examples of such alternative measures in Annex 2. As such, the Group recommends complementing the existing proposed text with an additional reference to “alternative measures” to facilitate financial inclusion, mitigating the risk that countries misinterpret a renewed R1 as limited to addressing financial inclusion only through “simplified measures”. We believe this proposed change maintains support for a risk-based approach while permitting FIs to design their own AML/CFT framework, as determined by their size, scale, footprint, customers, and risk appetite in a way the current language does not. Financial inclusion requires a national-level regulatory framework more sophisticated than “simplified measures”. Existing, successful strategies for financial inclusion often result in overall ML/FT risk reduction for the country but may result in FIs taking on more risk within their own portfolios (e.g., transitioning an economy off cash through the offering of basic bank accounts). In such circumstances where the ML/FT risk (including fraud risk) to the FI is not lower, end-to-end simplified measures are not being applied, nor can that be the expectation of the FI. What FIs are doing in those circumstances is tailoring their controls to the unique risks the customer represents – “alternative measures”. In ideal situations, those alternative measures are then paired with national initiatives to support FIs in maintaining an effective AML/CFT framework. For example, the Group’s members often find that those countries most committed to financial inclusion demonstrate that commitment through support for innovative identification channels, including accessible digital identification. The Group stands ready to provide further examples of “alternative measures”, as well as identify the regulatory changes that can support their adoption. The Group can also share examples of where members have faced regulatory scrutiny, including enforcement actions or similar sanctions, for implementing alternative due diligence measures, or where simplified measures exist within the regulatory framework but are not encouraged/enabled in practice. As with previous FATF guidance, the Group hopes the outcomes of this consultation will lead to an active discussion between national governments and the private sector, perhaps during the Private Sector Collaborative Forum (PSCF) in March 2025.

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