Bank of Zambia urges banks to balance financial inclusion with strong compliance

The Bank of Zambia (BoZ) has urged financial institutions to strike a careful balance between promoting financial inclusion and maintaining strong anti-money laundering and countering the financing of terrorism (AML/CFT) standards.

The central bank described this balance as “complex but necessary,” particularly in developing economies seeking to expand access to financial services without compromising integrity.

In the latest edition of its Zambanker journal, the BoZ cautioned that while financial inclusion is vital for economic growth and poverty reduction, it can also increase exposure to financial crime risks if not properly managed.

The bank noted that factors such as limited customer documentation, informal financial systems, emerging digital technologies, and remote onboarding could heighten vulnerabilities to money laundering and terrorism financing.

Citing findings from the 2022 follow-up mutual evaluation by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), the BoZ observed that Zambia’s compliance levels in key areas — including customer due diligence and transaction monitoring — were rated “largely compliant” or “partially compliant.”

“As the Financial Action Task Force refines its global standards, regulators and financial institutions must work together to ensure AML/CFT frameworks enhance both security and inclusivity,” the BoZ stated.

It indicated that: “This approach will enable the sector to serve communities effectively while mitigating financial crime risks.”

The central bank underscored the importance of adopting RegTech (regulatory technology) and SupTech (supervisory technology) tools to strengthen compliance, supported by skilled personnel, strong governance, and robust risk management systems.

It further noted that informal mechanisms such as savings groups play a critical role in inclusion but require stronger connections to the formal financial system and proper oversight to ensure transparency and stability.

According to the Zambanker, financial inclusion and financial integrity should be seen as mutually reinforcing rather than conflicting goals. The BoZ advocated for a risk-based approach, urging institutions to tailor AML/CFT measures according to the specific risk level of each customer, product, or channel instead of applying blanket controls.

It also encouraged the use of digital identity systems, agent networks, and tiered verification processes to expand access safely.

The BoZ’s position aligns with growing regional and global recognition that inclusive finance and robust compliance can advance together to foster sustainable financial systems.

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