Abstract
PurposeThis study aims to examine the effect of Financial Action Task Force (FATF) compliance on the degree of financial inclusion (FI) across 174 economies during the period from 2011 to 2021, including developed and developing countries.Design/methodology/approachThis paper uses panel dynamic threshold regression to examine whether there is a threshold effect that exists in FATF compliance.FindingsThe findings show that FATF regulations enhance financial inclusiveness all over the world, but at the same time, FATF regulations regarding AML/CFT implications impose a high cost on financial institutions above the threshold of FATF compliance.Research limitations/implicationsThis study’s findings indicate that nations should undertake deliberate struggle to reduce the prevalence of money laundering (ML) and terrorism financing by putting in place effective FATF regulatory frameworks to support FI.Originality/valueThis study’s findings indicate that nations should undertake deliberate struggle to reduce the prevalence of ML and terrorism financing by putting in place effective FATF regulatory frameworks to support FI. Regulators must, however, guarantee that the process is cost-effective and efficient.
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