Progress in addressing money laundering and terrorist financing (ML/TF) risks remains paralysed in many countries, according to the latest release of the Basel AML Index. The Basel AML Index is an independent ranking that assesses countries’ ML/TF risks and capacity to counter them. It draws on 18 indicators in five domains measuring different factors that contribute to high ML/TF risks.
The 11th Public Edition of the Basel AML Index reveals that the average global ML/TF risk remains stuck at 5.25 out of 10, where 10 is the maximum risk level. A tiny decrease in risks relating to the quality of AML/CFT frameworks has been offset by increased risks in the other four areas measured by the Basel AML Index: corruption, financial transparency, public transparency, and political/legal risks.
When it comes to tackling dirty money, most countries are taking one step forward and four steps back – and remaining too many steps behind criminals seeking to launder illicit funds.
Trends and concerns
The annual ranking this year includes 128 jurisdictions with sufficient data to calculate an overall risk score, up by 18 from last year. In addition, the Basel AML Index Public Edition report highlights some key trends in the data:
Both public and private actors are getting better at applying a risk-based approach to ML/TF. This is a positive development that enables governments and financial institutions to efficiently allocate resources towards the biggest and most serious risks or cases.
But progress is too slow in terms of compliance with standards on international cooperation and other crucial areas of AML/CFT. Fixing these weak spots in the global financial system is long overdue.
With regard to cryptocurrencies and other virtual assets, average compliance levels are dropping. This is a worrying development considering the speed at which criminals are embracing new technologies to commit crimes and launder money.
The gap between technical compliance with standards and the effectiveness of measures in practice is widening. The growing disconnect is especially concerning when it comes to key weak spots such as beneficial ownership transparency and the quality of supervision.
Too important and too complex for governments alone
Progress matters because AML/CFT is about more than just fighting financial crime – it is about protecting people and the planet. Weaknesses allow criminals to launder the proceeds of their corrupt deals, of fraud schemes, or of their illegal business trafficking in drugs, humans and wildlife. That makes the crimes they commit attractive. Those who ultimately suffer most are, as so often, ordinary people and our planet.
What’s more, failing to reach international AML/CFT standards can seriously impact business and investment opportunities.
The Basel AML Index Expert Edition hopes to make a contribution to addressing these challenges. It aims to help all stakeholders have a more in-depth understanding of their country’s main risks and weaknesses, thereby guiding efforts to effectively address them.
Covering 203 jurisdictions, the Expert Edition is reasonably priced for private-sector entities and free of charge for public authorities, multilateral institutions and non-profit organisations, as well as the media, academia and civil society. Users can quickly understand how a country is doing on vital policy areas relevant to AML/CFT and what the main problems are, plus compare with other countries in the region or income category. The data covers country-level sanctions and relevant blacklists.
In addition to its use for compliance, due diligence and policymaking, the Expert Edition will help identify crucial areas for advocacy or Collective Action, support research projects, and provide access to data and statistics for stories and investigative reports on corruption, money laundering, transparency and accountability.
October 4, 2022 Published by The Basel Governance.
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