The 10th Basel AML Index portrays a bleak image of the anti-money-laundering effort all around the world. Despite global anti-money laundering measures, the global mean money laundering risk score, described as a jurisdiction’s susceptibility to money laundering/terrorist funding and its capacity to combat it, has risen from 5.22 to 5.3 out of 10.
Four Significant AML Risk Trends for 2021
The Basel AML Index’s goal is to present a fuller view of money laundering risk, as well as a valuable geographical study of money laundering risks, and the most recent edition highlights four significant AML risk trends for 2021:
- Ineffective anti-money laundering systems contribute to increased money laundering risk.
Despite the availability of cutting-edge technology for combating financial crime, poor AML systems are regrettably the norm across the world. Jurisdictions regularly score lower for money laundering protection than for enforcement — despite the weak enforcement effectiveness. According to the Index, while governments may have laws and institutions in place that are substantially compatible with FATF recommendations, they are mainly ineffective in reality.
According to the most recent FATF statistics, the average score for efficacy across all reviewed countries is only 30%, although the average score for technical compliance with FATF recommendations is 64%. In addition, only the United Kingdom and Spain received 67 percent or higher ratings on both preventive and effectiveness categories.
- Jurisdictions are battling with how to react to money laundering dangers posed by virtual assets.
As the usage of virtual assets like cryptocurrencies spreads worldwide, countries are scrambling to address the money laundering risks they pose.
According to FATF recommendation 15, to control and mitigate the risks arising from virtual assets, nations should ensure that virtual asset providers are controlled for AML/CFT reasons and subject to effective systems for monitoring and ensuring compliance with all relevant FATF Recommendations.
However, the Index discovers that the average compliance score for suggestion 15 across all countries analyzed fell from 70% to 60%. The Basel research warns of the possibility of “regulator shopping” in the virtual assets sector, in which states with lax regulatory frameworks serve as safe havens for unlawful behavior involving virtual assets.
- The slow and poor introduction of beneficial ownership registers maintains safe havens for illicit money.
Despite frameworks and promises to strengthen beneficial ownership registers, poor performance is common, hurting all global money laundering attempts.
No country has an efficient, beneficial ownership registration system in place, where legal persons and arrangements are barred from being used for money laundering or terrorism funding and beneficial ownership data is easily accessible. In fact, over half of the jurisdictions evaluated received a 0 for effectiveness.
The press has highlighted the magnitude of these flaws multiple times, most recently in the Pandora Papers. The research suggests that the government take serious efforts to strengthen beneficial ownership transparency.
- Non-financial enterprises and professions pose a significant risk to most nations’ AML/CFT systems.
Although customer due diligence duties apply to both financial institutions and designated non-financial companies and professions (DNFBPs), the research indicates that DNFBPs continue to underperform in terms of AML/CFT compliance. As a result, DNFBPs are not only poorly safeguarded against ML/TF threats, but their AML/CFT efforts are also shallow, producing a severe vulnerability and serious loophole danger.
The study specifically mentions DNFBPs’ low grasp of risks and duties, poor AML/CFT procedures implementation, and inadequate monitoring and oversight. It advocates for increased monitoring in order to enhance effectiveness.
November 2021, published on Sanction Scanner