The Basel Institute on Governance released its 11th annual Basel AML Index on Tuesday, and the report presents a mixed picture of global attempts to tackle money laundering.
The index ranked anti-money laundering and countering of terrorist financing (AML/CTF) efforts across 128 jurisdictions worldwide, finding stalled or deteriorating progress in most areas.
But there are some (limited) grounds for optimism as governments continue to develop tighter AML regulation and financial institutions improve their money laundering detection methods.
Here are five key takeaways from the report.
1. Governments and banks are getting slightly better at fighting money laundering, but there are serious caveats
The Basel Index report notes that “most countries are taking one step forward and four
steps back” when it comes to tackling dirty money.
On the plus side, governments and financial institutions are improving at assessing money-laundering risks and “applying a risk-based approach” to counter such risks.
There was also progress on meeting some other Financial Action Task Force (FATF) recommendations among indexed countries, including action on sanctions, wire transfers and politically exposed persons.
Yet the report characterises progress on AML/CFT as “paralysed”, with the average global money laundering risk remaining almost exactly the same as in 2021.
This is because when it comes to fighting money laundering, governmental and institutional measures aren’t the only things that Basel takes into account.
The Basel Index scores countries according to five broad criteria:
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Quality of AML/CFT framework
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Bribery and corruption
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Financial transparency standards
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Public transparency and accountability
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Legal and political risks
The report notes that there has been a “tiny” increase in the quality of AML/CFT frameworks as governments introduce new legal measures to tackle financial crime.
But the improvement was offset by failures in the other four domains.
2. Corruption, transparency, political and legal risks are increasing
While AML/CFT frameworks have, on average, improved globally, risks relating to the other four domains—bribery and corruption, financial transparency and standards, public transparency and accountability, and political and legal risks— have increased.
All four of these risk domains were classed as having “deteriorated” since 2021’s report, meaning that, when combined with the slightly improved score for AML/CFT frameworks, the overall global average money-laundering risk score improved by only 0.05%.
In fact, Basel notes that there has been “depressingly little” progress in reducing money laundering risks since the organisation’s first AML Index 11 years ago.
“…the big picture is clear: we are not seeing significant progress in tackling money laundering at the global level,” the report states.
3. Authorities are not keeping up with crypto risks
This quote from the Basel Index will come as a surprise to no one:
“…organised criminals are increasingly using virtual assets and virtual asset service providers such as cryptocurrency exchanges to commit new forms of crime and launder stolen money.”
The report found that compliance levels with international standards are dropping when crypto was taken into account.
As criminals are innovating and finding new ways to move their money, the authorities are lagging behind.
This may change soon as more countries extend money laundering and asset transfer regulations to cover crypto transfers.
4. AML risks are decreasing slightly in the UK
The Basel Index scores each jurisdiction according to the extent of its money-laundering risks.
With a score of 3.63, the UK is ranked 117th in the world out of 128 jurisdictions—so the UK has the 11th lowest money-laundering risk score in the world, according to Basel’s methodology.
This is an improvement over 2021, in which the UK got a score of 4.05, and 2020, in which the UK scored 4.03.
5. Money laundering is too complex for governments alone
The ability for criminals to launder dirty money through legitimate institutions makes crime more attractive, Basel says in the press release accompanying its report.
Weaknesses in detecting money laundering “allow criminals to launder the proceeds of their corrupt deals, of fraud schemes, or of their illegal business trafficking in drugs, humans and wildlife.”
This reduces opportunities for companies to do business and make investments. But most importantly, “those who ultimately suffer most are, as so often, ordinary people and our planet”.
This means it’s both a moral and business imperative for financial institutions and other reporting organisations to do everything they can to tackle money laundering.
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