In contrast to financial risk models based purely on statistical calculations, the
Basel AML Index evaluates structural factors by quantifying regulatory, legal,
political and financial indicators that influence jurisdictions’ vulnerability to
ML/TF. The Index relies partially on perception-based indicators such as
Transparency International’s Corruption Perceptions Index.
Transforming qualitative data into quantitative data does not fully overcome the
limitations of perception-based indicators. Unlike financial risk models,
jurisdiction risk models cannot be used as a solid basis for prediction or for
calculating potential loss connected to ML/TF.'
The Basel AML Index methodology is reviewed each year to ensure that it continues to
accurately capture ML/TF risks. This may affect the comparability of the results
over the years.
Comparability between countries is also hampered by a lack of full coverage of
countries by FATF fourth-round evaluations. Data from FATF Mutual Evaluation Reports
(MERs) and Follow-up Reports, which assess the quality of countries’ AML/CFT
systems, makes up 35% of the total risk score in the Basel AML Index. The FATF
methodology was revised in 2013 (fourth round of evaluations) in order to assess not
only technical compliance with the FATF Recommendations but the effectiveness of
AML/CFT systems according to 11 Immediate Outcomes
As per 25 August 2022, 135 jurisdictions had been evaluated with the FATF's
fourth-round methodology. Although coverage with fourth-round evaluations is
increasing, several countries still have MERs based on older methodologies.