Over the last 11 years since the Basel AML Index was first published, the average global risk of money laundering has changed depressingly little. This year is no exception, with the average risk level decreasing by a negligible 0.05% to 5.25 out of 10, where 10 is the maximum risk level. Changes in methodology and country coverage make an exact year-by-year comparison challenging, but the big picture is clear: we are not seeing significant progress in tackling money laundering at the global level.
A very slight improvement in performance relating to the quality of AML/CFT frameworks has been offset by increased risks in the other four domains measured by the Basel AML Index: bribery and corruption, financial transparency and standards, public transparency and accountability, and political and legal risks.
An analysis of data from FATF Follow-up Reports from December 2017 to August 2022 revealed that at least in terms of technical compliance with the relevant Recommendation (R), countries are generally getting better at assessing their specific ML/TF risks and applying a risk-based approach to tackling them.
Over a third of jurisdictions were degraded in R 15 on virtual assets and virtual asset service providers as a result of a follow-up report.
AML/CFT: about people and the environment
AML/CFT is about more than just fighting financial crime – it’s about protecting people and the environment. Hence the decision at our annual review meeting to include an indicator of environmental crime in the Basel AML Index methodology, alongside existing indicators relating to narcotics and human trafficking.
An initial analysis shows a nearly 100% correlation between low-risk countries for ML/TF and low-risk countries for environmental crime. The opposite is true for countries with high risks of ML/TF, which also display a significant risk of environmental crime (although with a lower correlation of 38%). The regions of Sub-Saharan Africa and East Asia and the Pacific demonstrate the highest and second highest risk scores for environmental crime, according to the current data.
Tackling financial crime needs to go hand in hand with efforts to tackle the sources of illicit funds – which all too often come from crimes that directly and severely impact ordinary people and our fragile planet.