Basel AML Index 2024

Exploring the Basel AML Index 2024: Evolving Risks in Money Laundering

The Basel AML Index 2024, released in its 13th public edition, continues its vital role in assessing global money laundering risks. Developed by the International Centre for Asset Recovery at the Basel Institute on Governance, the index evaluates countries based on their vulnerability to money laundering and terrorist financing (ML/TF) threats. This year’s edition introduces pivotal updates that highlight the shifting dynamics of financial crime globally.

Key Findings

1. Rising Fraud Concerns: For the first time, the index integrates fraud indicators into its methodology. This inclusion reflects the growing scale of fraud as a driver of money laundering. The update underscores the need for global standards to combat fraud effectively and has notably increased risk scores for high-income countries and financial hubs, including New Zealand, Switzerland, and Singapore.

2. Incremental Improvements in Compliance: Since 2013, technical compliance with the Financial Action Task Force (FATF) recommendations has improved by 12 percentage points. Notable progress has been observed in targeted financial sanctions, measures to address higher-risk sectors, and customer due diligence practices by non-financial professionals.

3. Effectiveness Challenges Persist: Despite technical compliance advancements, the effectiveness of anti-money laundering (AML) measures remains a global concern. FATF evaluations reveal an average effectiveness score of only 28%, with critical weaknesses in investigations, prosecutions, and asset recovery.

Regional Insights

• Sub-Saharan Africa and Latin America show improvements in compliance, partly driven by FATF grey-listing, which incentivizes reforms.

• European Union and Western Europe, while better than the global average, face challenges in financial transparency, a weakness exacerbated by the inclusion of fraud indicators.

• East Asia and the Pacific exhibit increased fraud-related risks, highlighting vulnerabilities in cyber-dependent crimes and financial fraud.

The Role of the FATF Grey List

The report demystifies misconceptions about the FATF grey list. While often seen as a blacklist, the grey list identifies jurisdictions under increased monitoring due to strategic AML deficiencies. Surprisingly, grey-listing has catalyzed reforms in several countries, with Mauritius, Iceland, and Malta making significant strides to exit the list within a year.

Challenges and Recommendations

The report stresses the multi-dimensional nature of AML risks, pointing to factors like financial transparency, political stability, and legal independence as critical to resilience against financial crimes. It also calls for enhanced data collection and a coherent approach to addressing fraud, emphasizing the interdependence of AML measures and broader societal goals like peace and justice.

Conclusion

The Basel AML Index 2024 highlights both progress and persistent gaps in the global fight against financial crimes. As jurisdictions adapt to evolving threats, a holistic understanding of AML risks and sustained investment in compliance and enforcement mechanisms will be essential in fostering more secure financial systems worldwide.

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