Basel AML Index methodology

The Basel AML Index uses a composite methodology, drawing its components from various publicly available sources. The Index was originally developed as follows:

  1. Extensive research was conducted in measuring money laundering and its challenges before the indicators were carefully selected.
  2. Only relevant indicators, sub-indicators and assessments that examine AML/CFT frameworks and other factors related to money laundering risk were considered.
  3. This was followed by the weighing of indicators according to their importance, based on expert opinions with academic, financial and senior AML experts.
  4. The methodology is reviewed every year. During the annual review meeting, external experts verify the quality of the data, country coverage and methodology. 
Independent researchConduct extensive research in measuring money laundering and its challengesBased on this research, create and refine a compo-ite methodology, i.e. scores calculated from a variety of public sources Several factors can lead to a high risk score in the Basel AML Index (see figure)Data selectionIdentify indicators that examine AML/CFT standards and related factorsReview the data and methodology of all potential indicatorsSelect only relevant and reliable indicators of ML/TF riskWeightingConvert 14 selected indicators into a 0 (low risk) to 10 (high risk) scaleAggregate indicators using a weighting scheme based on a qualitative expert assessmentVerify resultsAnnual review by international and independent panel of expertsStatistical testing using regression analysis and correlation analysisReview process ensures that the rating is accurate, plausible and continues to capture the latest developments in the area of ML/TF risks
AML Index methodology

Factors that impact a country's risk score in the Basel AML Index

AMLindex_graphics_181003_04High riskHigh level of perceived corruptionLack of transparencyPoor financial standards and transparencyShortfalls in the AML/CFT frameworkWeak political rights and rule of law
Risk factors illustration

Data sources

Basel AML Index results are based on 14 indicators from publicly available sources. They fall into the following categories and are weighted in the composite index as follows: 

  • Quality of AML/CFT framework (65%)
  • Corruption risk (10%)
  • Financial transparency and standards (15%)
  • Public transparency and accountability (5%)
  • Political and legal risk (5%)

The expert weighting system used places greater emphasis on indicators reflecting AML/CFT assessments and financial standards. The FATF Mutual Evaluation Reports, Financial Secrecy Index and US INCSR therefore have a significant effect on the country’s final risk score.

Learn more about which indicators are used in the Basel AML Index and why.

Changes in 2018

The seventh edition of the Basel AML Index has seen two significant changes. To keep the comparability, the results of the 2017 Index have been recalculated using the 2018 methodology.

Approach to missing data

A country’s overall score is calculated based on available data only. Missing values are not replaced.

In previous Public Editions of the Basel AML Index, only countries for which data were available for a minimum of 8 out of 14 indicators were included in the ranking. However, such an approach has led to biases in assigning country scores. This can happen when, for example, only one indicator from the ML/TF risk category is available, so this indicator has a disproportionate impact on the country’s overall score.

To deal more effectively with this challenge in future, it was decided that from now on, only countries with data for two out of the three indicators in the ML/TF category will be included in the ranking. This has resulted in 17 more countries being removed from the ranking.

Adjusting the Financial Secrecy Index impact

In 2016, the FSI underwent sweeping methodological changes to reflect evolutions in several aspects of financial secrecy. In 2018, the FSI also increased its country coverage to 112 jurisdictions from a previous shortlist of 60 in 2009.

The original procedure to normalise the FSI score for the Basel AML Index involved giving each country on the list an automatic score of 5 out of 10, based on the assumption that every country on the list was considered a “secrecy jurisdiction”. Due to the FSI’s methodological changes, in 2018 it was decided to rescale the FSI in the same way as the other indicators in the Basel AML Index – from 0 to 10 – and to decrease the weight of the FSI from 25% to 20% in order to reduce the impact of the changes on the overall score. In turn, the weight of the FATF indicator increased from 30% to 35%.