Key trends in 2019

Money laundering and terrorist financing risks vary greatly from region to region, country to country, and even within countries. However, some key patterns and trends in ML/TF risk can be identified.

General trends

Some progress – but very slow

More countries showed slight improvements in their risk scores in 2019 than last year, but there have been no substantial changes indicating significant progress in tackling ML/TF. This confirms the general trend visible over the eight years since the Basel AML Index was first calculated: most countries are slow to improve their resilience against ML/TF risks.

Improvements are minor 

Between 2018 and 2019, 27% of countries listed in the Public Edition (34/125) improved their scores by more than 0.1 point. However, only one country (Tajikistan) managed to improve its score by more than 1 point.

Some countries are still going backwards

The risk scores of 13% of countries (16/125) deteriorated by more than 0.1 point. Colombia, Latvia, Finland and China demonstrated the highest deterioration in risk scores.

Most countries are at significant risk

 60% of countries in the 2019 Public Edition ranking (74/125) have a risk score of 5.0 or above and can be loosely classified as having a significant risk of ML/TF. This compares with 64% in 2018. The mean average level of risk, though marginally better than 2018, remains above this (5.39 in 2019 compared to 5.63 in 2018).

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Lowest performing countries: Mozambique, Laos and Myanmar

Mozambique, Laos and Myanmar are the lowest performing countries out of the 125 countries assessed by the Public Edition of the Basel AML Index. These three countries are on the US INCSR list of major money laundering countries. Only Myanmar has been assessed by the FATF fourth-round methodology, which may influence comparability between the countries.

Mozambique

Mozambique’s overall ML/TF risk score is 8.22 out of 10. The quality of its AML/CFT framework (Domain 1) is poor (9.28), based on data from the FATF (9.08) and the US INSCR (10), which lists it as a major money laundering jurisdiction. Poor border controls and weak government institutions expose the country to cross-border crimes related to drugs and human trafficking. Mozambique is also vulnerable to other predicate offences including corruption, car theft and smuggling, robbery, cash smuggling, illicit trade in precious metals and stones, customs fraud and goods smuggling.

Mozambique has high risks associated with corruption, which is a pervasive problem in the country. The country scores 7.11 for corruption (based on the TI CPI) and 7.70 for bribery risks (based on the TRACE Bribery Risk Matrix). In January 2019, Mozambique announced the indictment of 18 individuals in connection to the USD 2 billion “tuna bonds” scandal that plunged the country into its worst financial crisis since independence. According to the Organized Crime and Corruption Reporting Project (OCCRP), in 2013 the former finance minister Manuel Chang “approved $2 billion of government loans from Credit Suisse and Russian bank VTB Capital, partially concealing them from donors including the International Monetary Fund (IMF). The loans funded maritime projects including a state-owned tuna fishery. However, an estimated 10 percent was diverted into bribes and kickbacks”. Mozambique defaulted on the loans in January 2017, plunging the country into a financial crisis with debt soaring to 112% of GDP. 

The country also fares poorly on Financial Transparency and Standards (Domain 3), with a score of 6.5. The country’s risk level in Domain 4 (Public Transparency) and Domain 5 (Political and Legal Risks) is medium. The country faces issues with the strength of public institutions, as well as the financial openness of political parties and the level of media freedom.

Laos

Laos has an overall score of 8.21 and continues to face a high risk of money laundering despite leaving the FATF’s list of jurisdictions with strategic deficiencies in 2017.

The country has high risks relating to the poor quality of its AML/CFT framework (Domain 1), scoring 9.12 out of 10. The country also has a low performance rating according to the FATF assessment, with a score of 8.87 out of 10. However, the latest FATF report on Laos was issued in July 2011 and the country has not gone through a fourth-round evaluation, which impacts on the validity and accuracy of its score. The main issues noted in the 2011 report related to the general lack of awareness of AML/CFT and the lack of dedicated resources to undertake required reforms. The report also noted a high concern about drug-related illicit proceeds (estimated at about 10% of GDP or USD 750 million) as well as deficiencies in the criminalisation of ML and the absence of a freezing mechanism.

The US INCSR lists Laos as a major money laundering jurisdiction, giving it the highest risk level of 10. The main vulnerabilities relate to the cash-driven economy and limited law enforcement capacities, as well as the existence of widespread corruption, drug and human trafficking, and environmental crimes. The main sectors vulnerable to risk include the banking industry, stock market, insurance providers, casinos, the real estate industry and money exchange shops.

The country’s performance in Domain 2 (Corruption and Bribery) is also poor, with a score of 6.73 under TI CPI data and 7.10 under the TRACE Bribery Risk Matrix. Corruption is a high risk for companies operating in Laos and, as stated in a GAN report, “petty bribery is another dimension of corruption in Laos; companies are likely to encounter this when trading across borders, paying taxes or acquiring public services”. In June 2019, the ruling communist party announced an anti-corruption campaign. It remains to be seen whether this will lead to any immediate results.

Laos performed poorly in Domain 3 (Financial Transparency and Standards), with a risk score of 6.16, and Domain 4 (Public Transparency and Accountability), with a score of 7. In Domain 5 (Political and Legal Risks), Laos scored 6.82, reflecting a weak and inefficient judiciary as well as a low level of press freedom.

Myanmar

Myanmar’s overall score is 7.93. The quality of its AML/CFT framework (Domain 1) is poor, with a score of 8.6 based on data from the FATF (8.2) and US INSCR (10).

The country was assessed with the FATF’s fourth-round methodology in September 2018, and its performance in the 11 Immediate Outcomes ­– which measure the effectiveness of AML/CFT measures ­– was only 3%. Technical compliance was rated at 48%. The overall FATF score in the Basel AML Index is now 8.2, compared to 7.3 based on the previous 2011 FATF report. This does not necessarily reflect a deterioration of the country’s position in FATF data. Rather, compared to the previous year, a more accurate picture of the situation is now available as Myanmar has undergone its first assessment under the new FATF methodology.

According to this latest FATF report, Myanmar is exposed to a large number of significant ML threats, including drug production and trafficking, environmental crimes (including the illegal extraction of jade, wildlife trafficking and illegal logging), human trafficking, corruption and bribery.

Myanmar is listed in the US INCSR as a major money laundering jurisdiction. According to the State Department report, Myanmar’s economy is underdeveloped, as is its financial sector, and the majority of currency is still held outside the formal banking system (although bank deposits have increased over the past several years). The INCSR supports the FATF findings, noting that major sources of illicit proceeds in Myanmar include narcotics, trafficking in persons, the illegal trade in wildlife, gems, and timber, as well as public corruption.

Corruption and bribery (Domain 2) present a serious issue, with high scores of 6.73 (corruption) and 7.1 (bribery). The country lacks financial transparency (with a Domain 3 score of 7) and faces issues related to political and legal risks (scoring 6.44 in this category). These factors make Myanmar potentially appealing to criminal organisations.

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Notable performers in 2019: Estonia, Finland and New Zealand

While there is no country with a zero risk of money laundering, the best performing countries according to the Basel AML Index in 2019 are Estonia, Finland and New Zealand.

Estonia

Estonia’s overall risk score is low at 2.68 out of 10. Estonia scores 2.95 in Domain 1 (Quality of AML /CFT Framework). The low risk score is largely driven by its good performance in the 2014 FATF country report, which produces a score of 3.61 and states that Estonia’s supervisory framework is “broadly sound”, and the authorities “have been effective in confiscating and seizing property in ML and drug related cases”. This score may worsen when Estonia is re-assessed according to the FATF fourth-round methodology focusing on the effectiveness of AML/CFT measures and not only technical compliance. Not only is it common for countries to obtain poorer scores when assessed with the latest methodology, but Estonia has been subject to recent criticism of its effectiveness in preventing ML. 

The Financial Secrecy Index (FSI) also ranks Estonia as a low-risk country, listing it 93rd out of 112 countries.The few identified ML/TF issues relate to legal entity transparency (public company ownership and corporate tax disclosure, as well as recorded company ownership).

Estonia also displays good results in Domain 2 (Corruption and Bribery), scoring 2.54. Indeed, in January 2019, the TI CPI named Estonia as the least corrupt country in emerging Europe. The country’s scores for Domains 3, 4 and 5 demonstrate a low risk in the areas of financial transparency, public transparency and legal and political risk. 

It is important to note that the data does not reflect the risk of Estonia’s geographic proximity to Russia and the issues that may be associated with this. Estonia has been labelled as one of the first ports of entry for Russian money launderers wishing to gain access to the European financial market.

Finland

Finland’s overall score is 3.17 out of 10. In Domain 1 (Quality of AML/CFT Framework) Finland achieved a score of 4.38. Of the three best performing countries, Finland is the only country that has been assessed by the FATF fourth-round methodology, which occurred in February 2019. The country achieved a 45% performance score in relation to effectiveness, and a 66% performance score in technical compliance. According to the FATF report, “Finland has an adequate level of understanding of its ML and TF risks, and especially of its main ML risks associated to the grey economy. Those risks are addressed in a well-coordinated manner and through an efficient and comprehensive set of preventive measures”.

Despite this, the FATF highlighted the risks connected with its geographical proximity to Russia: “Given its geographical location, Finland is a major European gateway to and from non-European countries, and strong business and trade relationships have developed between Finland and Russia, as well as with neighbouring Baltic States and other Nordic countries. This geographic proximity supports the development of commercial routes, including trade routes in illicit flows of goods and funds”.

The FATF report, which notes the limited ability of competent authorities to establish the beneficial ownership of legal persons in a timely manner: “The public registries are not fully reliable and relevant remedies to ensure that registers are kept up-to-date are not available”. This is supported by the FSI, which ranks Finland 71 out of 112 countries. The main issues relate to secrecy of ownership registration (recorded company ownership, limited partnership transparency and public company ownership). Finland demonstrates a low risk level in Domain 2, 3, 4 and 5.  

Even though the country possesses a low ML/TF risk, in March 2019 the National Bureau of Investigation of Finland said it recorded dozens of cases of international money laundering in Finland in 2018, and has so far seized EUR 225,000 from criminal gangs. The cases relate to professional money launderers, so-called “money mules”, who have opened up hundreds of bank accounts all over the country. This demonstrates the general point that no country, including those with strong AML/CFT frameworks and institutions, is immune to money laundering risks.                                                                                     

New Zealand

New Zealand’s overall score is 3.18. The country’s performance in Domain 1 is 4.22, based on a good performance in the FATF report (3.81) and the low-to-medium risks associated with financial secrecy (4.95). As with Estonia, New Zealand has not yet been assessed with the FATF fourth-round methodology, and the country report was issued in 2009. It is hoped that the findings from 10 years ago, namely that the ML offence is being actively enforced, and that the confiscation regime is “generally sound” and is put to frequent and effective use, hold true today. The report did however identify some issues of concern related to weak preventive measures.

New Zealand is ranked in the FSI as a low-to-medium risk country. The main issues are related to ownership registration and legal entity transparency.

The risks in Domain 2 (Corruption and Bribery) score below 1.30. The country also has a low level of risk in relation to Domain 3 (Financial Transparency), which scores 1.68, Domain 4 (Public Transparency), which scores 0.55 as well as Domain 5 (Political and Legal Risks), which scores 1.37. 

Even though the country has a low risk of ML/TF, the Ministry of Justice estimates that about NZD 1.35 billion (USD 0.9 billion) from fraud and illegal drugs is laundered in New Zealand each year.

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Top five improving countries

Tajikistan, Cambodia, Egypt, Indonesia and Portugal demonstrate the greatest improvements in the Public Edition of the Basel AML Index 2019.

Top 5 improving countries
Country 2019 score 2018 score Difference
TAJIKISTAN* 6.28 8.3 -2.02
CAMBODIA* 6.63 7.48 -0.85
EGYPT 4.55 5.35 -0.8
INDONESIA* 5.13 5.73 -0.6
PORTUGAL* 4.10 4.66 0.56

*Countries assessed with the 4th round FATF methodology

Different reasons explain the improvements. Tajikistan enjoys a huge decrease in its ML risk score due to a much more positive FATF assessment in December 2018, which produces a score of 5.53 compared to 9.35 previously. The country also shows slightly improved scores in corruption and political/legal risks. Similarly, Indonesia’s updated FATF evaluation in September 2018 improves its FATF score from 6.32 to 4.73.

Making such significant progress in FATF assessments under the fourth-round methodology is rather exceptional; in general, the fourth-round evaluations lead to a deterioration in country scores. 

Improvements in the risk score for Cambodia, Egypt and Portugal are mainly due to them being dropped from the US INCSR list of major money laundering countries. Cambodia also shows slight improvements in relation to public transparency and accountability.

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Why some countries have fallen in the ranking

Colombia, Latvia, Finland, China and Lithuania have dropped significantly in the ranking due to an increase in the ML/TF risk category after having undergone an FATF evaluation based on the fourth-round methodology. Colombia’s FATF risk score rose sharply from 2.72 to 5.57, Latvia’s from 3.26 to 5.87, Finland’s from 3.26 to 4.77, China’s from 4.63 to 6.23 and Lithuania’s from 3.68 to 5.33.

This may, but does not necessarily have to, indicate a sudden and dramatic deterioration in the countries’ ML/TF risks. It is more likely that it points to longstanding gaps in relation to the effectiveness of the concerned country’s AML/CFT framework that have only just been highlighted by the new FATF methodology. 

This represents an opportunity for these countries to fill these gaps, as well as a wake-up call for all countries to focus on effectiveness and not just tick-box compliance with FATF Recommendations.

Top 5 deteriorating countries
Country 2019 score 2018 score Difference
COLOMBIA* 5.87 4.42 1.45
LATVIA* 4.95 3.98 0.97
FINLAND 3.20 2.57 0.63
CHINA* 6.61 6.02 0.59
LITHUANIA* 3.55 3.12 0.43

*Countries assessed with the 4th round FATF methodology

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Comparison of countries across five domains

Domain 1: Quality of AML/CFT Framework

This domain consists of three indicators covering risks related to the quality of the legal and institutional AML/CFT framework of a particular country and the ability of its financial and economic system to mitigate risks of ML/TF. This domain has a 65% weighting in the overall score. Countries’ scores for this domain are based on assessment of data from their latest FATF MER (35% weighting), the FSI (20% weighting) and the US INSCR (10% weighting).

Top performing countries in Domain 1

Country

2019 score

ESTONIA

2.95

BULGARIA

3.16

MACEDONIA

3.28

CROATIA

3.59

SLOVENIA*

3.67

MONTENEGRO

3.90

LITHUANIA*

3.91

URUGUAY

3.93

DOMINICA

3.95

NEW ZEALAND

4.22

* Countries assessed with the 4th round FATF methodology

Performance in Domain 1 is largely driven by FATF data and the methodology used for the FATF assessment of a particular country. The FATF reports issued prior to the introduction of the fourth-round methodology are outdated and do not cover the extent to which financial systems and economies are resilient against threats of ML/TF. They also do not provide data on a country’s performance regarding the 11 FATF Immediate Outcomes, measuring the effectiveness of systems. 

As a consequence countries that have not yet been subjected to the FATF’s fourth-round evaluation usually have better scores. Indeed, out of the 10 best performing countries in this domain, only two (Slovenia December 2018, Lithuania February 2019) have had recent FATF assessments. It can be expected that the risk rating of countries that have not been evaluated by the FATF in the last few years, including of current top performers, will change significantly in the next few years due to scheduled FATF evaluations (e.g. Uruguay to be evaluated in July 2019, Macedonia in April 2021, Croatia in July 2021 and Montenegro in April 2022). There are no scheduled onsite missions for Estonia and Bulgaria for the next three years. Consequently, these countries will not drastically change their position in the Basel AML Index before the new FATF data appears. 

For comparison, if the Basel AML Index only scored countries that had undergone FATF fourth-round evaluations, the Domain 1 list of top performers would be:

Top performing countries in Domain 1 with an FATF 4th round evaluation

Country

2019 score

SLOVENIA*

3.67

LITHUANIA*

3.91

PORTUGAL*

4.36

FINLAND*

4.38

SWEDEN*

4.5

ISRAEL*

4.55

CZECH REPUBLIC*

4.74

SPAIN*

4.85

AUSTRALIA*

5.08

DENMARK*

5.17

The two tables on countries’ performance in Domain 1 show a significant difference in the minimum and maximum scores of the top 10 performing countries. For countries that have undergone FATF fourth-round evaluations, the minimum risk score 1 is lower (2.95 versus 3.67), as is the average result for these countries (3.65 versus 4.52).

Data from the FSI and the US INSCR also have an important impact on Domain 1 risk scores. For instance, none of the countries in the two lists of best performers (except Dominica) are in the US INSCR list of major money laundering countries, and none are among the top 20 countries in the FSI.

 

Country

2019 score

MOZAMBIQUE

9.28

LAOS

9.12

MYANMAR*

8.60

KENYA

8.56

AFGHANISTAN

8.55

CAPE VERDE

8.49

BENIN

8.33

LIBERIA

8.16

VIETNAM

8.12

Lowest performing countries in Domain 1

In contrast, the US INSCR list includes most of the lowest performing countries in Domain 1. Mozambique, Laos, Kenya, Afghanistan, Cape Verde, Benin, Liberia, Vietnam and the Cayman Islands are defined by the INSCR Vol. II as “major money laundering countries” for narcotics-related money laundering.

The distribution of ML/TF risk in Domain 1 across all of the assessed countries shows that most countries (87 out of 125) have a medium level of risk, referring to a score between 3.3 and 6.6. 36 countries have a high risk of ML/TF, scoring from 6.70 to 9.90. Only three countries are rated as low risk with a score below 3.3.

Domain 2: Bribery and Corruption

Domain 2 consists of two indicators, covering corruption (TI CPI) and bribery (TRACE Bribery Risk Matrix). Corruption and bribery are very common predicate offences to money laundering. Countries with high exposure or vulnerability to corruption are at a higher risk of money laundering as proceeds of corruption need to be laundered. 

Domain 2 has a 10% weighting in the Basel AML Index, which is equally distributed between TI CPI scores (5%) and TRACE Bribery Risk Matrix scores (5%).

Top performing countries in Domain 2

Country

2019 score

DENMARK

1.03

NEW ZEALAND

1.08

SINGAPORE

1.20

SWEDEN

1.31

FINLAND

1.35

NORWAY

1.40

SWITZERLAND

1.50

NETHERLANDS

1.60

LUXEMBOURG

1.68

UNITED KINGDOM

1.82

 

Lowest performing countries in Domain 2

Country

2019 score

VENEZUELA

8.32

AFGHANISTAN

8.12

YEMEN

8.03

HAITI

7.96

ANGOLA

7.84

CAMBODIA

7.81

ZIMBABWE

7.57

NICARAGUA

7.43

MOZAMBIQUE

7.40

BANGLADESH

7.39

Most countries have a medium risk of ML associated with corruption and bribery. The distribution of low- and high-risk countries is almost equal.

Domain 3: Financial Transparency and Standards

Domain 3 covers risks of ML associated with financial transparency issues. The data is taken from the IMF and World Economic Forum (WEF) and covers such indicators as strength of auditing, business disclosure, regulations of security exchanges and quality of financial standards.

Transparency in the business sector is an important component to provide a holistic assessment of money laundering risks. The Domain has a 15% impact on the overall score of countries.

Top performing countries in Domain 3

Country

2019 score

FINLAND

0.97

MACEDONIA

1.00

NORWAY

1.14

SINGAPORE

1.21

CANADA

1.41

HONG KONG SAR

1.44

AUSTRALIA

1.53

NETHERLANDS

1.68

NEW ZEALAND

1.68

LUXEMBOURG

1.69

 

Lowest performing countries in Domain 3

Country

2019 score

MARSHALL ISLANDS

8.00

YEMEN

7.62

HAITI

7.35

BAHRAIN

7.00

MYANMAR

7.00

GRENADA

7.00

ST. LUCIA

6.50

MOZAMBIQUE

6.50

LIBERIA

6.36

LAOS

6.16

Similar to Domain 1, most countries (81 out of 125) are identified as medium risk. However, this time there are 37 countries with a low risk rating and only six countries with a high risk rating related to their financial transparency and standards.

 

Domain 4: Public Transparency and Accountability

Domain 4 relates to the transparency of public disclosures, the openness of budgets and public accountability. An example of money laundering in this context relates to bribery and contributions to election campaigns and political parties in return for advantages. The Domain has a 5% impact on the overall score and consists of data from the International IDEA Political Finance Database, the Open Budget Index and the World Bank IDA Resource Allocation Index.

The best performing countries show a near-zero risk level in this domain. Finland, Luxembourg, Israel, Taiwan, Belgium, Estonia, Jamaica, Ireland and Lithuania all score between 0 and 1.

Lowest performing countries in Domain 4

SWITZERLAND

10.00

QATAR

10.00

BAHRAIN

10.00

SAUDI ARABIA

9.90

GAMBIA

9.00

CHINA

8.70

LEBANON

8.60

ZIMBABWE

8.57

YEMEN

8.50

VANUATU

8.00

Low performance in this domain is mainly associated with poor transparency levels of political finances, mainly related to inadequate campaign spending reporting by parties and candidates. Unlike the other domains, the distribution of risk scores shows that most countries are ranked as low risk.

Domain 5: Legal and Political Risks

This domain covers political and legal risks associated with media freedom and strength of the rule of law in the country. The data is taken from Freedom House, the WEF and the World Justice Project (WJP). Freedom of expression in the press is seen as an important tool to expose money laundering. Additionally, a functioning and independent judicial system is a critical measure to deter crime, including financial crimes and money laundering, through the threat of punishment. Domain 5 has a 5% weighting in the overall score.

 

Lowest performing countries in Domain 5

Country

2019 score

YEMEN

8.04

VENEZUELA

7.83

UZBEKISTAN

7.35

LAOS

6.82

CAMBODIA

6.74

TAJIKISTAN

6.69

AFGHANISTAN

6.65

ANGOLA

6.49

AZERBAIJAN

6.47

HAITI

6.45

Top performing countries in Domain 5

Country

2019 score

FINLAND

1.03

NORWAY

1.11

SWITZERLAND

1.23

LUXEMBOURG

1.37

NEW ZEALAND

1.37

NETHERLANDS

1.37

DENMARK

1.38

SWEDEN

1.41

CANADA

1.72

ICELAND

1.75


Like in all other domains except Domain 4, the majority of countries are rated as medium risk.

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