But the effectiveness of anti-money laundering systems in practice remains low in the face of evolving threats from fraud and other complex, often transnational financial crimes, the Index shows. 

Developed and maintained by the Basel Institute on Governance since 2012, the Basel AML Index is an independent, data-based ranking and risk assessment tool for money laundering and related financial crime risks around the world.

At the heart of the index, it ranks countries and jurisdictions according to how vulnerable they are to money laundering and related financial crimes, as well as their capacity to counter these threats. The index gives rankings for 164 countries. Myanmar, Haiti and the Democratic Republic of the Congo receive the highest risk scores, while San Marino, Iceland and Finland receive the lowest. A press release from the institute said that 177 jurisdictions are included in the "Public Edition." (This news service has sought to clarify the numbers and will update this article in due course.)    

Compliance up, effectiveness down – The 2024 Basel AML Index report highlights trends and debates on the fight against financial crime, including:

-- A 12 per cent improvement in technical compliance with Financial Action Task Force (FATF) standards over the last decade among countries with available data. Specific areas of improvement include targeted financial sanctions, measures to address higher-risk countries and politically exposed persons, and customer due diligence by designated non-financial businesses and professions (DNFBPs) such as lawyers, accountants and gambling businesses.

-- A positive trend is that countries with major deficiencies appear to be catching up. In some cases, significant progress follows a period on the FATF’s so-called grey list of jurisdictions subject to increased monitoring.

-- However the effectiveness of anti-money laundering measures globally as measured by the FATF remains stagnant at just 28 per cent, down from 30 per cent in 2021. The above-mentioned gains in technical compliance with the standards are not translating into effective investigations, prosecutions or sanctions for financial crimes – the weakest spot at 20 per cent effectiveness. Beneficial ownership transparency remains a major weakness at 21 per cent effectiveness, down by a percentage point in the last three years. And despite significant investments in anti-money compliance by the private sector, globally the average effectiveness of preventive measures and suspicious transaction reporting by financial institutions and DNFBPs has sunk to 22 per cent from 24 per cent in the same period.

-- Including fraud indicators in the Basel AML Index methodology this year has increased risk scores for high-income countries and those with large financial centres. But there are too many unknowns – no clear definition or standards, no methodology for assessing risk, severe underreporting and numerous constantly changing typologies. The report argues that in order to get a grip on the rising threats from fraud and its impacts on people, businesses and governments everywhere, global coordination on standards, definitions and data collection is urgently needed.

What does success look like? 

“The stark gap between technical compliance and effectiveness with regard to FATF standards raises concerns about whether investments in anti-money laundering systems are leading to tangible results,” Kateryna Boguslavska, who leads the development of the Basel AML Index, said.

“But financial crime is a multi-dimensional and fast-evolving phenomenon with significant social, political and economic implications. We cannot assess success by looking at systems in isolation; it is important to consider broader contextual factors such as financial transparency, civil liberties, media freedom and judicial independence. That is why the Basel AML Index provides data on these factors, alongside indicators of fast-evolving threats like environmental crime and fraud,” Boguslavska added.