Money Laundering and Terrorism

Hilary Tuttle


October 1, 2014

The Basel AML Index, compiled by the International Centre for Asset Recovery, is an annual assessment of country risk regarding money laundering and terrorism financing. Compiled by representatives from the financial industry, law enforcement, and dedicated international and nonprofit organizations, it focuses on anti-money laundering and counter-terrorist financing (AML/CTF) frameworks and 14 related factors such as financial and public transparency and judicial strength. Nations are then scored from 0 (low risk) to 10 (high risk).

The scoring methods rely on Financial Action Task Force (FATF) reports. The center notes, however, that FATF reports only assess the quality of a country's legal and institutional frameworks-the effectiveness and actual enforcement of these framework is not yet factored in. Thus, the index does not consider the amount of illicit financial transactions, but rather a country's vulnerability to money laundering and terrorism financing.

According to the 2014 report, Finland and Estonia are the only countries considered fully low risk, both scoring below the established risk threshold of 3.3. These countries are characterized by strong AML/CTF frameworks, high public and financial transparency and low levels of corruption.

At the other end of the spectrum, the Sub-Saharan region has the highest average risk score, with Guinea-Bissau, Kenya, Mali, Mozambique, Swaziland and Uganda at the greatest risk within the region. "These countries remain vulnerable to money laundering/terrorism financing, not only due to inadequate AML/CTF frameworks, but also due to weak law enforcement and high rates of corruption," the International Centre for Asset Recovery reported.

Hilary Tuttle is managing editor of Risk Management.