Basel AML Index 2020: Weak oversight and dormant systems leave countries’ doors wide open to money laundering

Released today, the 9th Basel AML Index will disappoint anyone wishing for tangible progress in combating money laundering and terrorist financing (ML/TF) around the world. 

The average ML/TF risk score across all 141 countries in the 2020 Public Edition of the Basel AML Index remains unacceptably high at 5.22 out of 10, where 10 equals maximum risk. In fact, only six countries improved their scores by more than one point. 35 countries went backwards.

Too many countries’ financial systems remain too exposed to money laundering, terrorist financing and related crimes.

Weak supervision – does that explain Wirecard?

Digging into the data behind the annual AML ranking might help explain why money laundering scandals keep hitting headlines, even in countries that appear to be low risk. Germany's Wirecard debacle is just the latest in a string of financial scandals that beg the question: How could nobody have noticed earlier – and stopped – what was going on? 

In this year's report, you can read how data from the Financial Action Task Force (FATF) reveals serious failings in the quality of AML supervision almost across the board. Of the 100 countries assessed so far with the new FATF assessment methodology, a third score zero for the effectiveness of their supervisory bodies and measures designed to safeguard financial systems from abuse.

AML systems that exist but don't work

In his final statement as FATF president in 2019-20, Xiangmin Liu said: “The challenge many countries face today is not the absence of comprehensive global standards, but the effective implementation of those standards.” Echoing this, the European Parliament has stated that its Members “deplore the incorrect and patchy implementation" of AML/CFT rules in member states.

We are sad to say that the findings of this year’s edition of the Basel AML Index underscore the validity of these statements. Weak implementation and effectiveness are problems that the Basel AML Index has noted ever since the FATF started using its fourth-round evaluation methodology to assess not just the technical compliance of a country’s AML/CFT systems but their effectiveness in practice. 

The trend is clear: most countries that undergo a fourth-round FATF evaluation rate poorly for effectiveness. This has a major impact on their performance in the Basel AML Index, which weighs countries’ results in effectiveness as twice as important as their results in technical compliance. A lot of countries may have strong systems in place, but in practice they are not working. Or, the countries are not making them work. 

How money laundering risks are changing: human trafficking gains in importance

The Basel AML Index also showcases the changing nature of money laundering risks. This year's Index contains a new indicator for human trafficking, the Trafficking in Persons (TIP) Report of the US Department of State. This change reflects the huge and growing proceeds generated by this transnational crime and laundered through international financial systems.

Human trafficking is said to be the third largest source of income for organised crime groups after drug and arms trafficking, generating an estimated USD 150 billion in profits each year.

Regional deep dives

This year, we're zooming into money laundering risks in different regions. Our regional infographics show how countries score in relation to each other – and in too many cases let their neighbours down. 

The regional deep dives also highlight each region's weakest points and how the region compares to global averages across five risk categories relevant to evaluating ML/TF risk.

Policymakers should look at the regional deep dives and analyse their respective jurisdictions’ risks in detail to make plans for serious reform. No country is doing well. We call on all countries to step up their game.

Find out more

• The Basel AML Index is developed and maintained by our International Centre for Asset Recovery (ICAR)
• Visit the Basel AML Index website
• Download the 2020 report