[{"data":1,"prerenderedAt":302},["ShallowReactive",2],{"news-assessing-national-risks-related-to-virtual-assets-2896":3,"news-assessing-national-risks-related-to-virtual-assets-2896-similar":27,"i-heroicons:arrow-left-20-solid":297},[4],{"id":5,"status":6,"date_created":7,"date_updated":8,"title":9,"type":10,"body":11,"date":12,"topic":13,"slug":15,"activity":16,"nid":17,"topics":18,"activities":19,"programme":8,"area":8,"websites":8,"language":20,"image":8,"translation_of":8,"countries":21,"tags":22,"authors":23,"images":24,"translations":25,"content":26},10625,"published","2026-06-04T21:13:53.000Z",null,"Assessing national risks related to virtual assets","News","This feature appears in the 2025 Basel AML Index Public Edition report. [Download the full report and related resources](https:\u002F\u002Findex.baselgovernance.org\u002Fdownloads).\n\n> ### Key takeaways \n> \n> Understanding national risks linked to virtual assets is now essential, as their use has moved from niche to mainstream and is increasingly exploited for financial crime. \n> \n> Risk assessments are inherently challenging as (a) virtual assets are borderless by design, (b) large parts of the ecosystem fall outside regulation and (c) reliable national-level data remains limited. \n> \n> Illicit activity involving virtual assets does not take place in isolation: offenders exploit the same weaknesses – corruption, fraud, weak supervision and poor enforcement – that already undermine the wider financial system. \n> \n> The Basel AML Index provides valuable indicators to assess both a jurisdiction’s structural vulnerabilities and its capacity to counter threats related to financial crimes in general, including those related to virtual assets, even though it does not include a dedicated virtual assets risk indicator. \n\n_Note: in this article we use the term virtual assets in line with the FATF’s [definition](https:\u002F\u002Fwww.fatf-gafi.org\u002Fen\u002Ftopics\u002Fvirtual-assets.html) of “any digital representation of value that can be digitally traded, transferred or used for payment”. The terms crypto, cryptoassets, digital assets, digital currencies, etc. form part of this loose family, though they are often defined differently in different contexts – a factor that also complicates risk assessments and data analysis._\n\n### Why assessing risks related to virtual assets matters \n\nGovernments and private firms alike are under growing pressure to understand the risks associated with virtual assets. What was once a niche is becoming a mainstream part of financial markets and a common feature in all forms of financial crime. \n\nAs the virtual assets industry continues to mature, national authorities that lack a clear understanding of the risks find themselves on the back foot when drafting legislation, supervising market participants or countering financial crime. \n\nFor financial institutions, a clear picture of jurisdiction-level risk is essential for customer due diligence, transaction monitoring, calibrating controls and taking strategic decisions about where or where not to operate. Financial institutions that misjudge these risks leave themselves exposed to illicit finance, reputational harm and potential regulatory action. \n\n### Why jurisdiction-level risk assessments are difficult\n\n#### 1\\. A borderless system by design\n\nUnlike bank accounts or trust funds, virtual asset wallets or addresses do not have a meaningful jurisdictional location. There is no crypto equivalent of “a bank account in Switzerland”. A wallet can be accessed anywhere and may be controlled by a person or entity whose location is unknown or easily obscured. Large parts of the virtual asset ecosystem also fall outside the boundaries of traditional financial regulation. Self-hosted wallets, peer-to-peer transfers, decentralised finance (DeFi) protocols and informal over-the-counter (OTC) brokers create pockets of activity that are largely invisible. Any jurisdiction-level assessment will inevitably be incomplete. \n\nThe activities of virtual asset service providers (VASPs) further complicate matters. A VASP may be established in one jurisdiction while primarily serving customers in another. In the absence of harmonised legislation or cooperation among supervisors, many operate across numerous markets with minimal physical presence or regulatory engagement. \n\n#### 2\\. Data is limited, patchy and uncertain\n\nReliable quantitative data on financial crime risks related to virtual assets at the national level is scarce. In addition to the issue of contrasting definitions and the technology’s borderless nature, several factors contribute to this lack. \n\nFirst, commercial blockchain analytics providers publish broad indicators of virtual asset adoption and estimates of illicit usage. These can be helpful for spotting trends but require careful interpretation. They rely on estimates and proxies, including web traffic to exchanges or intermediaries, and do not provide precise amounts or reliably distinguish licit from illicit activity. \n\nSecond, it is reasonable to assume that where adoption rises, illicit activity will also increase, simply because criminals use the same infrastructure as legitimate users. However, such relationships cannot be measured with confidence. \n\nThird, at the government level, many jurisdictions still lack a coordinated approach across authorities to collect, share and analyse statistics on money laundering and related financial crimes. In many jurisdictions, data on virtual assets is either not gathered consistently or not collected at all. \n\nWithout reliable data on virtual assets usage and risks, national risk assessments may become detached from real-world threats. The result: regulation and supervision that is either insufficient or unnecessarily burdensome. \n\n### How the Basel AML Index can be used\n\nFor the above reasons, the Basel AML Index does not offer a dedicated indicator for virtual assets. Nevertheless, the Index data is still useful because illicit activity involving virtual assets typically exploits the same underlying weaknesses that enable money laundering, corruption, fraud and other financial crimes in the traditional financial system. Where protections against fraud are weak, for example, where supervision is lacking or where enforcement of regulations is inconsistent or politically compromised, opportunities to misuse virtual assets for illegal purposes tend to expand. \n\n> Two components of risk \n> \n> In line with the holistic methodology of the Basel AML Index and most AML\u002FCFT risk assessment frameworks, evaluating jurisdiction-level risk related to virtual assets centres on two elements: \n> \n> a) _vulnerability_ to the illicit use of virtual assets; and b) _capacity to mitigate_ and respond to these threats. \n\n### Relevant indicators\n\nThe following graphic highlights indicators of the Basel AML Index that are relevant for assessing either _structural vulnerabilities_ that illicit actors may exploit, or a jurisdiction’s _capacity to counter_ threats. These can be viewed individually in the Expert Edition. \n\n\\[GRAPHIC\\]\n\n#### FATF data \n\nUsing the Expert Edition Plus subscription and its quantitative analysis of the latest FATF mutual evaluation and follow-up reports, Basel AML Index users can gain rapid insights into whether a jurisdiction’s AML\u002FCFT framework provides it with the capacity to _counter threats_ related to financial crimes generally, including those involving virtual assets. FATF Recommendations that may be highly relevant for this include: \n\n*   R.15 (new technologies) \n*   R.16 (payment transparency) \n*   R.26 & 27 (regulation and supervision) \n*   R.29–31 (law enforcement) \n*   R.36–40 (international cooperation) \n\nAn additional useful source of information for jurisdiction-level risk assessments is the FATF’s [_2025 Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers_](https:\u002F\u002Fwww.fatf-gafi.org\u002Fen\u002Fpublications\u002FFatfrecommendations\u002Ftargeted-update-virtual-assets-vasps-2025.html). This report summarises progress in implementing FATF Recommendation 15 by FATF members and additional jurisdictions with materially important global virtual asset activity. “Materially important” refers to the presence of large VASPs (accounting for more than 0.25 percent of global trading) and\u002For a large virtual asset user base. \n\n### Where to start \n\nFor jurisdictions at an early stage of assessing national risks related to virtual assets, the World Bank’s _[AML\u002FCFT National Risk Assessment on Virtual Assets and Virtual Asset Service Providers: Guidance Manual](https:\u002F\u002Fopenknowledge.worldbank.org\u002Fentities\u002Fpublication\u002Fbb5a7475-ac52-4697-afdc-5f618a550623)_ (published in October 2025) is a strong starting point. It covers both threats and vulnerabilities, as well as the effectiveness of mitigation measures. \n\nAdditional useful resources include: \n\n*   [Practical recommendations from regulators and supervisors](https:\u002F\u002Fbaselgovernance.org\u002F9crc-crypto-regulation), developed at the 9th Global Conference on Criminal Finances and Cryptoassets, on understanding financial crime risks linked to virtual assets and designing effective regulatory and supervisory frameworks. \n*   Structured public–private partnerships, such as the [Europol Financial Intelligence Sharing Public Private Partnership](https:\u002F\u002Fefippp.eu\u002F), which offer opportunities to learn from peers and obtain early insights into emerging threats and financial crime typologies involving virtual assets.","2025-12-05",[14],"","assessing-national-risks-related-to-virtual-assets-2896",[14],2896,[],[],"English",[],[],[],[],[],[],[28,61,86,109,136,192,216,242,272],{"id":29,"body":30,"status":6,"type":31,"date":32,"slug":33,"title":9,"image":34,"countries":35,"topic":8,"activity":8,"tags":36,"nid":8,"topics":37,"activities":42,"authors":45,"images":47,"websites":48,"area":49,"programme":52,"language":20,"translations":54,"translation_of":8,"user_created":55,"date_created":56,"user_updated":57,"date_updated":58,"content":59,"link":60},10590,"This feature appears in the 2025 Basel AML Index Public Edition report. \u003Ca href=\"https:\u002F\u002Findex.baselgovernance.org\u002Fdownloads\">Download the full report and related resources\u003C\u002Fa>.\n\n\u003Cblockquote>\n\u003Ch3>Key takeaways\u003C\u002Fh3>\n\n\u003Cp>\u003Cstrong>Understanding national risks linked to virtual assets is now essential\u003C\u002Fstrong>, as their use has moved from niche to mainstream and is increasingly exploited for financial crime. \u003C\u002Fp>\n\n\u003Cp>\u003Cstrong>Risk assessments are inherently challenging \u003C\u002Fstrong>as (a) virtual assets are borderless by design, (b) large parts of the ecosystem fall outside regulation and (c) reliable national-level data remains limited. \u003C\u002Fp>\n\n\u003Cp>\u003Cstrong>Illicit activity involving virtual assets does not take place in isolation\u003C\u002Fstrong>: offenders exploit the same weaknesses – corruption, fraud, weak supervision and poor enforcement – that already undermine the wider financial system. \u003C\u002Fp>\n\n\u003Cp>\u003Cstrong>The Basel AML Index provides valuable indicators to assess both a jurisdiction’s structural vulnerabilities and its capacity to counter threats \u003C\u002Fstrong>related to financial crimes in general, including those related to virtual assets, even though it does not include a dedicated virtual assets risk indicator. \u003C\u002Fp>\n\u003C\u002Fblockquote>\n\n\u003Cem>Note: in this article we use the term virtual assets in line with the FATF’s \u003Ca href=\"https:\u002F\u002Fwww.fatf-gafi.org\u002Fen\u002Ftopics\u002Fvirtual-assets.html\">definition\u003C\u002Fa> of “any digital representation of value that can be digitally traded, transferred or used for payment”. The terms crypto, cryptoassets, digital assets, digital currencies, etc. form part of this loose family, though they are often defined differently in different contexts – a factor that also complicates risk assessments and data analysis.\u003C\u002Fem>\n\n\u003Ch3>\u003Cstrong>Why assessing risks related to virtual assets matters \u003C\u002Fstrong>\u003C\u002Fh3>\n\nGovernments and private firms alike are under growing pressure to understand the risks associated with virtual assets. What was once a niche is becoming a mainstream part of financial markets and a common feature in all forms of financial crime.\n\nAs the virtual assets industry continues to mature, national authorities that lack a clear understanding of the risks find themselves on the back foot when drafting legislation, supervising market participants or countering financial crime.\n\nFor financial institutions, a clear picture of jurisdiction-level risk is essential for customer due diligence, transaction monitoring, calibrating controls and taking strategic decisions about where or where not to operate. Financial institutions that misjudge these risks leave themselves exposed to illicit finance, reputational harm and potential regulatory action.\n\n\u003Ch3>Why jurisdiction-level risk assessments are difficult\u003C\u002Fh3>\n\n\u003Ch4>1. A borderless system by design\u003C\u002Fh4>\n\nUnlike bank accounts or trust funds, virtual asset wallets or addresses do not have a meaningful jurisdictional location. There is no crypto equivalent of “a bank account in Switzerland”. A wallet can be accessed anywhere and may be controlled by a person or entity whose location is unknown or easily obscured. Large parts of the virtual asset ecosystem also fall outside the boundaries of traditional financial regulation. Self-hosted wallets, peer-to-peer transfers, decentralised finance (DeFi) protocols and informal over-the-counter (OTC) brokers create pockets of activity that are largely invisible. Any jurisdiction-level assessment will inevitably be incomplete.\n\nThe activities of virtual asset service providers (VASPs) further complicate matters. A VASP may be established in one jurisdiction while primarily serving customers in another. In the absence of harmonised legislation or cooperation among supervisors, many operate across numerous markets with minimal physical presence or regulatory engagement.\n\n\u003Ch4>2. Data is limited, patchy and uncertain\u003C\u002Fh4>\n\nReliable quantitative data on financial crime risks related to virtual assets at the national level is scarce. In addition to the issue of contrasting definitions and the technology’s borderless nature, several factors contribute to this lack.\n\nFirst, commercial blockchain analytics providers publish broad indicators of virtual asset adoption and estimates of illicit usage. These can be helpful for spotting trends but require careful interpretation. They rely on estimates and proxies, including web traffic to exchanges or intermediaries, and do not provide precise amounts or reliably distinguish licit from illicit activity.\n\nSecond, it is reasonable to assume that where adoption rises, illicit activity will also increase, simply because criminals use the same infrastructure as legitimate users. However, such relationships cannot be measured with confidence.\n\nThird, at the government level, many jurisdictions still lack a coordinated approach across authorities to collect, share and analyse statistics on money laundering and related financial crimes. In many jurisdictions, data on virtual assets is either not gathered consistently or not collected at all.\n\nWithout reliable data on virtual assets usage and risks, national risk assessments may become detached from real-world threats. The result: regulation and supervision that is either insufficient or unnecessarily burdensome.\n\n### How the Basel AML Index can be used\n\nFor the above reasons, the Basel AML Index does not offer a dedicated indicator for virtual assets. Nevertheless, the Index data is still useful because illicit activity involving virtual assets typically exploits the same underlying weaknesses that enable money laundering, corruption, fraud and other financial crimes in the traditional financial system. Where protections against fraud are weak, for example, where supervision is lacking or where enforcement of regulations is inconsistent or politically compromised, opportunities to misuse virtual assets for illegal purposes tend to expand.\n\n\u003Cblockquote>\n\u003Cstrong>Two components of risk \u003C\u002Fstrong>\n\nIn line with the holistic methodology of the Basel AML Index and most AML\u002FCFT risk assessment frameworks, evaluating jurisdiction-level risk related to virtual assets centres on two elements:\n\n\u003Cp>a) \u003Cem>vulnerability \u003C\u002Fem>to the illicit use of virtual assets; and b) \u003Cem>capacity to mitigate \u003C\u002Fem>and respond to these threats. \u003C\u002Fp>\n\u003C\u002Fblockquote>\n\n### Relevant indicators\n\nThe following graphic highlights indicators of the Basel AML Index that are relevant for assessing either \u003Cem>structural vulnerabilities \u003C\u002Fem>that illicit actors may exploit, or a jurisdiction’s \u003Cem>capacity to counter \u003C\u002Fem>threats. These can be viewed individually in the Expert Edition.\n\n![](https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002F7f446525-136f-4018-a322-8a4e8872f23b) *Indicators visible in the Basel AML Index Edition that are particularly relevant to assessing national risks relating to virtual assets.*\n\n\n#### FATF data\n\nUsing the Expert Edition Plus subscription and its quantitative analysis of the latest FATF mutual evaluation and follow-up reports, Basel AML Index users can gain rapid insights into whether a jurisdiction’s AML\u002FCFT framework provides it with the capacity to \u003Cem>counter threats \u003C\u002Fem>related to financial crimes generally, including those involving virtual assets. FATF Recommendations that may be highly relevant for this include:\n\n- R.15 (new technologies)\n- R.16 (payment transparency)\n- R.26 & 27 (regulation and supervision)\n- R.29–31 (law enforcement)\n- R.36–40 (international cooperation)\n\nAn additional useful source of information for jurisdiction-level risk assessments is the FATF’s \u003Ca href=\"https:\u002F\u002Fwww.fatf-gafi.org\u002Fen\u002Fpublications\u002FFatfrecommendations\u002Ftargeted-update-virtual-assets-vasps-2025.html\">\u003Cem>2025 Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers\u003C\u002Fem>\u003C\u002Fa>. This report summarises progress in implementing FATF Recommendation 15 by FATF members and additional jurisdictions with materially important global virtual asset activity. “Materially important” refers to the presence of large VASPs (accounting for more than 0.25 percent of global trading) and\u002For a large virtual asset user base.\n\n### Where to start\n\nFor jurisdictions at an early stage of assessing national risks related to virtual assets, the World Bank’s \u003Cem>\u003Ca href=\"https:\u002F\u002Fopenknowledge.worldbank.org\u002Fentities\u002Fpublication\u002Fbb5a7475-ac52-4697-afdc-5f618a550623\">AML\u002FCFT National Risk Assessment on Virtual Assets and Virtual Asset Service Providers: Guidance Manual\u003C\u002Fa> \u003C\u002Fem>(published in October 2025) is a strong starting point. It covers both threats and vulnerabilities, as well as the effectiveness of mitigation measures.\n\nAdditional useful resources include:\n- \u003Ca href=\"https:\u002F\u002Fbaselgovernance.org\u002F9crc-crypto-regulation\">\u003Cstrong>Practical recommendations from regulators and supervisors\u003C\u002Fstrong>\u003C\u002Fa>, developed at the 9th Global Conference on Criminal Finances and Cryptoassets, on understanding financial crime risks linked to virtual assets and designing effective regulatory and supervisory frameworks.\n- \u003Cstrong>Structured public–private partnerships\u003C\u002Fstrong>, such as the \u003Ca href=\"https:\u002F\u002Fefippp.eu\u002F\">Europol Financial Intelligence Sharing Public Private Partnership\u003C\u002Fa>, which offer opportunities to learn from peers and obtain early insights into emerging threats and financial crime typologies involving virtual assets.\n","Blog","2025-12-08","assessing-national-risks-related-to-virtual-assets","https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002F78f8a1ec-bf8d-469a-ab92-228e79ddd8f2?width=1000&height=650&format=webp&quality=80",[],[],[38,39,40,41],"Anti-Money Laundering","Asset Recovery and Enforcement","Business Integrity Ethics and Compliance","Corruption Prevention and Public Governance",[43,44],"Basel AML Index","Research",[46],1365,[],[43],[50,51],"Asset Recovery & Enforcement","Business Integrity & Governance",[53],"International Centre for Asset Recovery",[],"545a204d-e41b-4882-afda-481ecf3fd971","2025-12-05T11:43:36.000Z","3d9ff205-1640-4f34-b5b6-86977f51bbd6","2026-05-29T22:22:39.000Z",[],"\u002Fresources\u002Fnews\u002Fassessing-national-risks-related-to-virtual-assets",{"id":62,"body":63,"status":6,"type":31,"date":64,"slug":65,"title":66,"image":67,"countries":68,"topic":69,"activity":71,"tags":73,"nid":74,"topics":75,"activities":76,"authors":77,"images":78,"websites":79,"area":8,"programme":8,"language":20,"translations":81,"translation_of":8,"user_created":82,"date_created":83,"user_updated":57,"date_updated":58,"content":84,"link":85},10586,"A breakout session at the [9th Global Conference on Criminal Finances and Cryptoassets](https:\u002F\u002Fbaselgovernance.org\u002F9crc) gathered regulators, supervisors and experts from more than 20 jurisdictions to discuss practical approaches to regulating and supervising cryptoassets. The central aim was to provide hands-on guidance and tips for jurisdictions at early stages of regulating and supervising cryptoassets.\n\nStructured around three key themes – building blocks for regulation, managing cross-border risks, and sustainable cooperation and peer support – the session captured actionable recommendations and insights from global best practices. A follow-up online meeting served to validate and enhance the draft practical recommendations below.\n\n### 1 Base regulatory frameworks on a clear, in-depth understanding of risks\n\n*   Start with a comprehensive national risk assessment that accounts for domestic and cross-border threats, as well as geopolitical factors. Other factors to take into account include market structure, business models, and prudential, conduct, operational and outsourcing risks. \n*   Prioritise quality over quantity in licensing or registration regimes and oversight models to ensure supervisors have adequate capacity to oversee all licensed\u002Fregistered entities. \n*   Consider providing pre-application consultations and enhanced guidance to parties wishing to be licensed as cryptoasset service providers.\n*   Use regulatory sandboxes to test innovative products and collect insights on emerging risks and technologies.\n\n> Advantages of regulatory sandboxes\n> \n> *   Test products and services in a real environment with real users.\n> *   Conduct supervised testing to identify and prevent potential flaws or regulatory breaches before the product’s final rollout.\n> *   Define new regulatory requirements or amend existing ones based on practical, real-world experience.\n\n_Why this matters:_ _A risk-based approach ensures scarce supervisory resources are deployed where it matters the most, thus supporting risk mitigation. Such an approach helps ensure that frameworks evolve as risks and technologies develop._\n\n### 2 Build strong coordination structures across government and sectors\n\n*   Set up structured working groups across relevant authorities, such as the central bank, tax authority, securities regulator, financial intelligence unit and law enforcement agencies, with the aim of enhancing internal coordination and building a common understanding. These groups can help ensure that policymakers integrate enforcement mechanisms at the policy design stage, for example in a stablecoin policy, the technical capability to freeze or block transactions as a condition for compliance. Within the main regulatory authority (such as the central bank), a formal arrangement such as a structured project framework can also enhance coordination. \n*   Establish and\u002For engage in structured public-private partnerships, such as working groups and task forces combining industry practitioners, legal specialists and academic experts, to enhance information sharing and awareness of market developments. Take care however to respect data privacy and other relevant regulations. \n*   Include wider policy goals like innovation, inclusion and economic resilience in regulatory design. \n\n_Why this matters:_ _Crypto markets cut across multiple policy domains. Whole-of-government coordination reduces gaps, aligns priorities and builds resilience against emerging risks._\n\n### 3 Use phased and proactive supervisory engagement\n\n*   Engage directly with industry actors through workshops, compliance days and joint training. Clearly communicate expectations on governance standards, safeguarding of client assets, outsourcing arrangements and technology risk management during early engagement.\n*   Encourage compliance through education rather than enforcement alone. \n*   Use structured questionnaires, interviews and audit reports to risk-rate firms before deciding on onsite or offsite inspections. \n*   Integrate risk-based supervisory models aligned with Financial Action Task Force (FATF) Recommendations, applying proportional measures based on business models and risk profiles.\n\n_Why this matters:_ _Early-stage regimes benefit from proactive, educative supervision that builds sector capacity and reduces systemic non-compliance._\n\n### 4 Leverage data, traceability and technology\n\n*   Use blockchain analytics & intelligence, open-source intelligence and financial intelligence unit data to develop a comprehensive risk picture. Surveys of relevant market participants – including during on-site supervision – can contribute to a dashboard of aggregated sector data, such as total transaction volume, number of transactions, number of clients and their associated risk levels, as well as cross-border transaction counts and volumes. Common supervisory data also includes detailed information that enables reconciliation and further investigation, including wallet addresses, transaction amounts and ownership details.\n*   Promote interoperability and standardisation of blockchain analytics & intelligence tools for consistent supervision and risk monitoring. \n*   Ensure existing cooperation channels and recovery mechanisms are suited for cryptoassets and adapt the regulatory framework and practice if needed. \n*   Adopt risk-based due diligence, enhanced cooperation and common supervisory templates, ensuring consistency across jurisdictions.\n\n> Blockchain analytics & intelligence applications for regulators and supervisors\n> \n> *   Early-warning systems to identify suspicious transactions and typologies (sanctions evasion, ransomware, market manipulation…).\n> *   Risk profiling that combines blockchain data with traditional supervisory information.\n> *   Cross-agency data fusion linking financial intelligence units, law enforcement and market regulators.\n> *   RegTech–SupTech integration for automated compliance monitoring.\n> *   Creation of regional and global intelligence nodes for secure data exchange.\n\n_Why this matters:_ _Blockchain analytics & intelligence enables supervisors to move from reactive investigation to proactive oversight. This facilitates earlier detection of cross-border risks and supports convergence with AML, prudential and conduct supervision._\n\n### 5 Build capacity and invest in skills and research\n\n*   Invest in specialist training and staffing. Capacity building is not only about training; it can also be built through structured exchange between colleagues responsible for different aspects of cryptoassets, such as AML\u002FCFT and prudential supervision.\n*   Scale supervisory capacity to market size and complexity. \n*   Extend capacity building to cover tokenised assets and smart-contract-based services.\n*   Engage with academic institutions – for example through research partnerships, joint workshops, internships and secondments – to facilitate structured knowledge sharing, rigorous research and the development of evidence-based methodologies. \n\n_Why this matters:_ _Skilled human capital is critical to interpret complex data and manage the diversity of crypto business models._\n\n### 6 Take early action and make full use of existing legislation\n\n*   Leverage existing legal frameworks (e.g. taxation, banking supervision, reporting obligations) to mitigate risks, in addition to and even prior to developing specific legislation. \n*   Circulate inquiries to all already-regulated financial institutions to assess their interactions with crypto-asset markets and to understand their future plans.\n*   Set supervisory expectations to guide financial institutions’ engagement with cryptoassets and services. It may help to communicate the guiding principle of “same activity, same risk, same regulation”, i.e. crypto activities should be subject to the same regulatory standards and supervisory expectations as traditional financial activities when they present similar risks.\n*   Conduct public awareness campaigns and wide consultations to shape proportionate frameworks before full regulation is enacted. \n\n_Why this matters:_ _Early actions increase transparency, guide market behaviour and reduce risk prior to formal frameworks taking effect._\n\n### 7 Strengthen management of cross-border risks and unregulated providers\n\n*   Integrate guidance from the FATF, Financial Stability Board (FSB) and International Organization of Securities Commissions (IOSCO) into national regulatory and supervisory frameworks. \n*   Develop cooperation protocols for inspections and enforcement, including for providers outsourcing critical functions abroad. \n*   Assess risks from regulatory arbitrage and passporting and close enforcement gaps that could be exploited, especially by multi-function crypto intermediaries (MCIs). \n*   Issue official communications to inform consumers about market-related risks that may arise over time, for example, about the dangers of dealing with unregistered cryptoasset service providers.\n\n_Why this matters:_ _Cryptoassets operate globally; common standards and cooperative oversight reduce loopholes and prevent unregulated entities from evading supervision._\n\n### 8 Build structured and formalised peer-learning and cooperation channels\n\n*   Consider establishing or participating in supervisory colleges, taskforces and peer-learning networks for information exchange on cryptoasset regulation and supervision. \n*   Use study visits, secondments and technical peer support to accelerate knowledge transfer. \n*   Create secure forums for supervisors to share typologies and risk mitigation strategies.\n\n> Supervisory colleges for cryptoasset supervision\n> \n> A “crypto supervisory college” brings together home\u002Fhost supervisors of major cryptoasset service providers and issuers to coordinate oversight and conduct joint risk assessments, exchange information securely and prepare for coordination in a crisis. Additional members may include competent authorities for AML\u002FCFT, data protection and cybersecurity, as well as third-country authorities. \n\n_Why this matters:_ _Structured cooperation fosters practical learning, mutual trust and consistent supervisory approaches across jurisdictions._\n\n### 9 Engage international institutions and build shared knowledge infrastructure\n\n*   Collaborate with international and regional centres of expertise such as the World Bank, FATF-style regional bodies, Organization for Security and Co-Operation in Europe (OSCE) and Basel Institute on Governance for training, research and other resources. \n*   Pool resources for joint studies, typologies and tool development. \n*   Contribute to international standard-setting and interoperability initiatives to enhance the quality of blockchain analytics and supervisory data.\n\n_Why this matters:_ _Global collaboration enhances consistency, strengthens intelligence-led oversight and ensures technology is harnessed responsibly for the public good._\n\n### 10 Recommended resources\n\nEssential texts for jurisdictions seeking to develop and enhance their cryptoasset regulation. Consider establishing a crypto knowledge hub for your authority or working group, where staff and members can contribute relevant articles, research, news and resources.\n\nPractical guidance:\n\n[AML\u002FCFT National Risk Assessment on Virtual Assets and Virtual Asset Service Providers: Guidance Manual](https:\u002F\u002Fopenknowledge.worldbank.org\u002Fentities\u002Fpublication\u002Fbb5a7475-ac52-4697-afdc-5f618a550623) (updated October 2025) and related [tool](https:\u002F\u002Fdocuments.worldbank.org\u002Fen\u002Fpublication\u002Fdocuments-reports\u002Fdocumentdetail\u002F099710107122245889) – The World Bank. _A practical tool and guidance to help countries assess money laundering and terrorist financing risks linked to virtual asset activities and virtual asset service providers in line with FATF Recommendation 15._\n\n[Best Practices on Travel Rule Supervision](https:\u002F\u002Fwww.fatf-gafi.org\u002Fcontent\u002Fdam\u002Ffatf-gafi\u002Frecommendations\u002FBest-Practices-Travel-Rule-Supervision.pdf) – Financial Action Task Force (FATF). _A set of good practices to help jurisdictions supervise and implement the FATF Travel Rule to enhance payment transparency and mitigate money laundering, terrorist financing and proliferation financing risks._\n\n[Guidelines on supervisory practices to prevent and detect market abuse under MiCA](https:\u002F\u002Fwww.esma.europa.eu\u002Fdocument\u002Fguidelines-supervisory-practices-prevent-and-detect-market-abuse-under-mica) – European Securities and Markets Authority (ESMA). _Guidelines to promote consistent and effective supervisory practices under MiCA for preventing and detecting market abuse in cryptoassets, including insider dealing, unlawful disclosure of inside information and market manipulation._\n\nTrends and progress:\n\n[Thematic Review on FSB Global Regulatory Framework for Crypto-asset Activities](https:\u002F\u002Fwww.fsb.org\u002F2025\u002F10\u002Fthematic-review-on-fsb-global-regulatory-framework-for-crypto-asset-activities\u002F) – Financial Stability Board (FSB). _A review of global progress and remaining gaps in implementing the FSB’s 2023 regulatory framework for cryptoasset activities and stablecoins, with recommendations to strengthen consistent and resilient regulation._\n\n[Thematic Review Assessing the Implementation of IOSCO Recommendations for Crypto and Digital Asset Markets](https:\u002F\u002Fwww.iosco.org\u002Flibrary\u002Fpubdocs\u002Fpdf\u002FIOSCOPD801.pdf) – International Organization of Securities Commissions (IOSCO). _An assessment of how selected jurisdictions are implementing IOSCO’s 18 policy recommendations for regulating crypto and digital assets to support market integrity and investor protection._\n\n[Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers](https:\u002F\u002Fwww.fatf-gafi.org\u002Fcontent\u002Fdam\u002Ffatf-gafi\u002Frecommendations\u002F2025-Targeted-Upate-VA-VASPs.pdf.coredownload.pdf) – Financial Action Task Force (FATF). _An update on progress and continuing challenges in implementing FATF Recommendation 15 for virtual assets and virtual asset service providers, including insights on emerging risks._\n\n[Advancing in tandem – results of the 2024 BIS Survey on Central Bank Digital Currencies and Crypto](https:\u002F\u002Fwww.bis.org\u002Fpubl\u002Fbppdf\u002Fbispap159.htm) - Bank for International Settlements (BIS). _A summary of the 2024 BIS survey showing how central banks are advancing work on retail and wholesale CBDCs alongside growing regulation of stablecoins, rising use of cryptoassets and increasing interest in tokenisation._","2025-11-25","designing-robust-cryptoasset-frameworks-practical-takeaways-from-international-regulators-and-supervisors-2880","Designing robust cryptoasset frameworks: Practical takeaways from international regulators and supervisors","https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002Fe78a30fa-3c74-4812-b35e-27eaa2f2cc3a?width=1000&height=650&format=webp&quality=80",[],[38,70],"Asset Recovery",[72],"Insights",[],2880,[38,39],[72],[],[],[43,80],"Main page",[],"03bebfd8-0b40-4a2a-820d-b9d9c13b9de6","2025-12-02T11:01:41.000Z",[],"\u002Fresources\u002Fnews\u002Fdesigning-robust-cryptoasset-frameworks-practical-takeaways-from-international-regulators-and-supervisors-2880",{"id":87,"body":88,"status":6,"type":31,"date":89,"slug":90,"title":91,"image":92,"countries":93,"topic":94,"activity":95,"tags":96,"nid":97,"topics":98,"activities":99,"authors":100,"images":101,"websites":102,"area":8,"programme":8,"language":8,"translations":103,"translation_of":8,"user_created":82,"date_created":104,"user_updated":105,"date_updated":106,"content":107,"link":108},10506,"The [Basel AML Index](https:\u002F\u002Findex.baselgovernance.org\u002F) – the Basel Institute’s ranking and risk assessment tool for money laundering risks around the world – will include indicators of fraud in its 2024 methodology update.\n\nThe changes reflect the growing significance of fraud as a predicate offence to money laundering and as a risk that regulated entities need to consider. Though definitions of fraud vary and data is both poor and inconsistent, the social and economic consequences of fraud make it impossible to ignore in any money laundering risk assessment.\n\nThe changes will be implemented in the 13th Public Edition of the Basel AML Index, due to be published on 2 December this year, as well as in the subscription-based [Expert Edition and Expert Edition Plus](https:\u002F\u002Findex.baselgovernance.org\u002Fexpert-edition) from that point onwards.\n\n### Spotlight: fraud on the rise\n\nStatistics from global financial centres (e.g. [US](https:\u002F\u002Fwww.thomsonreuters.com\u002Fen-us\u002Fposts\u002Finvestigation-fraud-and-risk\u002Fsars-fraud-2024\u002F), [UK](https:\u002F\u002Fwww.nationalcrimeagency.gov.uk\u002Fwho-we-are\u002Fpublications\u002F632-2022-sars-annual-report-1\u002Ffile), [Switzerland](https:\u002F\u002Fwww.fedpol.admin.ch\u002Ffedpol\u002Fen\u002Fhome\u002Fkriminalitaet\u002Fgeldwaescherei\u002Fjb.html), [Canada](https:\u002F\u002Ffintrac-canafe.canada.ca\u002Fpublications\u002Far\u002F2023\u002Far2023-eng.pdf)) indicate that fraud is among the top offences reported in suspicious activity reports submitted by banks and other regulated entities.\n\nAccording to the [U.S. 2024 National Money Laundering Risk Assessment](https:\u002F\u002Fhome.treasury.gov\u002Fsystem\u002Ffiles\u002F136\u002F2024-National-Money-Laundering-Risk-Assessment.pdf), \"\\[f\\]raud remains the largest and most significant proceed-generating crime for which funds are laundered in or through the United States.\" [Singapore’s 2024 National Risk Assessment](https:\u002F\u002Fwww.mof.gov.sg\u002Fdocs\u002Fdefault-source\u002Fdefault-document-library\u002Fml-national-risk-assessment.pdf?sfvrsn=3edc6832_3) likewise identifies fraud – particularly cyber-enabled fraud – as one of the country’s key money laundering threats.\n\nThe threat posed by fraud is not just about financial systems, but about its devastating impact on ordinary individuals and companies. Introducing the [2024 INTERPOL Global Financial Fraud Assessment](https:\u002F\u002Fwww.interpol.int\u002Fen\u002FNews-and-Events\u002FNews\u002F2024\u002FINTERPOL-Financial-Fraud-assessment-A-global-threat-boosted-by-technology), INTERPOL’s Secretary General referred to an “epidemic in the growth of financial fraud, leading to individuals, often vulnerable people, and companies being defrauded on a massive and global scale”. The assessment highlights the prevalence of investment, romance and advance payment fraud schemes.\n\nMethods used to commit fraud are also becoming more sophisticated and diversified. Technological advancements, including in artificial intelligence and virtual assets, can make (cyber) fraud and the laundering of proceeds easier to commit and more complex to investigate. The FATF, INTERPOL and Egmont Group of Financial Intelligence Units have joined forces on a new initiative to [counter illicit financial flows from cyber-enabled fraud](https:\u002F\u002Fwww.fatf-gafi.org\u002Fen\u002Fpublications\u002FMethodsandtrends\u002Fillicit-financial-flows-cyber-enabled-fraud.html), noting its link to other forms of criminality including human trafficking and proliferation financing.\n\n### Challenges around definitions and data\n\nBased on discussions with leading financial crime experts at two annual review meetings, we have decided to integrate fraud indicators into the Basel AML Index [methodology](https:\u002F\u002Findex.baselgovernance.org\u002Fmethodology).\n\nThis decision comes with challenges, including:\n\n*   the broad and disputed definition and scope of “fraud”;\n*   the complex, cross-border nature of many forms of fraud and the difficulty in assigning risks to a particular jurisdiction;\n*   poor data availability, exacerbated by significant underreporting and no global standard.\n\nOther indicators of ML\u002FTF risk related to financial crimes of a cross-border nature face similar challenges. Lack of reliable data and analysis in particular is a major [obstacle to countering fraud risks](https:\u002F\u002Fwww.interpol.int\u002Fen\u002FNews-and-Events\u002FNews\u002F2024\u002FINTERPOL-Financial-Fraud-assessment-A-global-threat-boosted-by-technology).\n\n### Pragmatic approach\n\nThe Basel AML Index is primarily a framework for assessing geographic risk, defined as a jurisdiction’s vulnerability to money laundering and related financial crimes and its capacities to counter these threats. and its capacities to counter it. The Index does not attempt to measure the actual amount of money laundering activity.\n\nTherefore we believe it is appropriate for the Basel AML Index methodology to incorporate fraud data with clear caveats and a transparent recognition of the above challenges and weaknesses.\n\nGiven the lack of a globally accepted definition, we use the term fraud loosely as an umbrella term for activities that involve deliberate deception of an individual or entity for the sake of obtaining a financial gain. These crimes are often transnational, orchestrated by organised criminal actors and facilitated by technology.\n\nFraud-related data will be sourced from the [Global Organized Crime Index](https:\u002F\u002Focindex.net\u002F). This source most closely aligns with the Basel AML Index standards on data quality and coverage.\n\nData will be taken from two categories:\n\n*   “Financial crimes”, covering financial fraud, tax evasion, embezzlement and misuse of funds\n*   “Cyber-dependent crimes”, including malware, hacking, ransomware and cryptocurrency fraud\n\nBoth indicators will join indicators of corruption in Domain 2 of the Basel AML Index methodology, with a weighting of 5 percent and 2.5 percent respectively.\n\n### Other changes\n\nThree outdated indicators will be removed, bringing the total to 17:\n\n*   \"Extent of corporate transparency\" from the World Bank’s discontinued _Doing Business_ report.\n*   “Strength of auditing and reporting standards” and “Institutional pillar” from the World Economic Forum’s discontinued _Global Competitiveness Report._\n\nData from the Tax Justice Network’s Financial Secrecy Index will move to Domain 3 on financial transparency and standards. This will enable Basel AML Index Expert Edition users to more clearly separate jurisdictions’ performance on financial transparency from other aspects of their anti-money laundering framework.\n\nMinor adjustments have been made to the weighting to account for the above changes.\n\n### Learn more\n\n*   Join the [online launch event on 4 December 2024](https:\u002F\u002Fbaselgovernance.org\u002Fnode\u002F2714).\n*   View the Basel AML Index and its current [methodology](https:\u002F\u002Findex.baselgovernance.org\u002Fmethodology) (prior to the above changes).\n*   Sign up for the [Expert Edition](https:\u002F\u002Findex.baselgovernance.org\u002Fexpert-edition) or Expert Edition Plus to explore the current data – it’s free for users from public-sector, non-profit and multilateral entities as well as journalists and academics.","2024-10-29","basel-aml-index-updates-methodology-to-reflect-rising-global-fraud-risks-2713","Basel AML Index updates methodology to reflect rising global fraud risks","https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002Fd49abadd-b50c-42d9-bba6-a10ee75414f0?width=1000&height=650&format=webp&quality=80",[],[38],[43],[],2713,[38],[43],[],[],[80,43],[],"2024-11-07T09:34:34.000Z","b0662e2a-864d-4888-a1b7-4342b7570b30","2025-08-31T23:14:40.000Z",[],"\u002Fresources\u002Fnews\u002Fbasel-aml-index-updates-methodology-to-reflect-rising-global-fraud-risks-2713",{"id":110,"body":111,"status":6,"type":31,"date":112,"slug":113,"title":114,"image":115,"countries":116,"topic":117,"activity":118,"tags":119,"nid":124,"topics":125,"activities":126,"authors":127,"images":129,"websites":130,"area":8,"programme":8,"language":8,"translations":131,"translation_of":8,"user_created":82,"date_created":132,"user_updated":57,"date_updated":133,"content":134,"link":135},10532,"_This article is adapted from the_ [_2024 Basel AML Index public report_](https:\u002F\u002Fbaselgovernance.org\u002Fpublications\u002Fbasel-aml-index-2024)_._\n\nFinancial crime has far-reaching impacts on people’s lives. Yet often the only time it draws serious attention in the media is when a country is added to the [FATF’s grey list](https:\u002F\u002Fwww.fatf-gafi.org\u002Fen\u002Fcountries\u002Fblack-and-grey-lists.html). This designation of “jurisdictions under increased monitoring” frequently sparks debate and concern, and is clouded by misconceptions. This section looks at five common myths that we come across in our work to support partner countries seeking to avoid or leave the grey list.\n\n### Myth 1: The grey list = high-risk countries\n\nA common misconception about the FATF grey list is that it represents (the only) countries and jurisdictions that pose high risks for money laundering, terrorist financing and proliferation financing.\n\nIn fact, in the FATF’s own words, the grey list is the public list of jurisdictions that are “actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.” It is the FATF’s black list that specifically identifies high-risk countries and calls for enhanced due diligence and\u002For countermeasures when dealing with these.\n\nThe distinction is important because not all grey-listed countries pose the same level or type of risk. Many are on a rapid path to improvement. Not all will require enhanced due diligence. And some countries that are not and never have been on the grey list may still present significant risks.\n\nInclusion on the grey list is based on the FATF's [International Co-operation Review Group](https:\u002F\u002Fwww.fatf-gafi.org\u002Fen\u002Fpublications\u002FHigh-risk-and-other-monitored-jurisdictions\u002FMore-on-high-risk-and-non-cooperative-jurisdictions.html) (ICRG) process and on the criteria summarised under Myth 2, rather than merely on its own criteria for identifying a higher-risk country (see box below).\n\nA complicating factor for financial institutions seeking to identify clear criteria for applying enhanced due diligence is the use of both the black and grey lists by the EU and UK for their own lists of high-risk third countries.\n\n> What is a higher-risk country?\n> \n> The Interpretative Note to the FATF’s [Recommendation 10](https:\u002F\u002Fcfatf-gafic.org\u002Fdocuments\u002Ffatf-40r\u002F376-fatf-recommendation-10-customer-due-diligence) on customer due diligence sets out guidelines on country or geographic risk factors that might trigger the application of enhanced due diligence according to a risk-based approach. The criteria (note 15b) refer to countries that are “identified by credible sources” as having inadequate AML\u002FCFT systems, high levels of corruption and crime or high levels of terrorist activity and financing, or that are subject to sanctions or similar measures. It does not specifically refer to either the grey list or the black list, though this may be one factor that organisations take into account.\n> \n> Similarly, [Recommendation 19](https:\u002F\u002Fwww.cfatf-gafic.org\u002Fdocuments\u002Ffatf-40r\u002F385-fatf-recommendation-19-higher-risk-countries) on higher-risk countries and its Interpretative Note require enhanced due diligence by financial institutions to be applied only to countries “for which this is called for by the FATF”, indicating the black list of jurisdictions subject to a call for action.\n\n### Myth 2: Grey listing is a surprise\n\nEach time the FATF holds a plenary session, commentators appear to “bet” which countries will be added or removed. This leads some to believe that grey listing comes as a surprise – even to a country’s authorities.\n\nIn fact, grey listing is based mainly on a country’s poor performance in its mutual evaluation report, specifically in one of four criteria:\n\n*   Fifteen or more non-compliant or partially compliant ratings for technical compliance in any Recommendation.\n*   A non-compliant or partially compliant rating for three or more of the following Recommendations: R.3 (money laundering offences), R.5 (terrorist financing offences), R.6 (targeted financial sanctions related to terrorist financing), R.10 (customer due diligence), R.11 (record keeping) and R.20 (reporting of suspicious transactions).\n*   A low or moderate level of effectiveness for nine or more of the 11 Immediate Outcomes, with a minimum of 2 low ratings.\n*   A low level of effectiveness for six or more of the 11 Immediate Outcomes.\n\nThe authorities typically have a year or more to work on their specific weaknesses without being publicly listed, under the FATF’s International Co-operation process.\n\nThe FATF also prioritises countries and jurisdictions with significant financial centres. For the fifth round of evaluations, the threshold has been increased from USD 5 billion to USD 10 billion, measured in [broad money terms](https:\u002F\u002Fwww.oecd.org\u002Fen\u002Fdata\u002Findicators\u002Fbroad-money-m3.html).\n\nSo grey listing is rarely a surprise to the authorities. It is however less easy for third parties like financial institutions and foreign donors to predict whether a jurisdiction will end up on the grey list.\n\nOur [Expert Edition Plus](https:\u002F\u002Findex.baselgovernance.org\u002Fexpert-edition) now offers subscribers an assessment of the risks that a particular country will end up on the grey list. This makes it possible to better anticipate this and prepare accordingly – including, we would recommend, by using the Basel AML Index to assess the broad range of factors contributing to a higher level of money laundering risk.\n\n### Myth 3: Grey listing has only negative impacts\n\nBeing added to the FATF grey list can trigger severe economic consequences for countries, especially low-income countries dependent on foreign investment and assistance. Investors and financial institutions may reduce their business in the country. A 2021 [IMF paper](https:\u002F\u002Fpapers.ssrn.com\u002Fsol3\u002Fpapers.cfm?abstract_id=4026331) found that capital inflows decline on average by 7.6 percent of GDP following grey listing, for example.\n\nFinancial institutions may also “de-risk” completely – cutting off all business to avoid the extra compliance and risk management costs. Individuals and businesses may have challenges accessing financial services as a result, leading to lower financial inclusion. Other [unintended consequences](https:\u002F\u002Fbaselgovernance.org\u002Fpublications\u002Fpb-12) may include an increase in the use of less regulated channels to move money.\n\nNegative economic consequences are not inevitable, however, especially for more developed economies. [Croatia’s economy and its financial sector](https:\u002F\u002Fwww.imf.org\u002Fen\u002FPublications\u002FCR\u002FIssues\u002F2024\u002F07\u002F26\u002FRepublic-of-Croatia-2024-Article-IV-Consultation-Press-Release-and-Staff-Report-552561), for example, both appear to be relatively unscathed by its placement on the grey list in 2023. S&P Global even [upgraded](https:\u002F\u002Fdisclosure.spglobal.com\u002Fratings\u002Fen\u002Fregulatory\u002Farticle\u002F-\u002Fview\u002Ftype\u002FHTML\u002Fid\u002F3250133) its long-term sovereign credit rating from BBB+ to A- in September 2023.\n\nWould it have done even better if it hadn’t been grey listed? It is hard to know – but in some cases perhaps being grey listed could even help a country’s performance in the long run, by motivating it to conduct necessary reforms quickly. For example, Iceland and Malta both managed to leave the grey list after just a year, having speedily fulfilled the requirements of their action plans.\n\nFor countries receiving development aid, grey listing can bring the benefit of increased targeted assistance to implement reforms and eventually exit the grey list. However, since authorities are typically aware of the risk of grey listing in advance (see Myth 2), it would be more effective if this assistance were provided earlier to help prevent the country from being listed in the first place.\n\n### Myth 4: The grey-listing system is inherently unfair\n\nCritics of the grey-listing system point out that it unfairly penalises low-income jurisdictions with less capacity for AML\u002FCFT but also lower significance due to their small financial centres.\n\nIt is true that low-income countries are disproportionately represented on the grey list, but this is changing. More than half of grey-listed countries at the time of writing are in [Sub-Saharan Africa](https:\u002F\u002Findex.baselgovernance.org\u002Fapi\u002Fassets\u002Ff2c74bc1-2760-4bea-a118-aaa96b9cdf09), for example. Yet the addition of European countries in 2023 and 2024 – Bulgaria, Croatia and Monaco – shows that the geography is shifting.\n\nThe following figure shows the percentage of jurisdictions in each region on the grey list as of October 2024:\n\n[](https:\u002F\u002Fbaselgovernance.org\u002Fsites\u002Fdefault\u002Ffiles\u002F2025-02\u002FGraphic%20regional%20percentage%20FATF%20grey%20list.png)\n\n[New prioritisation criteria](https:\u002F\u002Fwww.fatf-gafi.org\u002Fen\u002Fpublications\u002FFatfgeneral\u002FFATF-grey-listing-criteria.html) announced in October 2024 in effect apply a risk-based approach to grey listing. High-income countries and jurisdictions with financial centres over USD 10 billion will be prioritised. Least developed countries as defined by the UN will not be prioritised except in rare cases of high risk, in which case they will have a longer time period to work on their deficiencies before being grey listed.\n\nAs these changes take effect, we should see the grey-listing geography shift towards higher-income countries that are deeply integrated in financial markets.\n\nAnd there are some simple things that a country can do to avoid grey listing – namely, prepare well for the mutual evaluation process, which is always announced well in advance. Quite basic actions can help, like preparing an up-to-date [national risk assessment](https:\u002F\u002Fbaselgovernance.org\u002Fpublications\u002Fquick-guide-26-national-money-laundering-and-terrorist-financing-risk-assessments) (and specific sectoral assessments where relevant), gathering statistical data and developing strategies to mitigate identified risks.\n\nThe Basel AML Index methodology does not penalise countries for being on the grey list, since the deficiencies that led to them being grey listed are already apparent in the mutual evaluation report data. In 2023, we also [updated our methodology](https:\u002F\u002Findex.baselgovernance.org\u002Fnews\u002Fbasel-aml-index-2023-reflecting-the-progress-of-grey-listed-jurisdictions-2513) to better capture improvements in the effectiveness of jurisdictions that exit the grey list, even if the FATF does not release new effectiveness data.\n\n### Myth 5: Leaving the grey list is the end of the story\n\nGrey listing is just one period in a country’s anti-money laundering journey. Being delisted is naturally a cause for celebration and hope, but it’s not the end of the story. Many jurisdictions have been grey listed more than once, including Cambodia, Nicaragua, Panama and Pakistan.\n\nFATF standards continue to evolve and to strengthen, so jurisdictions need to constantly improve in order to keep up.\n\nA prominent example highlighted in several Basel AML Index reports over the years is Recommendation 15 on virtual assets. After it was updated in 2018, almost all subsequently assessed jurisdictions [achieved lower levels of compliance](https:\u002F\u002Findex.baselgovernance.org\u002Fnews\u002Fvirtual-currencies-are-we-missing-a-trick-insights-from-the-basel-aml-index-2023-2541) than previously. We can expect a similar effect with the [updated Recommendations 4 and 38](https:\u002F\u002Fbaselgovernance.org\u002Fblog\u002Ffatf-seeks-change-landscape-international-asset-recovery-what-means-latin-america) on asset recovery, where there are still some countries that do not meet basic criteria such as having a non-conviction based forfeiture law or enforcing international judgements based on these laws.\n\nThe FATF’s fifth round of evaluations will [emphasise effectiveness](https:\u002F\u002Fwww.fatf-gafi.org\u002Fcontent\u002Ffatf-gafi\u002Fen\u002Fpublications\u002FMutualevaluations\u002FFatf-methodology.html) over technical compliance. Countries will need to put in more effort to improve their effectiveness ratings, which are, on average, less than half as strong as their ratings for technical compliance.\n\nAs financial systems continue to evolve, criminals will find ever more ingenious ways to steal, launder and hide money or to use it for illicit purposes such as the financing of terrorism and weapons of mass destruction. Avoiding or graduating from the grey list is one step along a never-ending journey to a resilient system that successfully wards of money laundering and related threats while not limiting financial inclusion and innovation.\n\n### Learn more\n\n*   Read the [13th annual Public Edition report of the Basel AML Index](https:\u002F\u002Fbaselgovernance.org\u002Fpublications\u002Fbasel-aml-index-2024).\n*   Explore the [Basel AML Index](https:\u002F\u002Findex.baselgovernance.org\u002F).","2025-02-06","fatf-grey-list-truth-and-myths-2760","FATF grey list: truth and myths","https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002F2397c564-394a-4f1e-8448-ec230a14810c?width=1000&height=650&format=webp&quality=80",[],[38,70],[72],[120],{"tags_id":121},{"id":122,"name":123},818,"Anti-money laundering",2760,[38,39],[72],[128],1090,[],[80],[],"2025-02-06T11:01:49.000Z","2026-05-29T22:22:34.000Z",[],"\u002Fresources\u002Fnews\u002Ffatf-grey-list-truth-and-myths-2760",{"id":137,"body":138,"status":6,"type":31,"date":139,"slug":140,"title":141,"image":142,"countries":143,"topic":144,"activity":146,"tags":147,"nid":176,"topics":177,"activities":178,"authors":179,"images":182,"websites":183,"area":184,"programme":186,"language":20,"translations":187,"translation_of":8,"user_created":82,"date_created":188,"user_updated":105,"date_updated":189,"content":190,"link":191},10539,"Juhani Grossmann and Amanda Cabrejo le Roux explain the strategic re-focusing of our Green Corruption programme on energy and climate:\n\n### What is “green” corruption and why does it matter?\n\nGreen corruption refers to corruption and other financial crimes and governance failures that harm the environment and hinder global efforts to combat climate change.\n\nIt’s the reason crimes such as illicit deforestation, mining and wildlife trade continue to be multimillion-dollar illegal industries making organised criminals rich at the expense of our planet and the livelihoods of local communities. Green corruption also diverts crucial investments intended for renewable energy and other climate-related projects.\n\nAdapting to humanity’s changing energy needs in a just and sustainable manner are challenging enough. We cannot afford to let corruption undermine these generational challenges.\n\n### What are some key achievements of the programme so far?\n\nWe are proud that since its launch in 2018, the Green Corruption programme has contributed to significant strides in tackling corruption affecting the environment.\n\nOur programme started with an enforcement focus: applying “follow the money” approaches to environmental crimes like illegal wildlife trade and illegal logging. In practice, that means mentoring and training law enforcement officers of national partner agencies to investigate financial transactions that fuel environmental crimes, including between criminal groups and corrupt facilitators. And ideally, to seize and confiscate illicit profits or assets used in the crimes.\n\nThat’s the only way to get beyond the low-level perpetrators – such as poachers – to the high-level facilitators and organised crime networks. And the only way to take the profit out of the crime, reducing the incentives to engage in it.\n\nAt the end of 2024, assets worth around CHF 29.6 million were being targeted in 56 cases directly supported by our advisors. We had quite a few “firsts” – like Uganda’s first ever indictment for tax evasion and money laundering against a wildlife trafficking syndicate, Malawi’s first ever corruption cases related to natural resource crimes, Peru’s confiscation of over CHF 3 million in assets related to forestry and gold trafficking, and Indonesia’s first ever conviction on money laundering in relation to an illegal logging case.\n\nBehind the headlines lie many more positive steps towards changing mindsets and the priorities of law enforcement agencies to go after the finances of environmental criminals.\n\nOur prevention work rapidly grew as we and our partners realised the chronic under-investment in building systems that strengthen resilience to corruption in the environmental sector.\n\nGovernment agencies and state-owned enterprises in countries as diverse as Indonesia, Malawi, Ukraine and Bolivia have now begun to systematically assess and address corruption risks that are affecting their ability to carry out their important functions of protecting the environment and natural resources. Our prevention specialists supported these in applying our bespoke [methodology](https:\u002F\u002Fbaselgovernance.org\u002Fpublications\u002Fguide-conducting-corruption-risk-assessments-wildlife-law-enforcement-context) of assessing and prioritising corruption risks and implementing targeted mitigation measures. We developed a customised internal controls maturity assessment tool to reflect the historic lack of investment in this space, which meant that mainstream assessment tools were insufficiently granular at the first stage of maturity to reflect nuances and chart paths to growth.\n\nAs result of our partnerships, mitigation measures have been institutionalised in many agencies – for example:\n\n*   in Malawi through the creation of Internal Integrity Committees in environmental agencies;\n*   in Ukraine through the empowerment of anti-corruption officers to participate in key decision-making processes;\n*   in Ecuador by reducing unsupervised discretion in environmental inspections;\n*   in Indonesia in the adoption of conflict of interest regulations in the management of timber sales; and\n*   in Peru through the automation and digitalisation of numerous permitting and licensing processes related to the wood value chain.\n\nAlso pleasing to see are the many collaborations and partnerships that have sprung from our work. In Latin America, for example, forestry officials in [Peru, Bolivia and Ecuador](https:\u002F\u002Fbaselgovernance.org\u002Fnews\u002Fprotecting-forests-through-corruption-prevention-videos-promising-initiatives-bolivia-ecuador) are now collaborating on protecting the Amazon rainforest through corruption prevention.\n\nStill, targeting and preventing corruption tends to be a lonely effort. So, we have established the [Countering Environmental Corruption Practitioners Forum](https:\u002F\u002Fenvironmental-corruption.org\u002F) together with WWF, TRAFFIC and Transparency International as a support network, and it has now grown to over 800 members and four working groups. There are frequent meetings and collaborations between practitioners dedicated to tackling corruption and improving governance, and those specialised in environmental conservation or climate initiatives.\n\nIt’s a sign there’s much appetite and energy for action against green corruption!\n\n### Why is now the time to focus on the energy transition?\n\nWhatever happens in these volatile times, one thing is certain: we’ll continue to see growing demands for energy transition and climate mitigation and adaptation.\n\nThe urgency of tackling the energy transition, and the rapid increase in investments from both the public and private sectors, leaves the door wide open to criminals and the corrupt seeking to profit at the expense of investors and donors – as well as the planet.\n\nA clear example in this space is the growing geopolitical centrality of critical minerals and rare earths. The rapid rise in demand has been accompanied by particularly fragile governance structures, intense political and economic subsidies, and even warfare. Our experience shows that these are all breeding grounds for corruption. We are therefore prioritising efforts to analyse and mitigate corruption risks in this space in Bolivia, Indonesia and Ukraine.\n\nEnsuring that the energy transition is safeguarded from corruption is essential for achieving net-zero goals. As outlined in our Working Paper on [good governance and the just transition](https:\u002F\u002Fbaselgovernance.org\u002Fpublications\u002Fwp-53), corrupt practices can jeopardise renewable energy investments and hinder the development of clean energy infrastructure.\n\nRapidly emerging market-based solutions to stimulate responsible behaviour, such as carbon offsets, are also affected by weak governance systems and opportunities for corruption. The fast-evolving and highly technical nature of these activities only increases this risk.\n\nCorruption risks similarly threaten the effectiveness of climate mitigation and adaptation efforts. If funds are embezzled, used fraudulently or diverted to benefit powerful elites, that’s bad for donors and investors. And it’s bad for local communities, many of which are also directly affected by climate change.\n\nOn the other hand, there are opportunities. Using corruption risk management tools and enhancing enforcement capabilities can help companies and governments to create thriving, profitable supply chains of critical minerals needed for renewable energy facilities, electric vehicles and the like.\n\n### What does this shift in priorities mean in practice?\n\nThrough our Green Corruption programme, we are adapting to this evolving landscape by sharpening our focus on transition minerals and the renewable energy sector.\n\nWe will continue our dual approach of prevention and enforcement, working closely with long-standing partners in Ukraine, Indonesia, Madagascar, Malawi, Uganda, Peru, Bolivia and Ecuador.\n\nSome things you might see us doing in the next years:\n\n*   Strengthening transparency and anti-corruption measures in the extraction and trade of lithium, nickel, germanium and other minerals and rare earths essential for the energy transition.\n*   Customising financial investigation and asset recovery tools to the specifics of the energy transition.\n*   Working with governments, financial institutions and civil society to safeguard energy transition and climate mitigation funds from corruption, fraud and related crimes.\n\nWe will continue full force our ongoing engagement related to metals (gold in particular) and the forestry sector, which remain highly strategic.\n\nIn other areas, such as illegal wildlife trade, fisheries and waste, we will be more discerning, carefully assessing the potential of engagements prior to pursuing them.\n\n### What impact do we hope to achieve?\n\nBy applying our expertise to emerging climate and energy challenges, we want to contribute to measurable improvements in the energy transition, environmental conservation, climate change mitigation and equitable economic development.\n\nThrough these efforts, our Green Corruption programme will continue to play a vital role in ensuring that the green transition is not only sustainable but also just, transparent and a win-win for all: businesses, local communities and society at large – as well as our planet.","2025-03-11","how-tackling-green-corruption-can-help-us-get-ahead-in-the-race-to-net-zero-2781","How tackling green corruption can help us get ahead in the race to net zero","https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002Fb5fea614-8c8e-4097-ab4a-ac6687334577?width=1000&height=650&format=webp&quality=80",[],[145],"Green Corruption",[72],[148,152,156,160,164,168,172],{"tags_id":149},{"id":150,"name":151},843,"Asset recovery",{"tags_id":153},{"id":154,"name":155},1303,"Environment",{"tags_id":157},{"id":158,"name":159},804,"Natural resources",{"tags_id":161},{"id":162,"name":163},1374,"Law enforcement",{"tags_id":165},{"id":166,"name":167},1373,"Corruption prevention",{"tags_id":169},{"id":170,"name":171},859,"Corruption risks",{"tags_id":173},{"id":174,"name":175},1193,"Financial investigations",2781,[145],[72],[180,181],1086,1087,[],[80],[185],"Anti-Corruption & Prevention",[145],[],"2025-03-11T11:01:35.000Z","2025-08-31T23:12:02.000Z",[],"\u002Fresources\u002Fnews\u002Fhow-tackling-green-corruption-can-help-us-get-ahead-in-the-race-to-net-zero-2781",{"id":193,"body":194,"status":6,"type":31,"date":195,"slug":196,"title":197,"image":198,"countries":199,"topic":200,"activity":201,"tags":202,"nid":205,"topics":206,"activities":207,"authors":208,"images":209,"websites":210,"area":8,"programme":8,"language":8,"translations":211,"translation_of":8,"user_created":82,"date_created":212,"user_updated":57,"date_updated":213,"content":214,"link":215},9564,"_Our recently released [Basel AML Index 2021](http:\u002F\u002Fbaselgovernance.org\u002Fnews\u002Fbasel-aml-index-2021-4-things-holding-back-global-fight-against-money-laundering) highlights how slow and ineffective implementation of beneficial ownership registries continues to provide safe havens for dirty money._\n\n_We argue that this is damaging for individual jurisdictions, but more importantly undermines all global efforts to combat money laundering and terrorist financing (ML\u002FTF). Excerpt from the full report:_\n\n### Beneficial ownership and resilience to ML\u002FTF threats\n\nBeneficial ownership transparency is directly related to the effectiveness of a jurisdiction’s AML systems and the essential role of these systems in preventing, detecting, prosecuting and sanctioning financial crimes. It is therefore crucial to a jurisdiction’s resilience against ML\u002FTF threats.\n\nBoth public authorities (law enforcement, Financial Intelligence Units) and private actors (financial institutions and Designated Non-Financial Businesses and Professions, or DNFBPs) are responsible for maintaining this resilience.\n\nFor public authorities, low transparency of beneficial ownership and anonymity of some legal arrangements hamper ML\u002FTF investigations and attempts to trace and freeze illicit assets.\n\nThis is because of the very nature of money laundering, which is to disguise the criminal origins of money and take a number of actions to introduce it into the financial system and make it appear legal. Criminals often use complex “layers” of legal corporate structures spanning multiple jurisdictions to hide the illicit origin of their money.\n\nIf such layering activities remain undetected, the money is more easily integrated into the financial system. It then becomes much more difficult for law enforcement authorities to identify and prosecute the crimes and to recover whatever is left of the money.\n\nThis is especially the case where the trail of the money passes through multiple jurisdictions with very different methods for recording and sharing beneficial ownership information.\n\nThis problem of opaque beneficial ownership arrangements also applies to terrorist financing crimes, where criminals aim not only to stay undetected but to circumvent sanctions lists.\n\nFor the private sector, the information contained in beneficial ownership registers is also essential to effective AML \u002F CFT compliance processes.\n\nFinancial institutions and DNFBPs effectively play a gate-keeping role to prevent illicit money from entering the financial system. Without proper access to reliable information on beneficial ownership, private actors have a limited ability to understand who is behind the legal entities and legal arrangements – i.e. a limited ability to fulfil their customer due diligence requirements.\n\nThey are therefore not able to perform their role of preventing financial crimes and of protecting their own businesses to their full capacity.\n\nThe financial institutions and DNFBPs themselves also suffer as a result of a jurisdiction’s dysfunctional or nonexistent beneficial ownership transparency: poor AML compliance increases their exposure to legal, reputational and financial (fines) risks.\n\n### Beneficial ownership transparency has risen up the global agenda\n\nThe Financial Action Task Force (FATF) published the first international standards on beneficial ownership transparency in 2003. 190 jurisdictions committed to implementing legal requirements for:\n\n*   financial institutions and other gatekeepers to collect and verify information on the ownership of legal persons and arrangements;\n*   measures to ensure that this information is available competent authorities.\n\nThe standards were [revised in 2014](https:\u002F\u002Fwww.fatf-gafi.org\u002Fdocuments\u002Fnews\u002Ftransparency-and-beneficial-ownership.html) to provide more clarity, close loopholes and better distinguish between basic ownership information (about the immediate legal owners of a company or trust) and beneficial ownership information (about the persons who ultimately own or control it). In 2019, FATF published [best practices on beneficial ownership](https:\u002F\u002Fwww.fatf-gafi.org\u002Fpublications\u002Fmethodsandtrends\u002Fdocuments\u002Fbest-practices-beneficial-ownership-legal-persons.html) for legal persons.\n\nThere is now widespread consensus that beneficial ownership registers are needed not only to combat ML\u002FTF but also tax evasion and other forms of financial crime, to assist in tracing and recovering stolen assets, and – especially for publicly available registers – for their deterrent effect.\n\nThis concern has been picked up by a multitude of policy and advocacy bodies from all sectors. The [G20](http:\u002F\u002Fwww.g20.utoronto.ca\u002F2014\u002Fg20_high-level_principles_beneficial_ownership_transparency.pdf), [B20](https:\u002F\u002Fbteam.org\u002Fassets\u002Freports\u002FBeneficial-Ownership-Transparency-B20-Report.pdf) and [C20](https:\u002F\u002Fwww.transparency.org\u002Ffiles\u002Fcontent\u002Factivity\u002F15May2013_C20_Anti-CorruptionPositionPaper_1Pager.pdf), the OECD and its [Global Forum on Transparency and Exchange of Information for Tax Purposes](https:\u002F\u002Fwww.oecd.org\u002Ftax\u002Ftransparency\u002F), the [Extractive Industries Transparency Initiative](https:\u002F\u002Feiti.org\u002Fbeneficial-ownership) (EITI), the Open Government Partnership through its [Beneficial Ownership Leadership Group](https:\u002F\u002Fwww.opengovpartnership.org\u002Fbeneficial-ownership-leadership-group), and [Transparency International](https:\u002F\u002Fwww.transparency.org\u002Fen\u002Fpublications\u002Frecommendations-on-beneficial-ownership-transparency-for-ogp-national-actio) are just a few of those calling actively for the establishment of effective beneficial ownership registers globally.\n\nOpen Ownership, an NGO, has developed [Principles for Effective Beneficial Ownership Disclosure](https:\u002F\u002Fwww.openownership.org\u002Fprinciples\u002F), which provide a framework for implementing beneficial ownership reforms and assessing the adequacy of existing measures.\n\nFar from being a purely technical issue, beneficial ownership is also increasingly a public demand following scandals such as the Panama and Paradise Papers. These have revealed how anonymous shell companies have been misused (and in many cases intentionally set up for that purpose) to assist criminals and professional money launderers in hiding the proceeds of corruption and other crimes.\n\n### Implementation and effectiveness of beneficial ownership registers\n\nDespite the fact that the importance of beneficial ownership transparency is increasingly recognised, implementation remains uneven and more clarity and granularity are necessary. To gain a greater understanding of the main weaknesses, and perhaps draw first conclusions of the underlying reasons, we examined what the FATF data reveals on this question.\n\nFor this, we looked at the following FATF Recommendations and effectiveness indicators (IO5) for beneficial ownership:\n\nFATF indicators on beneficial ownership Technical compliance Effectiveness R.24: Transparency and beneficial ownership of legal persons. Jurisdictions should take measures to prevent the misuse of legal persons for money laundering or terrorist financing. IO5: Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments. R.25: Transparency and beneficial ownership of legal arrangements. Jurisdictions should take measures to prevent the misuse of legal arrangements for money laundering or terrorist financing.  \n\nThe data covers 112 jurisdictions assessed under the FATF’s fourth-round methodology. _Note that data collection ended in July 2021. The data do not reflect the recent changes with regard to beneficial ownership in the [US](https:\u002F\u002Fwww.openownership.org\u002Fnews\u002Fusa-adopts-a-central-beneficial-ownership-register\u002F) and [Canada](https:\u002F\u002Fwww.occrp.org\u002Fen\u002Fdaily\u002F14277-ngo-s-praise-canada-s-new-corporate-ownership-registry), as these jurisdictions have not undergone an FATF evaluation since the changes came into effect._\n\nThe analysis reveals poor performance across the board.\n\n*   Technical compliance with R.24 and R.25 across all 112 assessed jurisdictions lies at only 47% on average.\n*   Almost half of the jurisdictions (44%) score zero for the effectiveness of their beneficial ownership transparency measures under IO5 – 49 jurisdictions out of the 112 assessed.\n*   No jurisdiction has an effective system, where IO5 is achieved to a very large extent.\n*   Only 11 jurisdictions out of the 112 score 66% for effectiveness. A further 52 jurisdictions demonstrate just 33% effectiveness.\n*   The average effectiveness score across all assessed jurisdictions is only 22%.\n\nAs explained above and emphasised repeatedly by the FATF, this lack of effective collection and verification of information on the beneficial owner of a corporate vehicle hinders the efforts of law enforcement and financial institutions to prevent or investigate abuse of the financial system.\n\n### What will happen if the FATF strengthens requirements on beneficial ownership transparency?\n\nThe data also seem to indicate that the non-binding nature of the FATF Recommendations on beneficial ownership leaves a great deal of flexibility in the way that jurisdictions implement them in their national legislation. Is this the reason for the uneven and tardy implementation?\n\nThe FATF has conducted a public consultation this year on possible [amendments to R.24 on the transparency and beneficial ownership of legal persons](https:\u002F\u002Fwww.fatf-gafi.org\u002Fpublications\u002Ffatfrecommendations\u002Fdocuments\u002Fwhite-paper-r24.html), the outcomes of which are pending at the time of writing this report. It is hoped that this process will shed more light on the causes of the current weakness of existing beneficial ownership frameworks and the lack of such frameworks in far too many jurisdictions still.\n\nBased on our analysis of jurisdictions in the Basel AML Index, we predict that average performance will decrease if the FATF strengthens its requirements under R.24.\n\n### Beneficial ownership transparency in the EU\n\nThe case of the European Union illustrates that implementing effective beneficial ownership registers remains challenging even in a region with substantial resources at its disposal, a relatively low risk of ML\u002FTF (see regional profile, page 27) and, importantly when comparing to the global standard, very clearly defined mandatory rules.\n\nThese rules for EU Member States are set out in the so-called [EU AML Directives](https:\u002F\u002Fec.europa.eu\u002Finfo\u002Fbusiness-economy-euro\u002Fbanking-and-finance\u002Ffinancial-supervision-and-risk-management\u002Fanti-money-laundering-and-countering-financing-terrorism_en) (AMLD).\n\n*   The [4th AMLD](https:\u002F\u002Fec.europa.eu\u002Finfo\u002Flaw\u002Fanti-money-laundering-amld-iv-directive-eu-2015-849_en) signed in 2015 required Member States to ensure that the beneficial owners of legal persons and some trusts should be known and registered with an authority.\n*   The [5th AMLD](https:\u002F\u002Fec.europa.eu\u002Finfo\u002Flaw\u002Fanti-money-laundering-amld-v-directive-eu-2018-843_en) required that beneficial ownership registers for companies and legal persons should be publicly accessible, and that beneficial ownership information on trusts should be accessible to competent authorities, financial institutions and designated non-financial business and professions (DNFBPs), as well as anyone who can demonstrate a legitimate interest. By January 2020, Member States were supposed to have transposed the 5th AMLD into domestic law.\n\nAlthough the 5AMLD set out the necessary framework for establishing transparent beneficial ownership across EU jurisdictions, there remain gaps in implementation of these standards in national legislation as well as weaknesses in supervision at the EU level.\n\nAs [pointed out by Transparency International](https:\u002F\u002Fwww.transparency.org\u002Fen\u002Fnews\u002Feu-beneficial-ownership-registers-public-access-data-availability-progress-2021), three jurisdictions (Italy, Hungary, Lithuania) still have not established any form of beneficial ownership register. A further six (Cyprus, Czech Republic, Finland, Greece, Romania and Spain) have failed to make their registers public, as required in the 5AMLD. Others restrict access in different ways.\n\nSo the problem seems to be going further than “just” the question of how specific the rules are. In July 2021 the EU presented what it calls an “[ambitious package of legislative proposals](https:\u002F\u002Fec.europa.eu\u002Finfo\u002Fpublications\u002F210720-anti-money-laundering-countering-financing-terrorism_en)” to strengthen and harmonise AML \u002F CFT rules across Member States, including beneficial ownership transparency requirements. It can be hoped that with this, combined with the ongoing revisions of relevant FATF standards, at least the high-risk countries will start understanding the critical role of beneficial ownership registers in both ML\u002FTF prevention and enforcement, and act on it.\n\n### Are compliant systems more effective?\n\nActually, no. Interestingly, the data reveals no strong correlation between technical compliance and effectiveness.\n\n*   Only nine jurisdictions demonstrate a high performance (above 50%) in both technical compliance and effectiveness ratings: Armenia, Bermuda, Cuba, Cook Islands, Italy, Israel, Macao, Spain and the UK.\n*   Some jurisdictions, such as Latvia and Iceland, score highly on technical compliance criteria (67% and 83% respectively) but zero in terms of effectiveness.\n\nThe US and Canada are among those jurisdictions that have been – at least until now – let down by their ineffective beneficial ownership transparency measures. Both fall into the medium-risk category in the Basel AML Index: Canada is rated at 4.67 and the US at 4.60 out of a maximum ML\u002FTF risk score of 10.\n\nHowever, both jurisdictions suffer from beneficial ownership transparency systems rated by the most recent FATF evaluation as 0% effective.\n\n### What can we learn from analysing FATF data on beneficial ownership?\n\nThe analysis shows, among other things, that:\n\n*   There is still an unacceptably poor level of compliance in establishing beneficial ownership registers (or other mechanisms), even when this is required not only by FATF standards but by law. In some jurisdictions, this is a major aspect letting down their otherwise acceptable performance in AML\u002FCFT.\n*   The majority of beneficial ownership registers that do exist are either mostly or completely ineffective at doing even the minimum that they are supposed to do – provide reliable information to the competent authorities on the ultimate beneficial owners of companies or trusts incorporated in the jurisdiction.\n\nIncreasing the transparency of information on beneficial ownership is both an obvious and an essential measure to improve the general level of AML\u002FCFT compliance and to help prevent or investigate ML\u002FTF offences.\n\nThis applies both domestically (since no jurisdiction has a fully functioning beneficial ownership system) and internationally (due to the cross-border nature of financial crimes).\n\nStrong government action to improve beneficial ownership transparency will support not only the competent authorities responsible for investigating and prosecuting financial crimes, but also financial institutions and other reporting entities with their customer due diligence obligations.\n\n### Further reading on beneficial ownership and money laundering\n\n*   [Position Paper on Beneficial Ownership Transparency](https:\u002F\u002Fbaselgovernance.org\u002Fsites\u002Fdefault\u002Ffiles\u002F2021-09\u002FGCFFC-statement-on-BO-transparency.pdf) (2021) by the Global Coalition to Fight Financial Crime\n*   [Quick Guide to Offshore Structures and Beneficial Ownership](https:\u002F\u002Fbaselgovernance.org\u002Fpublications\u002Fquick-guide-19-offshore-structures-and-beneficial-ownership) (2020) by Phyllis Atkinson, Head of Training ICAR at the Basel Institute on Governance\n*   [Principles for Effective Beneficial Ownership Disclosure](https:\u002F\u002Fwww.openownership.org\u002Fprinciples\u002F) (2021) by Open Ownership\n*   [Beneficial Ownership Registers: Progress to Date](https:\u002F\u002Fknowledgehub.transparency.org\u002Fhelpdesk\u002Fbeneficial-ownership-registers-progress-to-date) (2020) by the U4 Anti-Corruption Helpdesk\n*   [Best Practices on Beneficial Ownership for Legal Persons](https:\u002F\u002Fwww.fatf-gafi.org\u002Fmedia\u002Ffatf\u002Fdocuments\u002FBest-Practices-Beneficial-Ownership-Legal-Persons.pdf) (2019) by the FATF\n\n### More from the Basel AML Index\n\n*   Find out about the Basel AML Index, view the latest Public ranking and find out whether your organisation is eligible for a free Expert Edition account at our brand new website: [index.baselgovernance.org](https:\u002F\u002Findex.baselgovernance.org\u002F).\n*   See the [Basel AML Index 2021 press release](https:\u002F\u002Fbaselgovernance.org\u002Fnews\u002Fbasel-aml-index-2021-4-things-holding-back-global-fight-against-money-laundering).","2021-09-20","beneficial-ownership-transparency-is-a-pillar-of-anti-money-laundering-systems-so-it-needs-to-stand-up-insights-from-the-basel-aml-index-2021-2095","Beneficial ownership transparency is a pillar of anti-money laundering systems – so it needs to stand up. Insights from the Basel AML Index 2021","https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002Fe1f35fe6-fef1-41be-a23b-83f145e1334d?width=1000&height=650&format=webp&quality=80",[],[38,70],[43],[203],{"tags_id":204},{"id":122,"name":123},2095,[38,39],[43],[],[],[80,43],[],"2022-05-26T22:52:33.000Z","2026-05-29T22:21:42.000Z",[],"\u002Fresources\u002Fnews\u002Fbeneficial-ownership-transparency-is-a-pillar-of-anti-money-laundering-systems-so-it-needs-to-stand-up-insights-from-the-basel-aml-index-2021-2095",{"id":217,"body":218,"status":6,"type":31,"date":219,"slug":220,"title":221,"image":222,"countries":223,"topic":225,"activity":226,"tags":227,"nid":230,"topics":231,"activities":232,"authors":233,"images":235,"websites":236,"area":8,"programme":8,"language":8,"translations":237,"translation_of":8,"user_created":82,"date_created":238,"user_updated":57,"date_updated":239,"content":240,"link":241},9760,"Russia’s risk level in the Basel AML Index has hit a record low following a December 2019 Financial Action Task Force (FATF) assessment that rated the country’s anti-money laundering and counter terrorist financing (AML\u002FCFT) systems as reasonably effective.\n\nThe [Basel AML Index](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index) is the only independent, data-based index of the risk of money laundering and terrorist financing (ML\u002FTF) around the world. Russia’s overall risk score has fallen from 5.75 to 5.60 out of 10, where 10 equals the highest assessed risk of ML\u002FTF. It remains in the medium\u002Fhigh-risk category, reflecting in particular its vulnerabilities to a high level of corruption and to political and legal risks.\n\nThe next [Expert Edition](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index\u002Fexpert-edition) update of the Basel AML Index will reflect these changes. The [Public Edition](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index\u002Fpublic-ranking), which is released annually, will be updated in mid-summer.\n\nAny indications of progress in tackling money laundering and terrorist financing are welcome. However, policymakers and analysts will need to take into account features of the FATF methodology and other factors that may influence a country's ML\u002FTF risk rating before drawing conclusions.\n\nRussia’s case illustrates why, when it comes to combating corruption and money laundering, nobody should take numbers at face value.\n\n### Russia’s latest FATF assessment\n\nFATF Mutual Evaluation Reports (MERs) are a primary [data source](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index\u002Fmethodology\u002Findicators#2) of the Basel AML Index. They assess the quality of a country’s AML\u002FCFT systems (according to 40 Recommendations) and their effectiveness in practice (according to 11 Immediate Outcomes, or IOs).\n\nIn the new MER published in December 2019, Russia scores an average of 58 percent across the effectiveness criteria. The highest level of compliance is in IO6 and IO9, relating to the use of financial intelligence information and the investigation and prosecution of TF offences.\n\nThe average level of effectiveness shown by all 91 countries assessed with the current (fourth-round) FATF methodology so far is around 30 percent. This puts Russia among the top six countries in terms of effectiveness, after the UK, Israel, the US, Spain and Italy. The results of its neighbours in the region are lower: Ukraine scores 36 percent, Moldova 39 percent, Armenia percent and Belarus 45 percent.\n\nIn terms of technical compliance with the 40 Recommendations, Russia scores 68 percent, which is around average.  \n\n### Why the surprise?\n\nThis relatively positive assessment of the effectiveness of Russia’s AML\u002FCFT systems has raised eyebrows among AML experts, including [Ellen Timmer](https:\u002F\u002Fellentimmer.com\u002F2019\u002F11\u002F23\u002Fwwft-238\u002F), [Koos Couvée,](https:\u002F\u002Fwww.moneylaundering.com\u002Fnews\u002Fas-fatf-readies-praise-for-russia-critics-anticipate-backlash\u002F?type=free)  and [Joshua Kirschenbaum and Jennifer DeNardis](https:\u002F\u002Fwp.nyu.edu\u002Fcompliance_enforcement\u002F2019\u002F06\u002F11\u002Fthe-financial-action-task-force-evaluation-of-russia-an-opportunity\u002F).\n\nIs this the same Russia that has featured prominently in recent money laundering schemes and scandals including Danske Bank, Swedbank, ABLV Bank, and the “Troika Laundromat”?\n\nRichard Gordon, director of the Financial Integrity Institute at Case Western University, [stated](https:\u002F\u002Fwww.moneylaundering.com\u002Fnews\u002Fas-fatf-readies-praise-for-russia-critics-anticipate-backlash\u002F?type=free) that on this FATF assessment of Russia, “It feels wrong, but, as you start to go through the methodology, it makes more sense.”\n\n### Tight state control\n\nThe FATF assessment framework does not consider the independence of the judiciary system in the country or the level of political centralisation, political rights and property rights. The consequence is that countries with tight state control tend to demonstrate a relatively high level of performance in the effectiveness of their AML\u002FCFT systems. Recent examples include Chinese Taipei (55%), Cuba (48%), Macao (45%), and Russia (58%).  \n\nIn a recent paper on “[Russian kleptocracy and the rule of law: how the kremlin undermines European judicial systems](https:\u002F\u002Fhenryjacksonsociety.org\u002Fpublications\u002Frussian-kleptocracy-and-the-rule-of-law-how-the-kremlin-undermines-european-judicial-systems\u002F)”, Dr Andrew Foxall argues that the current Russian administration exercises political control over the domestic judiciary. Echoing this, Mr. Gordon states that the Russians _“have got a pretty authoritarian operation and so the fact that Rosfinmonitoring \\[Russia’s Financial Intelligence Unit\\] is very good is not a surprise – when it’s looking at the people the government really wants to know about”_.\n\nIn such a situation, the country’s high level of performance in IO6 (on the use of financial intelligence for ML\u002FTF investigations) does not look surprising.\n\n### Too much emphasis on TF convictions?\n\nAccording to the [FATF assessment](https:\u002F\u002Fwww.fatf-gafi.org\u002Fmedia\u002Ffatf\u002Fdocuments\u002Freports\u002Fmer4\u002FMutual-Evaluation-Russian-Federation-2019.pdf), Russia has a robust legal framework for combatting TF. The executive summary states that _“\\[on\\] average, Russia pursues 52 TF prosecutions per year. Since 2012, Russia has convicted more than 300 individuals of TF, with the majority resulting in sentences of imprisonment ranging from 3-8 years”._\n\nThese numbers in TF prosecutions are very high in comparison to other countries.\n\n*   In the US, which was assessed in 2016, the [MER](https:\u002F\u002Fwww.fatf-gafi.org\u002Fmedia\u002Ffatf\u002Fdocuments\u002Freports\u002Fmer4\u002FMER-United-States-2016.pdf) speaks of 120 convictions for TF offences in five years, so 26 convictions annually. \n*   According to the [UK’s MER](https:\u002F\u002Fwww.fatf-gafi.org\u002Fmedia\u002Ffatf\u002Fdocuments\u002Freports\u002Fmer4\u002FMER-United-Kingdom-2018.pdf) in 2018, it had 103 convictions for TF offences from 2014 to 2017.\n*   [Australia’s MER](http:\u002F\u002Fwww.fatf-gafi.org\u002Fmedia\u002Ffatf\u002Fdocuments\u002Freports\u002Fmer4\u002FMutual-Evaluation-Report-Australia-2015.pdf) in 2018 describes only three convictions for TF offences.\n*   [Canada’s MER](http:\u002F\u002Fwww.fatf-gafi.org\u002Fmedia\u002Ffatf\u002Fdocuments\u002Freports\u002Fmer4\u002FMER-Canada-2016.pdf) in 2016 says the country has secured only two convictions.\n\nThe number of convictions for TF offences also looks disproportionally high in comparison to the data for [real terrorist incidents collected by Global Change Data Lab](https:\u002F\u002Fourworldindata.org\u002Fgrapher\u002Fterrorist-incidents). Data for 2017 shows 122 incidents in the UK, 65 incidents in the USA, 22 incidents in Russia, 12 incidents in Canada and four incidents in Australia.\n\nThis high level of effectiveness in one particular area may skew the overall results.\n\n### AML risk is not just about systems\n\nWhile assessing a country’s ML\u002FTF risks, it is important to consider not just its systems and their effectiveness, but other factors. These include the level of corruption and bribery in the country, the independence of its judicial system, and levels of public accountability, political transparency and media freedom.\n\nWhile the Basel AML Index places a high emphasis on FATF data, its [composite methodology](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index\u002Fmethodology) attempts to offer a more holistic picture of a country’s risk exposure to ML\u002FTF by including data on a country’s performance in the above areas.\n\n### Media reports are a problematic data source\n\nFATF evaluations are based on an assessment of recent developments in a country in the area of AML\u002FCFT. Some of the media reports on ML scandals associated with Russia happened several years ago and were only discovered and reported on recently. They therefore do not take account of more recent developments in a country’s systems.\n\nThis time lag makes it difficult, if not irresponsible, to use case-based data on money laundering in objective evaluations of country risk.\n\nAn additional factor is that once a country is labelled a high-risk jurisdiction on the basis of its involvement in a ML scandal in the media, it is not possible for it to demonstrate progress in this area.\n\n### Decision-making needs a variety of assessments\n\nWhen taking a business or policy decision based on a country’s assessed ML\u002FTF risk, it is important to use as many relevant sources of information as possible.\n\nA key additional source is the International Monetary Fund (IMF)’s Country Report. The latest IMF [Country Report 19\u002F260](https:\u002F\u002Fwww.imf.org\u002Fen\u002FPublications\u002FCR\u002FIssues\u002F2019\u002F08\u002F01\u002FRussian-Federation-2019-Article-IV-Consultation-Press-Release-Staff-Report-48549) for Russia notes that supervision and AML\u002FCFT regulations “have been improved”. Like the FATF, the IMF positively evaluated the role of Rosfinmonitoring in the area of AML\u002FCFT. It points out, however, several deficiencies related to Know your Customer\u002FCustomer Due Diligence (KYC\u002FCDD), the timely reporting of Suspicious Transaction Reports (STRs) and the identification of ultimate beneficial owners.\n\nAnother useful source of data on ML\u002FTF risks is a country’s internal reports. Russia’s [National AML Risk Assessment in 2017](http:\u002F\u002Fwww.fedsfm.ru\u002Fcontent\u002Ffiles\u002Fdocuments\u002F2017\u002Fkeyfindings.pdf) showed a generally high level of awareness of the country’s ML\u002FTF risks. The report identified main areas of concerns, including budget spending and taxes, corruption, fraud and drug trafficking.\n\n### The long view: assessing a country’s risk over time\n\nEvery year, the Basel AML Index emphasises the need to assess countries’ AML\u002FCFT risk levels over a long period rather than making a judgement based on a snapshot in time. Zooming out on the history of FATF evaluations on Russia gives us a clearer perspective on Russia’s efforts to combat ML\u002FTF over the past two decades. \n\n[_View the chart of Russia's performance in the Basel AML Index since 2012_](https:\u002F\u002Fwww.baselgovernance.org\u002Fsites\u002Fdefault\u002Ffiles\u002F2020-02\u002FRussiaintheBaselAMLIndex.png).\n\nFrom 2000 until 2003, the FATF [listed Russia as a non-cooperative jurisdiction](https:\u002F\u002Fwww.fatf-gafi.org\u002Fmedia\u002Ffatf\u002Fdocuments\u002Freports\u002F1999%202000%20ENG.pdf). Its AML\u002FCFT defences were evaluated as poor by international standards, in particular relating to the absence of comprehensive customer identification requirements; a lack of a suspicious transaction reporting system; and shortcomings in having an operational Financial Intelligence Unit. Russia was removed from the list in 2003, [based on the progress it made](https:\u002F\u002Fwww.oecd.org\u002Fnewsroom\u002F2789358.pdf), and became a full member of the FATF.\n\nIn 2008, the Russian Federation was placed in the FATF’s follow-up process as a result of non-compliant (NC) and partially compliant (PC) ratings for certain core and key Recommendations in its [MER of June 2008](http:\u002F\u002Fwww.fatf-gafi.org\u002Fcountries\u002Fn-r\u002Frussianfederation\u002Fdocuments\u002Fmutualevaluationoftherussianfederation.html).\n\nFrom 2008 to 2013, Russia had six follow-up reports. In October 2013, the FATF recognised that the Russian Federation had made significant progress in addressing the deficiencies identified in the 2008 MER and removed the country from the regular follow-up process. The [country’s main achievements](http:\u002F\u002Fwww.fatf-gafi.org\u002Fcountries\u002Fn-r\u002Frussianfederation\u002Fdocuments\u002Ffur-russia-2013.html) included:\n\n*   Enhancing corporate transparency by introducing beneficial ownership requirements in its AML\u002FCFT legislation.\n*   Prohibiting credit institutions from opening and maintaining anonymous accounts.\n*   Addressing certain shortcomings in the criminalisation of terrorist financing and the reporting of shortcomings concerning terrorist financing.\n*   Strengthening measures to freeze terrorist assets domestically or at the request of other countries.\n\n### Other articles you might like:\n\n*   [What can we learn from recent money laundering cases?](https:\u002F\u002Fwww.baselgovernance.org\u002Fblog\u002Fwhat-can-we-learn-recent-money-laundering-cases)\n*   [Money laundering risks in post-Soviet countries: what does the Basel AML Index reveal?](https:\u002F\u002Fwww.baselgovernance.org\u002Fblog\u002Fmoney-laundering-risks-post-soviet-countries-what-does-basel-aml-index-reveal)\n*   [AML risks in Pakistan: consequences of the latest FATF report](https:\u002F\u002Fwww.baselgovernance.org\u002Fblog\u002Faml-risks-pakistan-consequences-latest-fatf-report)\n*   [How can Estonia have the lowest risk of money laundering in the Basel AML Index?](https:\u002F\u002Fwww.baselgovernance.org\u002Fblog\u002Fhow-can-estonia-have-lowest-risk-money-laundering-basel-aml-index)\n*   [Basel AML Index 2019: Too little progress – are AML systems effective?](https:\u002F\u002Fwww.baselgovernance.org\u002Fblog\u002Fbasel-aml-index-2019-too-little-progress-are-aml-systems-effective)\n\n_Photo by [Pixabay](https:\u002F\u002Fwww.pexels.com\u002F@pixabay?utm_content=attributionCopyText&utm_medium=referral&utm_source=pexels) from Pexels._","2020-02-26","russias-money-laundering-risks-what-does-the-latest-fatf-report-mean-in-practice-1093","Russia’s money laundering risks – what does the latest FATF report mean in practice?","https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002Fc294e0d4-f552-4f5b-a317-e90868f89b12?width=1000&height=650&format=webp&quality=80",[224],7429,[38,70],[43,72],[228],{"tags_id":229},{"id":122,"name":123},1093,[38,39],[43,72],[234],1242,[],[80,43],[],"2022-05-26T22:55:18.000Z","2026-05-29T22:21:54.000Z",[],"\u002Fresources\u002Fnews\u002Frussias-money-laundering-risks-what-does-the-latest-fatf-report-mean-in-practice-1093",{"id":243,"body":244,"status":6,"type":31,"date":245,"slug":246,"title":247,"image":248,"countries":249,"topic":250,"activity":252,"tags":253,"nid":260,"topics":261,"activities":262,"authors":263,"images":265,"websites":266,"area":8,"programme":8,"language":8,"translations":267,"translation_of":8,"user_created":82,"date_created":268,"user_updated":57,"date_updated":269,"content":270,"link":271},9807,"In 2019, Estonia achieved the lowest risk score out of the 125 countries in the Public Edition of the [Basel AML Index](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index), 2.68 out of 10. In fact, Estonia has consistently been among the top performers since 2012, when the Basel AML index was first calculated.\n\nYet Estonia hit headlines two years ago with a massive [money laundering scandal](https:\u002F\u002Fen.wikipedia.org\u002Fwiki\u002FDanske_Bank_money_laundering_scandal): EUR 200 billion of suspicious payments (non-resident money from Russia and other former Soviet states) were channelled through the tiny Estonian branch of Danske Bank between 2007 and 2015.\n\nWith such huge media attention on this scandal, it is understandable that some people question the veracity of the Basel AML Index. If you are one of those people, please read on.\n\n### Reliance upon data sources\n\nThe Basel AML Index Public Edition is a composite index, meaning it provides a simplified comparison of countries’ risks of ML\u002FTF. Each country's risk score is calculated from available data and does not represent an opinion or subjective assessment by the Basel Institute.\n\nIn that sense, we are bound by what the [data](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index\u002Fmethodology\u002Findicators) and [methodology](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index\u002Fmethodology) reveal and cannot tweak individual countries’ risk scores if they don’t match our subjective perceptions. In the same way, a good scientist does not fiddle the results of an experiment if it doesn’t match her initial expectations but instead seeks to understand why it does not.\n\nEstonia receives good scores in reputable data sources – including from the Financial Action Task Force (FATF), Transparency International, the World Bank and the World Economic Forum – dealing with corruption and financial, legal and political risks.\n\nThe Basel AML Index reflects these scores, not the scandals.\n\n### No recent FATF evaluation – and none planned\n\nEstonia’s low risk score is largely driven by its good performance in its [2014 FATF Mutual Evaluation Report](https:\u002F\u002Fwww.coe.int\u002Fen\u002Fweb\u002Fmoneyval\u002Fjurisdictions\u002Festonia) by Moneyval, the regional monitoring body for AML\u002FCFT. FATF Mutual Evaluation Reports are a crucial indicator in the Basel AML Index, as they are the main instrument for assessing and comparing countries’ legal and institutional AML\u002FCFT frameworks.\n\nThe 2014 report, which produces a score of 3.61 out of 10, 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”.\n\nEstonia’s score may worsen when it is re-assessed according to the latest FATF methodology, which focuses on the _effectiveness_ of AML\u002FCFT measures and not only technical compliance with the FATF’s 40 Recommendations. 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. In fact, this is precisely [what happened to Malta](https:\u002F\u002Fwww.baselgovernance.org\u002Fblog\u002Fmalta-high-risk-or-low-risk-country-money-laundering).\n\nThe FATF does not seem to have scheduled an onsite mission to Estonia in the next three years. Consequently, it will not drastically change its risk score in the Basel AML Index for at least the next three years.\n\n### Skewed perceptions: is what we see all there is?\n\nThe Basel AML Index measures the _risk_ of money laundering, not the actual amount of money laundering. This would be an impossible task given the hidden nature of illicit financial flows.\n\nML\u002FTF risk is understood as a broad risk area in relation to a country’s vulnerability to ML\u002FTF and its capacities to counter it.\n\nIn countries with low risks of ML\u002FTF thanks to strong legislation, high levels of media freedom and sufficient transparency – like Estonia – money laundering offences are clearly more likely to be uncovered than in countries with the opposite conditions. This can lead to the flawed perception that the country has more ML\u002FTF offences simply because they have been brought to light.\n\nA similarly flawed conclusion would be finding a rotten apple in a transparent container of apples, and thinking that apples in the transparent container are more likely to be rotten than apples in the closed container that nobody can inspect.\n\n### No country is free of money laundering risks\n\nEstonia's risk score of 2.68 out of 10 – where 10 equals the highest risk of ML\u002FTF – is still a risk.\n\nThere has never been, and never will be, a country with zero risk of money laundering. Why? Because corrupt officials and criminals are adept at finding ever new and clever ways to launder their proceeds of their crimes.\n\nAnd yes, there are systemic issues with Estonia’s AML\u002FCFT systems. Most of the money laundering scandals hitting headlines in the last two years, including the Danske Bank scandal, date back around 8–12 years and took place over long periods of time.\n\nThe cases raised serious systematic concern about the quality of supervision and effectiveness of public-private efforts related to AML\u002FCFT. They highlight why no country should become complacent when it comes to money laundering.\n\n### Long-term measures vs. short-term cover-ups\n\nWe can expect more money laundering schemes to be uncovered in the next years, including in countries generally regarded as low risk. Part of the reason why the recent scandals were uncovered is thanks to enhanced levels of investigative journalism and data sharing, accompanied by increased public demand for open information globally.\n\nCountries that respond to these positive trends and demands by increasing their levels of transparency and supervision, for example by creating transparent beneficial ownership registries, may see a short-term increase in the uncovering of money laundering schemes.\n\nWe can understand why governments fear lifting up their carpets and revealing what's underneath. But the alternative is to continue providing a hiding place for dirty money from criminals and organised crime networks, so we would encourage them to be brave.\n\n### Can one-off media reports and scandals be taken into account in the Basel AML Index?\n\nEach year the Basel Institute brings together external experts from a diverse set of AML, compliance and risk assessment backgrounds to review the methodology of the Basel AML Index for continued validity and adequacy, and to discuss trends in global AML regulation and practice that may impact its effectiveness.\n\nAt the [2019 review meeting](https:\u002F\u002Fwww.baselgovernance.org\u002Fbasel-aml-index\u002Fmethodology#7), one question discussed was whether the Basel AML Index could and should take into account case-based data on money laundering such as the Panama Papers, Paradise Papers, scandals such as the Danske Bank and Swedbank cases, and other investigations by investigative journalism associations such as the OCCRP.\n\nIt was decided not to include case-based data due to the following reasons:\n\n*   Time lags between real cases and detection. After a number of ML cases, some national regulators increased fines imposed on financial institutions for failing to enforce AML regulations. The resulting penalties were often imposed for transactions that happened many years previously. This huge time lag between real cases of AML misconduct and detection\u002Fsanctioning is problematic for an Index that is updated annually.\n*   No regular updates. ML\u002FTF cases in the media appear without any predictable regularity. It is impossible to provide updates to the data and to change positions of countries.\n*   Countries cannot demonstrate progress. Once a country is labelled a high-risk jurisdiction on the basis of its involvement in a ML media scandal, it is not possible for it to demonstrate progress in this area.\n\n### What other factors should be considered when assessing ML\u002FTF risk?\n\nIn the case of Estonia, the data in the Basel AML index 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.\n\nTrade-based money laundering is another factor to take into consideration. The [FATF identifies three main methods](https:\u002F\u002Fwww.fatf-gafi.org\u002Fpublications\u002Fmethodsandtrends\u002Fdocuments\u002Ftrade-basedmoneylaundering.html) by which criminal organisations and terrorist financiers move money for the purpose of disguising its origins and integrating it into the formal economy: use of the financial system; physical movement of money (e.g. cash couriers); physical movement of goods through the trade system.\n\nThe Basel AML Index focuses mostly on the first two ways, with less coverage of financial crime facilitated by international trade. This is due to a lack of comparable data on trade-based money laundering. We are investigating data sources with a view to covering this aspect in future editions of the Basel AML index.\n\nAn [analysis of recent high-profile money laundering cases](https:\u002F\u002Fwww.baselgovernance.org\u002Fblog\u002Fwhat-can-we-learn-recent-money-laundering-cases), including the Danske Bank scandal, reveals several other red flags for money laundering that financial institutions and companies should take into account in addition to country risk. These include politically exposed persons (PEPs), non-resident legal persons and issues around shell companies in offshore jurisdictions.\n\n_Photo of Tallinn, Estonia by [Maria Geller](https:\u002F\u002Fwww.pexels.com\u002Fphoto\u002Fwhite-and-brown-concrete-building-1803860\u002F) from Pexels._","2019-09-25","how-can-estonia-have-the-lowest-risk-of-money-laundering-in-the-basel-aml-index-1003","How can Estonia have the lowest risk of money laundering in the Basel AML Index?","https:\u002F\u002Fjam.baselgovernance.org\u002Fapi\u002Fassets\u002F9889a925-86e5-45f9-8100-7ebdb892a99a?width=1000&height=650&format=webp&quality=80",[],[38,70,251],"Private Sector",[43,72],[254,258],{"tags_id":255},{"id":256,"name":257},879,"Money laundering",{"tags_id":259},{"id":122,"name":123},1003,[38,39,251],[43,72],[264],1256,[],[80,43],[],"2022-05-26T22:55:57.000Z","2026-05-29T22:21:56.000Z",[],"\u002Fresources\u002Fnews\u002Fhow-can-estonia-have-the-lowest-risk-of-money-laundering-in-the-basel-aml-index-1003",{"id":273,"body":274,"status":6,"type":31,"date":275,"slug":276,"title":277,"image":278,"countries":279,"topic":280,"activity":282,"tags":283,"nid":284,"topics":285,"activities":286,"authors":287,"images":290,"websites":291,"area":8,"programme":8,"language":8,"translations":292,"translation_of":8,"user_created":82,"date_created":293,"user_updated":105,"date_updated":294,"content":295,"link":296},10188,"_By Patricia E. Dowden and Philip M. Nichols._ _This article was [originally published](http:\u002F\u002Frussiancouncil.ru\u002Fen\u002Fblogs\u002Fpatricia-dowden-philip-nichols\u002F?id_4=1599) by the [Russian International Affairs Council](http:\u002F\u002Frussiancouncil.ru\u002Fen\u002F) on 25 December, 2014. Republished here with permission._\n\nWhat standards should businesses observe in their own countries, or abroad? Businesses now have resources and influence that rival or surpass those of governments and certainly of ordinary people.(1) The choices businesses make can profoundly influence the lives of every person on the planet. Businesses, governments, and people now recognize that businesses must do much more than merely obey the law. Yet discerning and agreeing on globally appropriate rules for business behavior has been a formidable and contentious discussion among business leaders and academics.\n\nWhile acknowledging all of the contentiousness, we now offer a modest proposal for a unifying global business ethics principle:\n\n_A basic duty of every organization is to earn stakeholder trust._\n\nThis principle is meant to replace a more familiar but flawed imperative: that the basic duty of each business leader is to \"maximize shareholder value.\"(2) Such a duty has never been explicitly written into corporate law, yet is often practiced by CEOs as a way of avoiding dissatisfied shareholders and being replaced by a similarly dissatisfied Board of Directors. But a single-minded focus on profitability – especially very short-term profitability – has serious limitations and risks to the ongoing enterprise; we will explain why earning and maintaining stakeholder trust – including shareholders -- can not only serve businesses' bottom line over time, but also make the market economies where they operate much more sustainable.\n\nStating that businesses should earn and maintain stakeholder trust clearly implies that business should give moral consideration not only to owners, but also to small and large interest groups related to the business – groups such as customers, employees, creditors, suppliers, and even government. \"Stakeholders\" is, then, a much broader term than \"investors.\" The investors in a corporation include its shareholders, in a partnership its partners, in a privately held business its principals. These terms – particularly \"shareholders\" – are most often used when discussing who is affected by a business. Yet while investors are important, they are not the only groups with whom a business interacts. A business will typically have workers, customers, suppliers, and other people with whom it directly interacts. A business may owe money to a bank, or to bondholders, or other institutions. A business might interact with people and groups less directly. For example, a business might be the center of a community, or conduct research important to sick people, or develop technology to enable people. All of these groups, all of these people, are stakeholders in that business. All of these groups and all of these people are also part of the wider economy and social sphere in which these businesses operate.\n\nSo, it is the job of each business to earn stakeholders’ trust. But \"trust\" is an even more elusive concept than \"stakeholders.\" For each business, trust is often expressed in the value of its brand and its reputation. For a nation's economy, largely powered by its businesses, the value of widespread trust among its businesses and institutions is abundantly clear: robust market economies need a high degree of trust to prosper.(3) Trust contributes immeasurably to the functioning of an economy; a relative lack of trust degrades and disempowers a nation's economy. No better example can be offered than the global economic crisis of 2008, which we will discuss in a future post.\n\nThe logic of establishing trust as a unifying principle is, therefore, straightforward. Businesses operate in an economic context and in a larger social and natural environment. Individual businesses succeed when there is consistent and positive economic performance. Because trust is a critical factor in creating a robust economy, businesses should therefore act in ways that engender trust in all its activities, not only in its interactions with shareholders, but with all relevant stakeholders. To do otherwise would degrade the economic environment and would ultimately condemn businesses to failure. When business succeeds investors, stakeholders and society benefit.\n\n### Earning Trust\n\nStakeholder trust is created by organizational behaviors valued by stakeholders. Our hypothesis is that these behaviors are consistent with principles of business ethics, and therefore that trust levels can serve as accurate barometers for assessing a company’s business ethics.\n\nTrust can be defined as confidence in both character and competence. For example, the standard banking industry criteria for borrower trustworthiness (\"5 C’s of Credit\") begins with character. Pierson and Malhotra find that \"internal stakeholders, such as employees and investors, look most for evidence of managerial competence…. External stakeholders, such as customers and suppliers, typically care much more about technical competence\".(4) Trust reflects reactions to personal experience with the organization's representatives (fellow employees, marketing representatives) and to organizational culture, policies, reputation.(5)\n\nAnalyzing what behaviors are most likely to create trust is a challenge to every organization, and priorities will likely vary by industry, by national culture, by institutional strategy, etc. Research on both employee and customer trust, though, suggests that the basic elements are similar(6):\n\n*   Integrity, honesty\n*   Reliability, dependability, consistency\n*   Fairness, accountability­\n*   Competence, capability: required skills, resources, authority are available\n*   Benevolence, shared values, empathy: a genuine interest in partner’s welfare and finding mutual benefit\n*   Respectfulness\n*   Communication, transparency: timely, comprehensive, comprehensible information; listening as well as speaking\n*   Responsiveness: timely, constructive reactions to issues\n\nResearch also indicates that there is a strong correlation between employee trust and customer trust; and that employee trust and customer trust both influence shareholder value.\n\n### Stakeholder Trust and Shareholder Value\n\nMilton Friedman, a Nobel economist, famously wrote in 1970 that \"The social responsibility of business is to increase its profits\".(7) This evolved in the 1980s to the market economy mantra: \"The purpose of the corporation is to maximize shareholder value,\" where \"value\" was nearly always assumed to mean \"financial value.\" Money quickly became an end in itself: the common terms \"capital markets,\" \"market economy,\" \"shareholder value\" – now dominating discussions of business and economics – did not appear in 1970s economic texts. Today, maximizing shareholder value may be particularly inappropriate as a guide for businesses in emerging economies.(8)\n\nProfits serve as a proxy for value. It is widely assumed that profits reflect the collective judgment of the market, allocating resources to the \"best\" firms. But this assumption is undermined by a major shift in the behavior of investors: many shareholders no longer take long-term positions in most firms; rather, they acquire a financial interest on a temporary basis by buying securities. This has led to a very short-term focus on profitability, and has unintentionally encouraged firms to make highly-leveraged risks. One factor among many causing the 2008 subprime \"meltdown\" was short-term thinking by over-leveraged financial firms. Ignoring value to all stakeholders, some firms lost their economic value as well.\n\nOne of the world’s most successful shareholders, Warren Buffet, provides a different definition of \"shareholder value\": \"Lose money and I will forgive you. Lose even a shred of reputation and I will be ruthless.\" Buffet goes on: \"Wealth can always be recreated, but reputation takes a lifetime to build and often only a moment to destroy.\"\n\nWarren Buffet's experience has taught him that stakeholder trust enhances shareholder value. The cost of losing trust can be demonstrated anecdotally: earnings decline, loss of market share, loss of market cap, etc. There are also other examples of the economic benefit of trust:\n\n*   In emerging economies, research indicates that the single most important element in economic development is trust, specifically \"bridging trust,\" or the willingness to cooperate across groups.\n*   In developed economies, shareholder trust can be quantified by the difference between a company's asset value and its market value.\n    *   The S&P 500 Price to Book Value list shows that from 1999 to 2014, the \"trust premium\" ranges from half the companies' average value (in 2008, following the financial crisis) to about 84%.\n    *   In accounting terms, the difference between book value and market value is called \"goodwill.\" Many of the components of goodwill are related to trust. Recent research on purchase price of acquired companies suggests that goodwill may make up on average as much as a third of the value of these companies.(9)\n*   In recent years, the \"competition\" paradigm has shifted to a trust-dependent \"cooperation\" paradigm, called \"coopetition\"(10): it is common now for companies to optimize their economic performance and customer service through sharing resources with competitors, in order to increase market size rather than market share. Examples include airlines sharing routes with other airlines; universities expanding their curriculum by sharing classes with other universities; banks making their cash machines available to customers of other banks. Intel, Nintendo, American Express, NutraSweet are among numerous other companies using this strategy.\n\nThe West, we believe, has done a serious injustice to emerging economies – including Russia – to have exported a version of capitalism that measures success by money only. It is time to correct that error.\n\nIn future posts we would like to discuss the following topics and others of interest to our readers:\n\n*   role of trust in reducing corruption\n*   role of customer and employee trust in enhancing profitability;\n*   role of trust in emerging economy economic development;\n*   unique role of trust in the global financial system and how this failed in 2008;\n*   role of civility in creating trust\n\nWhile we will focus on business, we propose that earning stakeholder trust is not only the obligation of businesses but of all organizations. We look forward to your discussion of this proposition.\n\n\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\n\n_The authors are grateful to Professor Donald Mayer, whose generosity in sharing his extensive knowledge and experience in the field of business ethics has been a valuable contribution to this paper._\n\n*   Daniel Yergin and Joseph Stanislaw, The Commanding Heights: The Battle Between Government and the Marketplace (2008)\n*   Creating Shareholder Value by Alfred Rappaport: \"VBM \\[Value Based Management\\] is an approach to management whereby the company’s overall aspirations, analytical techniques, and management processes are aligned to help the company maximize its value by focusing management decision making on the key drivers of shareholder value.\" [http:\u002F\u002Fwww.imanet.org\u002FPDFs\u002FPublic\u002FResearch\u002FSMA\u002FMeasuring%20and%20Managing%20Shareholder.pdf](http:\u002F\u002Fwww.imanet.org\u002FPDFs\u002FPublic\u002FResearch\u002FSMA\u002FMeasuring%20and%20Managing%20Shareholder.pdf)\n*   Francis Fukuyama, Trust: The social virtues and the creation of prosperity (1995)\n*   Unconventional Insights for Managing Stakeholder Trust by Michael Pirson and Deepak Malhotra, p.11\n*   The Commitment-Trust Theory of Relationship Marketing by Robert M. Morgan and Shelby D. Hunt Journal of Marketing © 1994 American Marketing Association p 41\n*   The Commitment-Trust Theory of Relationship Marketing by Robert M. Morgan and Shelby D. Hunt Journal of Marketing © 1994 American Marketing Association p 41 Unconventional Insights for Managing Stakeholder Trust by Michael Pirson and Deepak Malhotra, p. 17 Altman and Taylor, 1973; Dwyer and LaGace 1986; Larzelere and Huston 1980; Rotter 1971 Heide and John (1992) Dwyer, Schurr, and Oh (1987) p 21 An Examination of the nature of Trust in Buyer-Seller Relationships, Patricia M. Doney and Joseph P. Cannon Journal of Marketing April 1997 p.1 How the Best Leaders Build Trust, Stephen M. R. Covey [http:\u002F\u002Fwww.leadershipnow.com\u002FCoveyOnTrust.html](http:\u002F\u002Fwww.leadershipnow.com\u002FCoveyOnTrust.html)\n*   [https:\u002F\u002Fwww.morethanaccountants.co.uk\u002Fthe-social-responsibility-of-business-is-to-increase-its-profits-by-milton-friedman\u002F](https:\u002F\u002Fwww.morethanaccountants.co.uk\u002Fthe-social-responsibility-of-business-is-to-increase-its-profits-by-milton-friedman\u002F)\n*   Mary Gentile describes other critical weaknesses in the \"shareholder primacy\" corporate governance concept, among them the fact that it is based on assumptions about underlying legal and cultural systems that don’t apply to emerging economies. See [http:\u002F\u002Fwww.aspeninstitute.org\u002Fsites\u002Fdefault\u002Ffiles\u002Fcontent\u002Fdocs\u002Fbsp\u002FEABIS.GENTILE.2004-1.DOC](http:\u002F\u002Fwww.aspeninstitute.org\u002Fsites\u002Fdefault\u002Ffiles\u002Fcontent\u002Fdocs\u002Fbsp\u002FEABIS.GENTILE.2004-1.DOC).\n*   2013 Purchase Price Allocation Study by Houlihan Lokey [http:\u002F\u002Fwww.hl.com\u002Fus\u002Fpress\u002Finsightsandideas\u002F4862.aspx](http:\u002F\u002Fwww.hl.com\u002Fus\u002Fpress\u002Finsightsandideas\u002F4862.aspx)\n*   Co-opetition by Adam M. Brandenburger and Barry J. Nalebuff (290 pages, Currency\u002FDoubleday, 1996)","2015-01-08","stakeholder-trust-a-proposal-for-a-global-business-ethics-principle-172","Stakeholder trust: a proposal for a global business ethics principle","\u002Fpics\u002Fimg-placeholder.png",[],[281,251],"Collective Action",[72],[],172,[281,251],[72],[288,289],1330,1331,[],[80,281],[],"2022-05-26T22:59:22.000Z","2025-08-31T23:14:59.000Z",[],"\u002Fresources\u002Fnews\u002Fstakeholder-trust-a-proposal-for-a-global-business-ethics-principle-172",{"left":298,"top":298,"width":299,"height":299,"rotate":298,"vFlip":300,"hFlip":300,"body":301},0,20,false,"\u003Cpath fill=\"currentColor\" fill-rule=\"evenodd\" d=\"M17 10a.75.75 0 0 1-.75.75H5.612l4.158 3.96a.75.75 0 1 1-1.04 1.08l-5.5-5.25a.75.75 0 0 1 0-1.08l5.5-5.25a.75.75 0 1 1 1.04 1.08L5.612 9.25H16.25A.75.75 0 0 1 17 10\" clip-rule=\"evenodd\"\u002F>",1780676521230]