Anti-money laundering

Is this a turning point for asset recovery success in Europe?

Those of us dedicated to fighting financial crime were excited to see the Council of Europe’s recent adoption of an Additional Protocol to the Warsaw Convention, an international treaty on the prevention and control of money laundering and terrorist financing. The Protocol, together with the Warsaw Convention, arguably represents one of the most advanced treaty frameworks on asset recovery. It elevates practices developed in more advanced jurisdictions into binding commitments and raises the baseline for all participating states. It also requires states to rethink their approach to anti-money laundering and asset recovery in several important respects. Among others, it: - places greater emphasis on financial investigations; - strengthens the institutional architecture supporting asset recovery; - obliges states to significantly improve their ability to cooperate in cross-border cases. To achieve these objectives, it introduces a range of operational measures designed to facilitate the tracing, freezing, management and recovery of criminal assets. These include dedicated asset recovery bodies, centralised account registries and enhanced mechanisms for information sharing and international cooperation. This short explainer highlights some of the points that we, at the Basel Institute, find most important and potentially impactful based on two decades of experience of our International Centre for Asset Recovery supporting jurisdictions around the world on anti-money laundering and asset recovery. Why the new Protocol? The 2005 Warsaw Convention – formally the Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime and on the Financing of Terrorism – establishes a comprehensive framework for anti-money laundering and asset recovery. It requires its 39 States Parties to implement anti-money laundering measures, including customer due diligence, suspicious transaction reporting and Financial Intelligence Units. It also requires them to cooperate internationally to identify, trace, freeze, seize, confiscate and return criminal assets. The need to modernise the Convention and respond to evolving forms of illicit finance, digital assets and the increasingly rapid movement of assets across borders drove the adoption of the new Protocol. The Protocol seeks to ensure consistency with emerging international and regional standards, including the Financial Action Task Force Recommendations. It also seeks to make advanced asset recovery mechanisms developed within the European Union framework available across the wider Council of Europe space, which includes 46 European states. Connecting financial intelligence with asset recovery and management The Protocol's main innovation lies in the integration of Financial Intelligence Units, Asset Recovery Offices and Asset Management Offices into a coherent institutional architecture. The integration is designed to support rapid intervention, effective asset tracing and management, and cross-border cooperation. By doing so, it strengthens the role of non-law enforcement actors in tracing, safeguarding and preserving the value of assets. First, under the Protocol, States Parties are required to establish Asset Recovery Offices with powers to trace assets, cooperate directly with foreign counterparts and take immediate action to preserve assets, including crypto, in cross-border cases. Second, States Parties are also required to establish Asset Management Offices responsible for managing frozen and confiscated property and for cooperating with domestic and foreign authorities. Third, the Protocol also strengthens the operational role of Financial Intelligence Units in asset recovery by requiring states to grant them powers to temporarily suspend transactions, accounts and business relationships. Many jurisdictions already permit the temporary suspension of suspicious transactions. However, FATF standards do not require Financial Intelligence Units to have such authority. In practice, these reforms recognise that anti-money laundering and asset recovery are closely interconnected. Early intervention significantly increases the chances of successful asset recovery at both domestic and cross-border level. They also emphasise that asset value must be preserved from freezing to disposal. Achieving this requires empowering specialised authorities responsible for financial intelligence, asset tracing and asset management. Streamlining access to asset and ownership data The Protocol requires the establishment of centralised account registries capable of identifying bank accounts, payment accounts, securities accounts, safe deposit boxes and crypto accounts, along with their beneficial owners and any persons authorised to act on behalf of account holders. Financial Intelligence Units, Asset Recovery Offices and other competent authorities are explicitly granted access to these mechanisms. This creates a dedicated infrastructure for locating assets within a jurisdiction. It also allows the exchange of such information between authorities in cross-border cases. While centralised bank account registries already exist in many jurisdictions, they are far from universal. Moreover, where such systems do exist, they have traditionally focused on bank account information and often do not extend to other forms of financial holdings, such as securities accounts, safe-deposit boxes or crypto accounts. In practice, this addresses a major operational bottleneck. Identifying accounts usually requires multiple requests to banks and other institutions, which increases the length of financial investigations. Centralised registries significantly improve operational efficiency by accelerating asset tracing and reducing the risk of asset dissipation before authorities can act – an approach now being extended to volatile asset classes such as cryptocurrencies. Maximising the value of financial investigations The Protocol establishes a comprehensive framework to prioritise and enhance asset tracing and financial investigations. The Protocol requires competent authorities to be able to conduct financial investigations without delay, independently or alongside criminal investigations at all stages of proceedings. This includes after a confiscation order has been issued. Such investigations are intended to be flexible in scope and may be used to identify the scale of criminal networks, trace and secure assets subject to confiscation, or gather evidence for criminal or asset recovery proceedings. This emphasis on early and adaptable financial investigation underscores the Protocol’s objective of embedding asset tracing and recovery as a routine component of enforcement processes, while preserving discretion for competent authorities in how these tools are applied in practice. Asset management gets the attention it deserves The Protocol encourage states to shift away from perceptions that asset management is a secondary administrative task and instead view it as a necessary, value-preserving core function of asset recovery systems. It obligates States Parties to establish a detailed asset management framework, that includes: - the possibility of selling seized assets before confiscation where property is perishable, rapidly depreciating or requires specialised management that is not readily available, thereby preserving value pending the outcome of proceedings; and - measures facilitating the reuse of seized and confiscated assets. Experience shows that preserving the value of seized assets requires more than legal powers. It also depends on having clear procedures, dedicated resources and expertise. This is particularly true for complex or newer forms of assets, such as cryptocurrencies. The practical side of asset management is an especially important consideration for many of the Basel Institute’s partner jurisdictions, where asset management has often not been prioritised until now. Lessons from the field show that strong asset management depends on the combination of legal frameworks and the capacity to putting them into practice, including specialized institutions for asset management. Practical ways to enhance international cooperation The Protocol introduces several measures designed to strengthen international cooperation between Financial Intelligence Units, Asset Recovery Offices and Asset Management Offices , as well as judicial authorities. On the latter, key measures we highlight as particularly valuable include: First, mandatory standard forms for the transmission and execution of freezing and confiscation requests. Although model templates already exist in a number of international and regional frameworks, their use is often optional. The Protocol seeks to promote greater consistency in requests, reduce delays caused by incomplete information and facilitate more efficient cooperation between authorities. Second, Joint Investigation Teams established for the purpose of tracing and recovering assets liable to confiscation. Joint Investigation Teams provide a mechanism for authorities to work together in real time, exchanging intelligence and evidence directly without relying on formal mutual legal assistance. While they are already envisaged under instruments such as United Nations Convention Against Corruption, United Nations Convention against Transnational Organized Crime and EU law, these frameworks primarily focus on the investigation of criminal offences. By contrast, the Protocol innovatively provides for Joint Investigation Teams dedicated solely to asset recovery objectives. Joint Investigation Teams dedicated to financial investigations already operate in practice, but the Protocol provides a clear legal basis and encourages more systematic reliance on them. The combination of proactive domestic investigations and cross-border teams can be a powerful tool bolster the identification and ultimate freezing of criminal assets on a broader scale. A powerful Protocol that can inspire all States – and is hopefully not a paper tiger The Additional Protocol marks a clear shift in asset recovery towards an intelligence-led and institutionally integrated model of enforcement that also seeks to maximise the value of criminal assets that are seized and recovered by the state. Its practical impact though, will depend less on legislative alignment than on whether states can build the specialised institutions, tools, expertise and cross-border cooperation needed to make early tracing, preservation and recovery operationally effective. Depending on existing capacity, this may require legal reform, technical assistance and targeted training. Without this, the Protocol’s significance risks remaining largely theoretical. In any case, even beyond the Council of Europe space, the Protocol provides a clear blueprint for jurisdictions seeking to strengthen their asset recovery frameworks. Its approach is closely aligned with the principles that guide our work with partner jurisdictions outside Europe. The Protocol will provide an additional tool to support countries in designing reforms that are both ambitious and grounded in their specific legal, institutional and operational realities.

Virtual assets, real-world crime and the search for effective responses

As the use of virtual assets accelerates worldwide, so too does their appeal to criminal actors looking to move money faster, hide transactions more effectively and stay one step ahead of enforcement authorities. And it’s natural that when people discuss crypto-related crime, the focus is often on governments, regulators, law enforcement agencies and the private sector – crypto exchanges, financial institutions and blockchain intelligence firms. What about international organisations, non-profits, expert networks and professional associations – what role do they play behind the scenes? And how much impact can they really have when it comes to tackling illicit activity involving virtual assets? These questions were at the centre of a webinar co-hosted by the Basel Institute on Governance and the Organization for Security and Co-operation in Europe OSCE . The discussion brought together experts from the OSCE, the Basel Institute, the Financial Intelligence Unit of Moldova, the United Nations Office on Drugs and Crime UNODC , and the Global Coalition to Fight Financial Crime. Across the discussion, speakers kept circling around the same point: the crypto-crime field does not need more vague talk about cooperation or more one-off awareness workshops. It needs practical, sustained and operational forms of support that help investigators, prosecutors and financial intelligence units respond to increasingly sophisticated criminal activity. Beyond awareness raising A recurring theme throughout the discussion was the gap between recognising the problem and building the capability to address it. Speakers noted that crypto-related crime evolves faster than most institutions can adapt. Bots on the Telegram messaging app are now providing money-laundering-as-a-service, as one speaker noted by way of example. Criminal actors – and bots – exploit regulatory gaps, fragmented information-sharing systems and uneven levels of expertise across jurisdictions. At the same time, many authorities are still in the early stages of developing operational capacity. This is where international organisations and networks can play an important role. Not simply by producing guidance documents or organising workshops and conferences – which are necessary but not sufficient – but by helping countries build practical and lasting capabilities. The OSCE shared examples from its regional project on mitigating the money laundering risks of virtual assets, which supports participating states across Eastern Europe, the South Caucasus, Central Asia and Mongolia. One example was Moldova’s sectoral national risk assessment on virtual assets. Beyond identifying vulnerabilities, the process helped prompt institutional action and legislative development. The OSCE also pointed to measurable operational outcomes linked to its capacity-building support. Institutions supported through the programme, for example, traced more than USD 100 million in illicit crypto assets in 2025 alone. Why PowerPoint presentations are not enough Several speakers emphasised that complex investigations involving virtual assets and asset recovery require highly specialised expertise that cannot be built through isolated workshops. Investigators need opportunities to apply knowledge in real cases. Financial intelligence units need ongoing mentoring and technical support. Prosecutors need to understand not only the technology itself but also how to present complex digital evidence in court. The Basel Institute highlighted the importance of long-term engagement with practitioners. The approach of its International Centre for Asset Recovery ICAR includes combining case-centered training with hands-on mentoring, operational support on live cases and efforts to foster collaboration between different government agencies and with the private sector. Together with highly effective train-the-trainer programmes, the focus is on helping agencies develop capabilities that can evolve alongside changing technologies and criminal methods, rather than delivering isolated workshops. Networks that make cooperation operational The webinar also challenged the tendency to talk about “international cooperation” in abstract terms. In practice, it’s difficult to develop trusting relationships between individuals and institutions operating in very different legal and cultural contexts, especially where there are language barriers. In this environment, organisations such as the OSCE, Basel Institute, UNODC and the Global Coalition to Fight Financial Crime can act as connectors between sectors, jurisdictions and professional communities. They can: help investigators and practitioners exchange expertise and emerging typologies; create trusted channels for faster information sharing; connect authorities facing similar challenges across jurisdictions; support the development of common standards and approaches; and bridge gaps between public authorities, financial institutions and technical experts One example is the Global Coalition’s proposal to develop a framework for sharing illict crypto wallet attribution data between public authorities – a major need, especially for jurisdictions without the resources to purchase multiple blockchain intelligence tools. Research and analysis as a basis for action Another important thread running through the webinar was the role of research and evidence-based analysis. As technologies and criminal typologies evolve rapidly, policymakers and practitioners need reliable analysis rather than hype or speculation. Speakers discussed how international organisations support countries by analysing emerging threats, identifying trends and helping governments design informed legal and operational responses. Speakers highlighted several concrete projects, such as UNODC research into scam compounds and cyber-enabled fraud in Southeast Asia and into the links between cybercrime and corruption, and the Global Coalition’s research on links between gaming and crypto-related financial crime. A rapidly evolving challenge The webinar closed with a discussion on what aspects of collaboration participants would most like to strengthen in the virtual assets space. While perspectives differed, there was broad agreement that current models of cooperation and capacity building are still not moving fast enough to match the pace of technological change and criminal innovation. It’s been said many times, but it warrants saying again: As virtual assets continue to evolve at breakneck speed, so too must the international response. The discussion demonstrated that international organisations, non-profits and professional networks can have significant impact – particularly when they focus less on rhetoric and more on operational support, sustained partnerships and measurable outcomes. Speakers With thanks to our moderator, Vera Strobachova-Budway, Head of the Economic Governance Unit, OSCE, and to our excellent speakers: Erlin Agich, Associate Anti-Corruption Officer, OSCE Valentin Draganel, Deputy Head, Financial Intelligence Unit Moldova Alexandru Donciu, Specialist, Financial Investigations – Virtual Assets, Basel Institute on Governance Fabrizio Fioroni, AML/CFT Advisor, United Nations Office on Drugs and Crime UNODC Michal Gromek, Chair, Digital Assets Task Force, Global Coalition to Fight Financial Crime Learn more View the recordings: browse the full playlist or go straight to individual interventions: Vera Strobachova-Budway, Erlin Agich, Valentin Draganel, Alexandru Donciu, Fabrizio Fioroni and Michal Gromek, plus the final lightning round. Sign up to the second joint Basel Institute-OSCE webinar on the role of investigative journalists in tackling crime linked to virtual assets, on 2 June 2026. Read the OSCE’s Decoding Crypto Crime – A Guide for Law Enforcement in multiple languages. Learn more about the OSCE Virtual Assets project. Learn about the Global Coalition’s Digital Asset Task Force and how you can get involved. The Basel Institute’s training opportunities are now open to individuals – learn more about short online courses on crypto and blockchain compliance and financial investigations and asset recovery; plus postgraduate courses on anti-corruption and asset recovery.

Advancing trust and standards between banks and virtual asset service providers – lessons from Wolfsberg Group events at the 9th Global Conference

By J. Edward Ned Conway, Executive Secretary, The Wolfsberg Group As virtual assets move into the mainstream of traditional finance, tricky questions arise. What does a reasonable, risk-based control framework look like for banks that provide services to virtual asset service providers VASPs ? And how can compliance teams strengthen private-to-private information sharing to better detect suspicious activity? These were some of the questions tackled by the Wolfsberg Group at the 9th Global Conference on Criminal Finances and Cryptoassets, organised by the Basel Institute on Governance, Europol and UNODC and held in Vienna on 28–29 October 2025. The Wolfsberg Group is an association of 12 global banks that develops frameworks and guidance for the management of financial crime risks. Housed at the Basel Institute on Governance, this long-standing initiative brings together senior financial crime compliance leaders through various working groups, including one dedicated to virtual assets. This flagship event provided a valuable platform for the Group to explain its Stablecoin Guidance, gauge interest in a specific Due Diligence Questionnaire focused on VASPs, and further advance efforts to break down silos in private-to-private information sharing. This blog summarises some of the key discussions – dialogues that are continuing in dedicated meetings and consultations of the Wolfsberg Group with members, regulators and institutional partners. Regulatory clarity as a catalyst for TradFi–VASP relationships? Day 1 of the conference saw Ned Conway, Executive Secretary of the Wolfsberg Group, moderate a high-level panel discussion featuring representatives from Circle, Bullish and Société Générale on the theme “Bridging the TradFi–DeFi Gap.” The panel discussed the barriers to relationship building between traditional finance TradFi institutions such as banks and VASPs such as cryptocurrency exchanges and stablecoin issuers. The speakers noted that a lack of trust and understanding persists, particularly around risks specific to virtual assets. That is one reason that TradFi is slow to onboard VASPs as clients and provide them with the banking services they need in order to operate. However, stablecoins are helping bridge this gap by bringing parts of the crypto universe under regulatory frameworks. TradFi institutions underlined that they would benefit from clearer scenarios from regulators on where collaboration and information sharing would be permissible between regulated entities and VASPs. Recent guidance issued by regulators on stablecoins and virtual assets in Asia, in particular, could help improve confidence both ways in the TradFi-VASP relationship. Aligning risk appetite, due diligence and monitoring for suspicious activity On Day 2, a dedicated Wolfsberg side event brought together VASPs, FinTech firms and traditional banks for in-depth discussions. Representatives from several Wolfsberg member banks – Deutsche Bank, Citi, UBS, Société Générale, and Bank of America – joined the sessions. The agenda focused on frameworks for information sharing, but the discussions touched upon a range of hot topics including: risk appetite and the risk-based approach; payment transparency i.e. the travel rule ; and approaches to monitoring for suspicious activity. During the discussions, participants highlighted that one of the main barriers to effective collaboration between traditional financial institutions and VASPs is a lack of mutual trust. Both sectors face difficulties in interacting with each other. The Wolfsberg Correspondent Banking Due Diligence Questionnaire CBDDQ is useful for setting standards, but onboarding challenges could be overcome by framing risk in common language. Many viewed the current onboarding approaches as fragmented, and expressed strong support for the Wolfsberg Group to develop standardised guidance and a due diligence questionnaire for VASPs. Questions remain about what is “reasonable” and “risk-based” for VASPs, especially for smaller institutions, and whether banks should monitor blockchain transactions themselves. VASPs need to be able to articulate their risk appetite, and how this changes as they continue to develop innovative products and services. VASP participants viewed the Wolfsberg Group’s Stablecoin Guidance as applicable beyond stablecoin issuers to the wider VASP ecosystem. This is particularly true for the tailored questions on the underlying control environment, and the linking of risk appetite directly to monitoring approaches. Improving private-private information sharing on suspicious activity Discussion on information sharing between TradFi and VASPs highlighted that this can rely heavily on personal relationships across entities, limiting scalability. VASPs showed concern around sharing wallet addresses under private-to-private information sharing frameworks, given geopolitical trends and concerns around the EU’s General Data Protection Regulation GDPR . However, consensus emerged that better data sharing both increases the quality of suspicious activity reports SARs and reduces SAR volumes. Particularly on this latter point, activities often thought to be suspicious in a silo are better understood when viewed from multiple perspectives, confirming the importance of information exchange. Continuing to build bridges as the financial system evolves Bridging the gap between TradFi and DeFi remains a central theme in the Wolfsberg Group’s strategy. The Vienna events offered a unique opportunity to engage key stakeholders across the sector and advance this important dialogue. The side event was opened by Elizabeth Andersen, Executive Director of the Basel Institute on Governance. The Wolfsberg Group extends its sincere thanks to the Basel Institute for the opportunity to co-host this side event and to participate in the 9th Global Conference on Criminal Finances and Cryptoassets. Learn more Learn more about the Wolfsberg Group and explores its guidance and resources on managing financial crime risk, including its Stablecoin Guidance. Learn more about the 9th Global Conference and see selected recordings. Find out about the 10th Global Conference on Criminal Finances and Cryptoassets on 15–16 September 2026 in Luxembourg.

Anti-money laundering: what is success?

This article is adapted from the 2024 Basel AML Index public report . Private companies and governments invest significant resources in efforts to combat money laundering and related financial crimes. Financial institutions alone spent an estimated USD 206 billion globally on anti-money laundering AML compliance in 2023 – and that figure is rising. Yet illicit assets continue to flow through and outside of regulated financial systems. Confiscation rates are still very low, with a long way to go before asset recovery becomes an effective deterrence to financially motivated crimes. This is a disaster for countries deprived of desperately needed funds for development, while also negatively impacting on economies, security and the health of our planet. It is right to question whether we are on the path to success, and indeed what we mean by success in the fight against money laundering and related financial crimes. This article looks at what data we have and what else we should consider in answering this question. 1 Are we making progress in terms of international standards? A very basic question is whether countries and regions are at least in line with minimum international standards for AML set by the FATF. While it is important to question FATF data and standards, and to identify abuses and unintended consequences, ultimately they are the foundation of a harmonised global framework aimed at reducing opportunities for criminals to hide and launder illicit funds. Technical compliance: fewer black holes on the map First, the good news. Technical compliance with the FATF’s 40 Recommendations has, on average, increased by 12 percentage points globally since the start of the fourth round of evaluations in 2013. Much of that improvement comes from lower-performing countries catching up with the others. This indicates that more countries are at least meeting basic standards of an AML legal and institutional infrastructure. There are fewer black holes on the map. To reach the 12 percentage point figure, we analysed data on 113 countries and jurisdictions that had both mutual evaluation reports MERs and subsequent follow-up reports FURs from the FATF. The greatest progress has taken place in the area of preventive measures and targeted financial sanctions. The following table indicates the highest level of progress in technical compliance with FATF Recommendations across all 113 jurisdictions assessed with MERs and FURs: Recommendation Average technical compliance R.7: Targeted financial sanctions – proliferation of weapons of mass destruction 57% up from 31% R.19: Higher-risk countries 74% up from 51% R.12: Politically exposed persons 73% up from 51% R.16: Wire transfers 71% up from 50% R.22: DNFBPs – Customer due diligence 59% up from 40% R.6: Targeted financial sanctions – terrorism and terrorist financing 62% up from 43% It is good to see progress in R.22 on designated non-financial businesses and professions DNFBPs , since this has traditionally been an area of low performance globally and a frequently criticised weakness in AML systems. The progress brings hope that more countries have now imposed stricter customer due diligence requirements for gambling businesses, improved record-keeping standards on customer information and transactions, increased the coverage of customer due diligence requirements to relevant professionals such as property developers and precious metal dealers, and increased the responsibilities and obligations for legal professionals. While improvements in most Recommendations may show real progress across countries, the dynamics in R.16 on wire transfers are complicated by the increase in new payment systems and methods that are not captured by this Recommendation. In early 2024, the FATF conducted public consultations on possible amendments to R.16 to reflect this evolution in payment systems and to increase the transparency of cross-border payments. It may be that stricter requirements under R.16 will lead to a rapid deterioration in compliance in the next period. Regional picture: closing the gap In general, countries and regions with low scores in technical compliance with the FATF Recommendations are catching up, including as a result of being grey listed. The top 20 countries and jurisdictions in terms of progress are mostly in Sub-Saharan Africa and Latin America and the Caribbean, followed by East Asia and Pacific, regions with low average performance previously. The following table shows countries with the highest level of progress in technical compliance with FATF Recommendations, out of all those assessed with MERs and FURs. Countries with an asterisk \ are those that are or have been on the FATF grey list. Progress between mutual evaluation report and latest follow-up report Countries and jurisdictions progress in percentage points 40–52 percentage points Mauritius\ 52 , Botswana\ 50 , Vanuatu\ 49 , Mauritania 48 , Uganda\ 40 25–39 percentage points Pakistan\ 33 , Iceland\ 33 , Saint Lucia 29 , Bahamas\ 28 , Sri Lanka\ 27 , Zimbabwe\ 26 20–25 percentage points Mongolia\ 24 , Kenya\ 24 , Norway 24 , Costa Rica 23 , Morocco\ 23 , Fiji 22 , Jamaica\ 22 , Bhutan 21 , Trinidad and Tobago\ 21 , Tunisia\ 20 These leaps in performance are not the norm, however: more than half of the assessed countries made progress of less than 10 percentage points. Effectiveness is falling More challenging, and more depressing, is to assess changes in effectiveness according to the FATF’s 11 Immediate Outcomes IOs . FATF follow-up reports do not currently reassess countries against these effectiveness criteria. At the global level, however, we can see that effectiveness is decreasing. And that decrease is happening from an already very low base. We analysed the difference in global effectiveness scores as the FATF increased its coverage of fourth-round evaluation reports from 115 countries and jurisdictions in 2021 to 178 in 2024. Average effectiveness dropped from 30 percent in 2021 to 28 percent in 2023 and remained at that low level in 2024. That means newly assessed countries have similarly low levels of effectiveness as those assessed in earlier years. What’s falling the most? The following table displays the IOs with the lowest effectiveness scores on average across all jurisdictions assessed with mutual evaluation reports. All of them dropped still further between 2021 and 2024: Immediate Outcome paraphrased Average effectiveness IO7: Money laundering investigations, prosecutions and effective, proportionate and dissuasive sanctions 20% down from 21% in 2021 IO5: Legal persons and arrangements prevented from misuse for money laundering and terrorist financing ML/TF ; beneficial ownership information available to competent authorities 21% down from 22% IO4: Financial institutions and DNFBPs apply AML/CFT preventive measures commensurate with their risks and report suspicious transactions 22% down from 24% IO11: Prevention of financing of proliferation of weapons of mass destruction 22% down from 24% IO3: Appropriate supervision according to a risk-based approach 23% down from 26% IO10: Prevention of terrorist financing / abuse of non-profit sector 24% down from 27% Even in the IOs with the highest average performance globally across all jurisdictions assessed with MERs, we see decreasing effectiveness as more countries are assessed: Immediate Outcome paraphrased Average effectiveness IO2: International cooperation on information, financial intelligence and evidence against criminals and assets 44% down from 49% in 2021 IO1: Risks understood and domestic coordination to combat ML/TF and proliferation financing 36% down from 38% IO6: Financial intelligence and other information used investigations 34% down from 37% IO9: Terrorist financing investigations, prosecutions and effective, proportionate and dissuasive sanctions 33% down from 37% IO8: Proceeds and instrumentalities of crime confiscated 27% down from 29% IO8 on proceeds and instrumentalities of crime confiscated dropped despite hopes for a rise, as asset recovery was an FATF priority in 2022–2023. The big picture? Overall, countries’ AML frameworks are gradually becoming more technical compliant with the global standards but less effective in practice. Effectiveness along the asset recovery chain Data from the Basel AML Index Expert Edition Plus, which includes the full FATF dataset, can help to identify weak links in what we call the asset recovery “chain” – all the steps from preventing and detecting illicit financial flows through to their confiscation and restitution. Applying this concept to FATF data on effectiveness can give us a simplified picture of what might be weak links in the chain. The following figure shows FATF average effectiveness ratings applied to key links in the asset recovery “chain”: The concept of the asset recovery chain is at the heart of the support provided by our International Centre for Asset Recovery ICAR to partner countries, including Basel AML Index-based technical assistance in strengthening understanding of and resilience to money laundering risks. 2 What other data and metrics can we use to better measure success in practice? FATF data is the best that is available for comparing money laundering vulnerabilities in different countries and jurisdictions, as the same assessment methodology is applied globally. Yet alone it is clearly not enough to give an accurate picture of success. Critics point out that many countries with high performance in both technical compliance and effectiveness are favoured destinations for those seeking to stash, spend and launder money. This is why the Basel AML Index methodology takes into account a variety of indicators beyond the quality of a country’s AML framework as assessed by the FATF. They make it easier to evaluate financial crime risk exposure more widely as well as the functioning of the system as a whole. They also make it possible to see where data is missing or could be misleading. Many of these metrics are useful in evaluating whether systems are working in practice not only to address illicit financial flows as an end in itself but considering wider implications for people and societies. The following figure offers some illustrative examples. See the methodology online for more information and subscribe to the Expert Edition free for most users outside the private sector to view and filter the full data. 3 Clearer goals, better evidence It may seem obvious to readers, but it still needs to be stressed: the fight against financial crime is not a narrow technical issue but a multi-dimensional challenge that is interlinked with many aspects of our lives at both the national and global level. A single metric alone will never be sufficient to measure success. Measuring success depends on defining the ultimate objective. The FATF’s purpose has always been to “protect financial systems and the broader economy”. This may be a useful intermediate goal. But we support rising calls to position the fight against money laundering and related financial crimes as ultimately key to achieving a more peaceful, just and sustainable world. Achieving this ambition requires a nuanced understanding of the broader factors driving money laundering risk and their far-reaching consequences, as illustrated above. It also demands robust evidence of the effectiveness and tangible benefits of AML measures, to counter scepticism and bolster the case for sustained investment in these efforts Crucially, building an effective AML system is not merely a technical task for a single government department or a compliance team. It is a collective mission that requires collaboration across sectors, industries and borders. Only through a shared commitment and clear vision of our end goal can we create a world where financial systems are resilient to exploitation for criminal purposes and where AML measures support broader societal goals. Learn more Read the 13th annual Public Edition report of the Basel AML Index. Explore the Basel AML Index.

FATF grey list: truth and myths

This article is adapted from the 2024 Basel AML Index public report . Financial 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. 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. Myth 1: The grey list = high-risk countries A 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. In 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/or countermeasures when dealing with these. The 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. Inclusion on the grey list is based on the FATF's International Co-operation Review Group 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 . A 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. What is a higher-risk country? The Interpretative Note to the FATF’s Recommendation 10 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/CFT 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. Similarly, Recommendation 19 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. Myth 2: Grey listing is a surprise Each 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. In fact, grey listing is based mainly on a country’s poor performance in its mutual evaluation report, specifically in one of four criteria: Fifteen or more non-compliant or partially compliant ratings for technical compliance in any Recommendation. 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 . A low or moderate level of effectiveness for nine or more of the 11 Immediate Outcomes, with a minimum of 2 low ratings. A low level of effectiveness for six or more of the 11 Immediate Outcomes. The 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. The 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. So 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. Our Expert Edition Plus 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. Myth 3: Grey listing has only negative impacts Being 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 found that capital inflows decline on average by 7.6 percent of GDP following grey listing, for example. Financial 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 may include an increase in the use of less regulated channels to move money. Negative economic consequences are not inevitable, however, especially for more developed economies. Croatia’s economy and its financial sector, for example, both appear to be relatively unscathed by its placement on the grey list in 2023. S&P Global even upgraded its long-term sovereign credit rating from BBB+ to A- in September 2023. Would 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. For 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. Myth 4: The grey-listing system is inherently unfair Critics of the grey-listing system point out that it unfairly penalises low-income jurisdictions with less capacity for AML/CFT but also lower significance due to their small financial centres. It 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, for example. Yet the addition of European countries in 2023 and 2024 – Bulgaria, Croatia and Monaco – shows that the geography is shifting. The following figure shows the percentage of jurisdictions in each region on the grey list as of October 2024: New prioritisation criteria 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. As these changes take effect, we should see the grey-listing geography shift towards higher-income countries that are deeply integrated in financial markets. And 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 and specific sectoral assessments where relevant , gathering statistical data and developing strategies to mitigate identified risks. The 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 to better capture improvements in the effectiveness of jurisdictions that exit the grey list, even if the FATF does not release new effectiveness data. Myth 5: Leaving the grey list is the end of the story Grey 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. FATF standards continue to evolve and to strengthen, so jurisdictions need to constantly improve in order to keep up. A 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 than previously. We can expect a similar effect with the updated Recommendations 4 and 38 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. The FATF’s fifth round of evaluations will emphasise effectiveness 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. As 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. Learn more Read the 13th annual Public Edition report of the Basel AML Index. Explore the Basel AML Index.

Case Study 13: The Beauty Queen case: non-conviction based forfeiture across borders