Global money laundering and terrorist financing risks continue to escalate, as highlighted by the 2023 Basel Anti-Money Laundering (AML) Index. This independent ranking evaluates countries’ capacities to counteract money laundering and terrorist financing, drawing on 18 indicators across five domains. The sobering findings of the 12th Public Edition of the Basel AML Index underscore the urgency for concerted global action against these pervasive threats, which impact everything from well-funded terrorist activities to the massive outflow of trillions of dollars through corruption and organised crime.
A worrying trend
The Basel AML Index reveals a worrying trend, with the average global money laundering and terrorist financing risk level rising from 5.25 in 2022 to 5.31 in 2023, measured on a scale where 10 represents the maximum risk. Notably, risks increased across four out of the five domains assessed: corruption and bribery, financial transparency and standards, public transparency and accountability, and political/legal risks. Although the scores for the quality of anti-money laundering and counter-financing of terrorism (AML/CFT) frameworks remained stable, there is a concerning drop in the effectiveness of these systems, as demonstrated by the analysis of Financial Action Task Force (FATF) data.
One critical revelation from the Basel AML Index is the decline in the effectiveness of AML/CFT systems, despite robust structures on paper. This underscores the global struggle to prevent the misuse of the financial system for illicit activities.
The rise of new technologies
In an effort to explore the consequences of implementing or neglecting AML/CFT standards, the 2023 report takes a closer look at three topical issues. Firstly, the rise of new technologies, particularly cryptocurrencies, demands heightened efforts from countries to comprehend evolving financial crime risks. Compliance with relevant FATF standards in this area has plummeted by 20 percentage points in the last two years, emphasising the need for focused regulation, supervision, and enforcement.
Disrupting financial support for terrorists while safeguarding civilians
The report also urges countries to improve their prevention of terrorist financing through illegitimate non-profit organisations, an area exhibiting the weakest compliance with relevant FATF standards. A risk-based approach is emphasised to avoid indiscriminate cutoffs that could hinder vital humanitarian assistance and violate human rights.
Confiscating illicit assets
A crucial missing element in the fight against money laundering and terrorist financing is the effective confiscation of criminal assets. While law enforcement authorities are adept at identifying and freezing illicit funds, the permanent confiscation of assets to create a deterrent effect remains a challenge. Globally, the effectiveness of confiscation measures, as per FATF data, stands at a mere 28 percent.
The 2023 Basel AML Index serves as a stark reminder that action on money laundering is more urgent than ever, with global collaboration needed to address the evolving challenges posed by financial crimes.