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Thursday, 28.03.2024, 15:02
AML report ranks Estonia 2nd on list of low-risk countries for money laundering, Latvia – 117, Lithuania - 127
Latvia and Lithuania received 117 and 127th place in the
ranking, respectively.
"Between 2017 and 2018, Latvia, Iceland, Denmark and
Poland left the list of top 10 low-risk countries and Lithuania, Macedonia,
Bulgaria and Croatia joined it.", the report says.
Country |
Risk score 2017 |
Risk score 2018 |
Change in score 2017–2018 |
FINLAND |
1.78 |
2.57 |
-0.80 |
ESTONIA |
2.73 |
2.73 |
0.00 |
LITHUANIA |
3.67 |
3.12 |
-0.55 |
NEW ZEALAND |
3.03 |
3.20 |
+0.17 |
MACEDONIA |
4.09 |
3.33 |
-0.76 |
BULGARIA |
3.84 |
3.53 |
-0.31 |
SLOVENIA* |
2.78 |
3.75 |
+0.97 |
SWEDEN* |
3.40 |
3.75 |
+0.35 |
CROATIA |
4.11 |
3.83 |
-0.28 |
ISRAEL |
3.59 |
3.84 |
+0.24 |
*Countries assessed according to the new FATF methodology
Estonia ranks second after Finland, having improved its
standing by one notch compared with the previous similar survey. Denmark, which
is suffering from the scandal related to alleged money laundering at the
Estonian branch of Danske Bank, dropped more than any other country
in the fresh rankings.
Estonia ranked second with 2.73 points in the fresh index,
keeping its point score unchanged from last year despite the Danske scandal.
Mostly as a result of the same scandal, Denmark's score moved up 1.14 points to
4.11 and the country finished 16th among the 129 nations ranked.
Low-risk countries wishing to maintain their low risk
ranking, and all countries wishing to improve their ranking, should take
guidance in the following characteristics that low-risk countries typically
share:
- Strong
AML/CFT legislation including on the freezing of terrorist funds
- Competent
authorities with the mandate and resources to investigate and prosecute
ML/TF offences and issue sanctions for non-compliance
- Comprehensive
measures for domestic and international cooperation
- High
level of press freedom, with the media playing a central role in
uncovering and reporting financial crime
- Financial
sector highly regulated with competent supervisory authorities and minimal,
if any, cash-based transactions
- High
levels of transparency and integrity in public institutions and businesses
- Low
levels of corruption
While some countries have a lower risk of money laundering
than others, no country was rated as having zero risk of ML/TF. In fact, the
Basel AML Index shows an increase in the minimum risk score, from 1.78 in 2017
to 2.57 in 2018.
The increase may partly be due to improved detection
mechanisms and more availability of data. Another factor is changes in the
Financial Secrecy Index, which automatically assigns a raised level of risk to
countries with a large share in the global financial sector.
The index for 2018 is the seventh edition of the Basel AML
Index issued by the International Center for Asset Recovery, part of the Basel
Institute on Governance. The index offers an overview of 129 countries
according to their risk of money laundering and terrorist financing.
The 10 countries with the greatest improvements in risk
score in the Basel AML Index 2018 are:
Country |
Risk score 2017 |
Risk score 2018 |
Change in score 2017–2018 |
TRINIDAD AND TOBAGO* |
6.75 |
5.25 |
-1.50 |
TANZANIA |
7.86 |
6.71 |
-1.15 |
BOLIVIA |
7.13 |
6.02 |
-1.11 |
GHANA* |
6.33 |
5.32 |
-1.01 |
GRENADA |
5.05 |
4.20 |
-0.85 |
MONTENEGRO |
4.76 |
3.95 |
-0.81 |
BRAZIL |
5.76 |
4.96 |
-0.80 |
MACEDONIA |
4.09 |
3.33 |
-0.76 |
VENEZUELA |
6.44 |
5.69 |
-0.75 |
ST. VINCENT AND THE GRENADINES |
5.22 |
4.46 |
-0.75 |
*Countries assessed according to the new FATF methodology
The Basel AML Index demonstrates that there is no strong
correlation between a country's region and its change in risk score.
Significant changes in 2018 were instead primarily affected by the following
two factors, which are partly related to methodology:
Obtaining a better Financial Secrecy Index rating
Some countries improved their risk score due to changes in
the methodology underlying the Financial Secrecy Index (FSI). The FSI measures
the level of bank secrecy, scale of a country’s offshore banking activity and
size of its financial centre. A significant increase in the number of countries
covered by the FSI led to the need to re-score FSI ratings for inclusion in the
Basel AML Index (see Methodology).
For example, Trinidad and Tobago was assessed by the FSI for
the first time in 2018 and obtained a low risk score. When combined with a
lower risk of corruption and increased financial transparency, this allowed the
country to achieve a significant improvement in risk score in the Basel AML
Index.
Macedonia saw slight improvements in political and legal
risks, financial transparency and public transparency, but the most substantial
influence on the country’s overall score was also the improvement in its FSI.
Positive changes for Ghana, Brazil, Paraguay and Tanzania are also mainly
explained by improved FSI scores.
Leaving the Jurisdictions of Primary Concern blacklist
Another influential factor for major changes in some
countries’ performance in the 2018 Basel AML Index was the inclusion or
exclusion of the country on the list of Jurisdictions of Primary Concern in the
US State Department International Narcotics Control Strategy Report (INCSR).
Jurisdictions included in this list are considered to be “major money
laundering countries” by the US Bureau of International Narcotics and Law
Enforcement Affairs.
The improvement in Grenada’s score in the 2018 Basel AML Index, for example, was mainly driven by the country’s disappearance from the Jurisdictions of Primary
Concern list.
Despite the positive improvements, most countries in the
list of top improvers are still assessed as having middle or high risks of
ML/TF and should continue to address the factors that are dragging them down.
Which countries have significantly worsened their scores
and why
The top 10 decliners in 2018 are:
Country |
Overall score 2017 |
Overall score 2018 |
Change in score 2017–2018 |
DENMARK* |
2.98 |
4.11 |
+1.14 |
ICELAND* |
3.52 |
4.59 |
+1.07 |
SLOVENIA* |
2.78 |
3.75 |
+0.97 |
TAIWAN, CHINA |
4.34 |
5.15 |
+0.81 |
FINLAND |
1.78 |
2.57 |
+0.80 |
POLAND |
3.62 |
4.38 |
+0.77 |
CYPRUS |
4.26 |
5.01 |
+0.75 |
SOUTH AFRICA |
4.59 |
5.34 |
+0.75 |
PORTUGAL* |
3.95 |
4.66 |
+0.72 |
NETHERLANDS |
4.30 |
4.90 |
+0.60 |
*Countries assessed according to the new FATF methodology
Iceland, Denmark and Slovenia recorded a significantly
higher risk rating in 2018 due to having been assessed using the new FATF
evaluation methodology, which measures not only technical compliance but
importantly emphasises effectiveness.
The recent Danske Bank scandal seems to confirm the observation
that there are big issues with the effectiveness of money laundering
supervision in countries generally regarded as low-risk.
This phenomenon has been observed in previous years with
other countries that underwent a FATF evaluation using the new evaluation
methodology. The results illustrate that most countries are typically stronger
on technical compliance and struggle with effective implementation of legal
requirements. As more and more countries are assessed with the new methodology,
the same phenomenon is likely to occur for a few years to come before it levels
out.
The same two main factors behind improvements in ML/TF risk
(see the previous section) caused some countries to fall down the rankings. For
example:
- Although
still at the top of the list of low-risk countries, Finland saw a
deterioration in its overall score due to changes in its Financial Secrecy
Index rating, as well as other indicators of corruption and financial
transparency.
- Poland
demonstrated higher risks in such indicators as financial secrecy,
corruption, financial transparency and political and legal risks.
- Cyprus
saw increased financial secrecy scores and was also, crucially, included
in the UN INCSR list of Jurisdictions of Primary Concern.