On 23 July, 2020 Basel Institute on Governance released its 9th public edition of risk assessment that ranked 141 countries. Lithuania was ranked 131st (1st being the highest risk, 141st being the lowest risk), becoming one of the best countries at dealing with ML/TF risks.
Apart from Lithuania‘s leading position, this year‘s risk assessment yielded disappointing results globally. In his final statement as FATF president Xiangmin Liu said: “The challenge many countries face today is not the absence of comprehensive global standards, but the effective implementation of those standards.” This year’s ranking reflects this statement, as results in effectiveness were rated as twice as important than results in technical compliance.
The Basel AML Index also showcases the changing nature of money laundering risks. This year’s Index contains a new indicator for human trafficking. This change reflects the huge and growing proceeds generated by this transnational crime and laundered through international financial systems. Human trafficking is said to be the third largest source of income for organised crime groups after drug and arms trafficking, generating an estimated USD 150 billion in profits each year.
The main shortcomings observed in AML by region are:
- European Union and Western Europe – deficiency in the quality of AML/CFT frameworks;
- Europe and Central Asia – high levels of corruption and issues with political and civil rights, media freedom and independence of the judiciary;
- East Asian and Pacific – deficiency in the quality of AML/CFT frameworks;
- Latin America and Caribbean – high levels of corruption and bribery;
- Middle East and North Africa – public transparency and accountability;
- North America – deficiency in the quality of AML/CFT frameworks;
- South Asia – major deficiencies in the quality of AML/CFT frameworks, very high levels of corruption and bribery. This region has the highest overall risk score.
- Sub-Saharan Africa – major deficiencies in the quality of AML/CFT frameworks, low financial transparency and standards. This region also suffers from a lack of data on AML/CFT and related risks.
Before entering into agreements with entities from other countries, it is necessary to consider how effectively those countries comply with AML/CFT requirements – geographical area is one of the main factors of risk assessment. On 1 July, 2020 the Bank of Lithuania issued an overview of the activities of electronic money and payment institutions, indicating with which countries’ entities financial institutions performed the most transactions. In terms of the value of payment transactions, most of them were executed between EU Member States, Germany being in the first place (16% of all payment transactions by value).
EU Member States with most payment transactions by value:
2. United Kingdom
The Basel AML Index ranked the mentioned above countries as follows – Germany 107th; United Kingdom 116th; Latvia 97th; Poland 110th; Estonia 141st. In addition to the members of the European Union, there has been a noticeable increase in payment transactions with Chinese companies. AML Index ranked China as one of the most vulnerable countries to ML/TF – 18th.
The Basel AML Index is an independent annual ranking that assesses the risk of money laundering and terrorist financing (ML/TF) around the world.
The review was prepared by Vilius Neverdauskas, legal assistant of ECOVIS ProventusLaw, and Inga Karulaitytė, attorney at law of ECOVIS ProventusLaw.