Risk

Afghanistan has taken the top spot in the world in risk for money laundering, reports the Basel Institute on Governance and Samuel Rubenfeld in his blog for The Wall Street Journal.

The ability to transfer money - making it appear to come from legitimate sources - allows crime to flourish.  "The launderer might choose to invest the funds into real estate, luxury assets, or business ventures," notes the inter-governmental Financial Action Task Force. Without money-laundering outlets, "international organized crime would not be able to function," explains Investopedia.


The non-profit Basel Institute on Governance is based in Switzerland and focuses on prevention of corruption in public and corporate governance, prevention of money laundering and the recovery of stolen assets.


The Basel Anti-Money Laundering Index is not a crime report: "As the Basel AML Index is designed to assess the risk of money laundering, the fact that any of these countries received a high ranking does not necessarily mean that they experience the most money laundering or terrorism financing.... It is indeed important to note that money laundering and terrorist financing cannot be quantitatively measured since most of it occurs, due to its illegal nature, in absolute secrecy."

The index assessed 149 countries, assigning scores from 1 to 10. Afghanistan is rated 8.55, Pakistan at 6.53, the United States at 5.24 and Norway poses least risk at 3.17.  The index excludes countries lacking in data so a few like North Korea are not on the list. Afghanistan is new to the list.

Basel AML indicators cover adherence to financial and accounting standards, transparency, rule of law, judicial strength and more. A possible sign of erosion in the availability of public data is a reduction of index indicators, from 15 to 14: "Euromoney’s sub-indicator on political risk has been removed as it is not publicly available anymore." That indicator represented less than 2 percent of the overall index. Compiling and presenting data require money and time, and such public reports could be targets as indebted nations search for cost reductions.

The UN Office on Drugs and Crime has estimated that proceeds from money laundering at $1.6 trillion, or 3.6 percent of global GDP. The estimates may run low.

"Launderers are continuously looking for new routes for laundering their funds," the task force warns. "Economies with growing or developing financial centres, but inadequate controls are particularly vulnerable as established financial centre countries implement comprehensive anti-money laundering regimes."