A number of obligations under the Maltese Prevention of Money Laundering and Funding of Terrorism Regulations require subject persons to assess whether the jurisdictions they are dealing with are nonreputable jurisdictions. A non-reputable jurisdiction is one that has deficiencies in its national anti-money laundering and terrorist financing regime or has inappropriate and ineffective measures for the prevention of money laundering and terrorist financing. In assessing these elements, subject persons are to take into account any accreditation, declaration, public statement or report issued by an international organisation as well as whether the jurisdiction has been included by the European Commission in the list that it may publish in terms of Article 9 of the 4th AML Directive.
The Basel AML Index
The focus of today's newsletter is the Basel AML Index, which is an independent, research-based index issued by a not-for-profit organisation with the main goal of ranking countries according to their risk of money laundering and terrorist financing (ML/TF). It is, therefore, worth highlighting that this Index does not measure the actual amount of money laundering or terrorist financing activity, but rather the risk which is inherent to a country's vulnerability to ML/TF and its capacities to counter it.
The latest AML Index 2019 has assessed 125 countries with sufficient data to classify them depending on their national anti-money laundering and countering the financing of terrorism framework and related factors such as perceived levels of corruption, financial sector standards and public transparency. By combining data sources including the Financial Action Task Force (FATF), Transparency International, the World Bank and the World Economic Forum, the overall risk score represents a holistic assessment addressing structural as well as functional elements of the country's resilience against ML/TF.
Simplifying a complicated matter As some rankings might seem surprising, it may be appropriate to spend a few words on the methodology used by the Basel Institute. Five domains, each of them bearing a different weight on the overall scale, were taken into consideration:
i. Quality of AML/CFT Framework
ii. Bribery and Corruption
iii. Financial Transparency and Standards
iv. Public Transparency and Accountability
v. Legal and Political Risks.
The scores were then aggregated as a composite index using a qualitative and expert-based assessment in order to form the final country ranking. This implies that, on the one hand, the Index provides a simplified comparison of countries' risks of ML/TF; and that, on the other hand, the scores summarise a complex and multidimensional issue and should therefore not be viewed as a factual or quantitative measurement of ML/TF activity or as a specific policy recommendation for countries or institutions.