Money laundering and terrorist financing risk rose across the globe in 2023, while the tools used to fight the illicit financial flows are becoming less effective, according to a new study.
The Basel AML Index, an annual survey published by the International Centre for Asset Recovery (ICAR) at the Basel Institute of Governance, found that countries are not keeping up with “the evolving financial crimes risk of new technologies,” especially crypto and other digital assets. Citing Financial Action Task Force (FATF) data covering six years from 2017 to 2023, the report found that only 43% of global jurisdictions surveyed are in technical compliance with international standards for crypto anti-money laundering (AML) measures.
The study also found that countries are doing a poor job of combating terrorist financing. Of particular concern are phony nonprofits that are funneling funds to terrorist organizations, but the report urged countries to take a risk-based approach “and not indiscriminately cut off funding to whole classes of non-profit organizations” and inadvertently harm necessary humanitarian aid when enforcing CTF regulations.
Worryingly, the Index also found the effectiveness of global AML and counterterrorism financing (CTF) efforts falling in 2023. The Index found that “the least effective areas are those that are key to AML/CTF,” including beneficial ownership transparency, misuse of nonprofit organizations, and “measures to prevent the proliferation of weapons of mass destruction.”
The report did find reasons for optimism. Global regulations are starting to catch up with technological advances in crypto, and there have been recent successful enforcement efforts.
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