BION - Índice de Basilea 2019

Basel Institute on Governance Steinenring 60 | 4051 Basel, Switzerland | +41 61 205 55 11 info@baselgovernance.org | www.baselgovernance.org Basel AML Index 2019 A country ranking and review of money laundering and terrorist financing risks around the world International Centre for Asset Recovery | August 2019BASEL INSTITUTE ON GOVERNANCE

Table of contents 1 Introduction 1 2 What does the Basel AML Index measure? 1 3 Scores and ranking 4 4 Analysis of results 6 5 Comparison of countries across five domains 12 6 Special indicator focus - analysis of FATF data 19 7 Special regional focus – post-Soviet countries 22 8 Looking ahead 24 9 Subscription details 25 10 About and contact 26 11 Annex I: Methodology 27 12 Annex II: Indicators 32 Table of tables Table 1: Basel AML Index 2019 - Public Edition .................................................................................... 6 Table 2: Top 5 improving countries ..................................................................................................... 11 Table 3: Top 5 deteriorating countries ................................................................................................ 12 Table 4: Top performing countries in Domain 1 ................................................................................... 13 Table 5: Top performing countries in Domain 1 with an FATF fourth-round evaluation .......................... 14 Table 6: Lowest performing countries in Domain 1 ............................................................................. 14 Table 7: Top performing countries in Domain 2 ................................................................................... 15 Table 8: Lowest performing countries in Domain 2 ............................................................................. 15 Table 9: Top performing countries in Domain 3 ................................................................................... 16 Table 10: Lowest performing countries in Domain 3 ........................................................................... 16 Table 11: Lowest performing countries in Domain 4 ........................................................................... 17 Table 12: Top performing countries in Domain 5 ................................................................................. 18 Table 13: Lowest performing countries in Domain 5 ........................................................................... 18 Table 14: Basel AML Index risk scores since 2012 ............................................................................. 23 Table 15: FATF evaluations according to the fourth-round methodology .............................................. 23BASEL INSTITUTE ON GOVERNANCE

Table of figures Figure 1: Global distribution of ML/TF risks (Domain 1) ...................................................................... 15 Figure 2: Global distribution of corruption and bribery risks (Domain 2) ............................................... 16 Figure 3: Global distribution of financial transparency risks (Domain 3) ............................................... 17 Figure 4: Global distribution of public transparency risks (Domain 4) .................................................. 18 Figure 5: Global distribution of political and legal risks (Domain 5) ...................................................... 19 Figure 6: Sample of FATF data available in the Expert Edition Plus package ......................................... 20 Figure 7: Overview of the methodological process behind the Basel AML Index ................................... 27 Figure 8: Factors contributing to a high risk score .............................................................................. 28 Figure 9: Simple diagram of the expert weighting system .................................................................... 30 Acronyms AML/CFT Anti-Money Laundering / Countering the Financing of Terrorism FATF Financial Action Task Force FATF MERs FATF Mutual Evaluation Reports FIU Financial Intelligence Unit FSI Financial Secrecy Index IDEA Institute for Democracy & Electoral Assistance IMF International Monetary Fund IO Immediate Outcome (FATF) ML/TF Money Laundering / Terrorist Financing NGO Non-governmental organisation OCCRP Organized Crime and Corruption Reporting Project OECD Organisation for Economic Co-operation and Development R. Recommendation (FATF) TI CPI Transparency International Corruption Perceptions Index US INCSR United States State Department International Narcotics Control Strategy Report WEF World Economic Forum WJP World Justice ProjectBASEL INSTITUTE ON GOVERNANCE 1

1 1 Introduction This report accompanies the eighth edition of the Basel AML Index, which has been published by the Basel Institute on Governance since 2012. The Basel AML Index is the only independent, research-based index issued by a not-for-profit organisation ranking countries according to their risk of money laundering and terrorist financing (ML/TF). It provides risk scores based on the quality of a country’s anti-money laundering and countering the financing of terrorism (AML/CFT) framework and related factors such as perceived levels of corruption, financial sector standards and public transparency. The Public Edition of the Basel AML Index 2019, and the analysis in this report, covers 125 countries with sufficient data to calculate a reliable ML/TF risk score. It focuses on five domains: 1. Quality of AML/CFT Framework 2. Bribery and Corruption 3. Financial Transparency and Standards 4. Public Transparency and Accountability 5. Legal and Political Risks The Expert Edition interface, which includes a customisable interactive ranking and world map, covers 203 countries. This subscription-based service is used by companies and financial institutions as an ML/TF country risk-rating tool for compliance and risk assessment purposes. In the public sector, it is used by regulatory bodies and Financial Intelligence Units, as well as NGOs and academia, for research and policy measures in the area of AML/CFT. Additional services and resources this year include an upgraded, in-depth analysis of FATF Mutual Evaluation Reports as part of the Expert Edition Plus package (see Chapter 6) and a detailed analysis of ML/TF risks in a particular region (see Chapter 7 for a special regional focus on post-Soviet countries). The Basel Institute has conducted extensive research in calculating the risk scores following academic best practices. The methodology is reviewed every year by an international and independent panel of peer reviewers to ensure that the ranking is accurate, plausible and continues to capture the latest developments in ML/TF risks. The Basel AML Index is developed and maintained by the Basel Institute’s International Centre for Asset Recovery (ICAR). 2 What does the Basel AML Index measure? The Basel AML Index measures the risk of ML/TF in countries using data from publicly available sources such as the Financial Action Task Force (FATF), Transparency International, the World Bank and the WorldBASEL INSTITUTE ON GOVERNANCE 2

Economic Forum. A total of 15 indicators of countries’ adherence to AML/CFT regulations, levels of corruption, financial standards, political disclosure and the rule of law are aggregated into one overall risk score. By combining these data sources, the overall risk score represents a holistic assessment addressing structural as well as functional elements of the country’s resilience against ML/TF. The scores are aggregated as a composite index using a qualitative and expert-based assessment in order to form the final country ranking in Chapter 3. They should be read in conjunction with the analysis and descriptions of the methodology and indicators in the rest of the report. Without this background, the results may easily be misunderstood or misrepresented, and this may have unwanted consequences for any policy or compliance decision that is taken as a result. The Basel AML Index does not measure the actual amount of money laundering or terrorist financing activity, but rather is designed to assess the risk of such activity. ML/TF risk is understood as a broad risk area in relation to a country’s vulnerability to ML/TF and its capacities to counter it. The Basel AML Index ranks countries based on their overall scores, capturing the complex global nature of ML/TF risks and providing useful data for comparative purposes. However, the primary objective is not to rank countries superficially in comparison with each other, but to provide an overall picture of different countries’ risk levels and serve as a solid basis for examining progress over time. 2.1 Notes and limitations Simplifying a complex issue: The Basel AML Index Public Edition is a composite index, meaning it provides a simplified comparison of countries’ risks of ML/TF. Each country's risk score is calculated from available data and does not represent an opinion or subjective assessment by the Basel Institute. The scores summarise a complex and multidimensional issue, and should not be viewed as a factual or quantitative measurement of ML/TF activity or as a specific policy recommendation for countries or institutions. For a more thorough understanding of where exactly the risks lie, or to verify overall scores that look implausible, users should look at the individual results of underlying indicators available in the Expert Edition. Methodological choices: There is no objective standard in creating a composite index, which is why choices and judgments on indicators and their weight have to be made when developing and evolving the Basel AML Index. See Annex I (Methodology) for more information. Perception-based indicators: The Index relies heavily on perception-based indicators such

results of underlying indicators available in the Expert Edition. Methodological choices: There is no objective standard in creating a composite index, which is why choices and judgments on indicators and their weight have to be made when developing and evolving the Basel AML Index. See Annex I (Methodology) for more information. Perception-based indicators: The Index relies heavily on perception-based indicators such as the Transparency International Corruption Perceptions Index (TI CPI). In contrast to financial risk models based purely on statistical calculations, the Basel AML Index evaluates structural factors by quantifying regulatory, legal, political and financial indicators that influence countries’ vulnerability to ML/TF. Transforming qualitative data into quantitative data does not fully overcome the limitations of perception-based indicators. Unlike financial risk models, country risk models cannot be used as a solid basis for prediction or for calculating potential loss connected to ML/TF. FATF fourth-round evaluations: The Financial Action Task Force (FATF) Mutual Evaluation Reports (MERs), a key indicator in the Basel AML Index, assess a country’s legal and institutional AML/CFT framework and its implementation of AML/CFT measures in line with the 40 FATF Recommendations (see Annex I (Methodology) and II (Indicators)). The FATF methodology was revised in 2013 (fourth round of evaluations) in order to emphasise not only technical compliance with the Recommendations but theBASEL INSTITUTE ON GOVERNANCE

3

effectiveness of AML/CFT systems according to 11 Immediate Outcomes.1 The overwhelming majority of countries assessed in the fourth round of evaluations so far – marked by an asterisk in the Basel AML Index – have received dramatically lower scores for effectiveness than for technical compliance. This has also had a major impact on their performance in the Basel AML Index, which weighs countries’ results in effectiveness as twice as important as their results in technical compliance. Data collection: Data collection for the 2019 Public Edition of the Basel AML Index was finished in June 2019. The results of Cape Verde, Haiti, Senegal, Trinidad and Tobago, and Zimbabwe do not include the latest FATF reports, published in late July and August 2019. The Expert Edition is updated throughout the year. Insufficient data for some countries: Only countries with sufficient data to calculate a reliable ML/TF risk score are included in the Public Edition of the Basel AML Index. See Annex I (Methodology) for the definition of "sufficient data". The Expert Edition contains a more comprehensive overview of all 203 countries with their risk scores and details of the available data. Comparability of results: The Basel AML Index methodology evolves each year to more accurately capture ML/TF risks. The addition this year of one extra indicator with a 5% weighting, the TRACE Bribery Risk Matrix, may slightly influence comparability of the results between 2018 and 2019, but not more than 5%. Separating ML vs. TF risks. The Index does not disaggregate data on MLand TF-related risks. This is due to a shortage of separate, consistent and regularly updated data related to TF risks. Current FATF MERs are still the most solid basis for evaluating both ML and TF, though as aggregated scores. Trade-based money laundering: The FATF identifies three main methods by which criminal organisations and terrorist financiers move money for the purpose of disguising its origins and integrating it into the formal economy: use of the financial system; physical movement of money (e.g. cash couriers); physical movement of goods through the trade system.2 The Basel AML Index focuses mostly on the first two ways, with less coverage of financial crime facilitated by international trade. Use for compliance or risk assessment purposes: Due to these limitations, we recommend that the Basel AML Index Expert Edition, rather than the Public Edition, should be used for compliance or

cash couriers); physical movement of goods through the trade system.2 The Basel AML Index focuses mostly on the first two ways, with less coverage of financial crime facilitated by international trade. Use for compliance or risk assessment purposes: Due to these limitations, we recommend that the Basel AML Index Expert Edition, rather than the Public Edition, should be used for compliance or risk assessment purposes. The Expert Edition should also form part of a comprehensive, risk-based compliance programme along with additional indicators and procedures relevant to the organisation’s specific needs.

1 https://www.fatf-gafi.org/media/fatf/documents/methodology/FATF%20Methodology%2022%20Feb%202013.pdf 2 https://www.fatf-gafi.org/publications/methodsandtrends/documents/trade-basedmoneylaundering.htmlBASEL INSTITUTE ON GOVERNANCE 4 3 Scores and ranking Countries are ranked from highest to lowest level of risk. The change column reflects the comparison of 2018 and 2019 results. Negative scores identify progress made (lower risks for the country) and positive scores demonstrate an increase in ML/TF risks.

1 MOZAMBIQUE 8.22 -0.06 24 ANGOLA 6.33 -0.16 2 LAOS 8.21 -0.04 25 SERBIA 6.33 -0.19 3 MYANMAR 7.93 0.43 26 TAJIKISTAN 6.28 -2.02 4 AFGHANISTAN 7.76 -0.52 27 ALGERIA 6.28 -0.07 5 LIBERIA 7.35 -0.07 28 KAZAKHSTAN 6.27 -0.09 6 HAITI 7.34 0.01 29 ECUADOR 6.25 -0.05 7 KENYA 7.33 -0.07 30 JAMAICA 6.24 -0.24 8 VIETNAM 7.30 -0.07 31 THAILAND 6.22 -0.08 9 BENIN 7.27 0.02 32 SENEGAL 6.20 0 10 SIERRA LEONE 7.20 -0.04 33 TURKEY 6.19 0.08 11 CAPE VERDE 7.01 -0.01 34 PANAMA 6.19 -0.02 12 NIGERIA 6.89 0.03 35 GUYANA 6.14 0.02 13 ZIMBABWE 6.87 0.01 36 MOROCCO 6.12 -0.1 14 PARAGUAY 6.74 -0.05 37 UKRAINE 6.01 -0.05 15 YEMEN 6.74 -0.07 38 BOLIVIA 6.01 -0.01 16 CAMBODIA 6.63 -0.85

39 ALBANIA 6.00 0.43 17 TANZANIA 6.63 -0.08 40 VANUATU 5.90 -0.47 18 COTE D'IVOIRE 6.62 0.03 41 KYRGYZSTAN 5.86 -0.33 19 CHINA 6.59 0.57 42 BOSNIA-HERZEGOVINA 5.83 -0.01 20 MONGOLIA 6.57 -0.08 43 COLOMBIA 5.83 1.41 21 NICARAGUA 6.53 -0.19 44 PHILIPPINES 5.81 -0.13 22 ARGENTINA 6.50 -0.05 45 BANGLADESH 5.80 0.02 23 PAKISTAN 6.45 -0.04 46 MARSHALL ISLANDS 5.76 -0.16BASEL INSTITUTE ON GOVERNANCE

5

47 HONDURAS 5.76 -0.09 76 BRAZIL 4.97 0.01 48 RUSSIA 5.75 -0.08 77 QATAR 4.97 -0.11 49 VENEZUELA 5.72 0.03 78 SWITZERLAND 4.96 -0.37 50 UZBEKISTAN 5.71 -0.11 79 CANADA 4.92 0 51 INDIA 5.60 0.32 80 HUNGARY 4.90 -0.02 52 UNITED ARAB EMIRATES 5.60 -0.1 81 LATVIA 4.89 0.91 53 BAHRAIN 5.46 0.13 82 NETHERLANDS 4.86 -0.04 54 EL SALVADOR 5.46 0.03 83 TAIWAN, CHINA 4.84 -0.31 55 LEBANON 5.46 -0.53 84 SOUTH AFRICA 4.83 -0.51 56 BOTSWANA 5.46 0.06 85 LUXEMBOURG 4.82 -0.29 57 DOMINICAN REPUBLIC 5.41 -0.39 86 JORDAN 4.77 -0.07 58 PERU 5.33 0.19 87 ROMANIA 4.76 0.01 59 AZERBAIJAN 5.31 -0.12 88 GUATEMALA 4.75 -0.2 60 GHANA 5.29 -0.03 89 ST. LUCIA 4.73 0.25 61 MOLDOVA 5.29 -0.08 90 ST. VINCENT AND GRENADINES 4.69

0.23 62 MALAYSIA 5.28 -0.21 91 ICELAND 4.66 0.07 63 SAUDI ARABIA 5.26 0.25 92 AUSTRIA 4.64 0.3 64 TRINIDAD AND TOBAGO 5.26 0.01 93 KOREA, SOUTH 4.60 -0.09 65 COSTA RICA 5.23 -0.24 94 GRENADA 4.59 0.39 66 GEORGIA 5.20 -0.11 95 SINGAPORE 4.58 0.07 67 INDONESIA 5.13 -0.6 96 GREECE 4.56 0 68 MEXICO 5.13 -0.04 97 IRELAND 4.55 -0.03 69 HONG KONG SAR, CHINA 5.11 -0.07 98 EGYPT 4.55 -0.8 70 ARMENIA 5.08 -0.15 99 GERMANY 4.49 0.05 71 GAMBIA 5.05 -0.03 100 SPAIN 4.42 -0.03 72 UNITED STATES 5.03 0.03 101 DOMINICA 4.40 0.23 73 JAPAN 5.02 -0.09 102 POLAND 4.34 -0.04 74 CYPRUS 5.01 0 103 BELGIUM 4.29 -0.17 75 ITALY 4.99 -0.1 104 CHILE 4.18 0.02BASEL INSTITUTE ON GOVERNANCE

6 105 CZECH REPUBLIC 4.15 0.03 116 ISRAEL 3.76 -0.08 106 UNITED KINGDOM 4.13 -0.1 117 SLOVENIA 3.70 -0.05 107 PORTUGAL 4.10 -0.56 118 URUGUAY 3.58 -0.47 108 FRANCE 4.09 -0.03 119 LITHUANIA 3.55 0.43 109 SLOVAKIA 4.04 -0.09 120 BULGARIA 3.51 -0.02 110 AUSTRALIA 3.97 -0.09 121 SWEDEN 3.51 -0.24 111 DENMARK 3.95 -0.16 122 MACEDONIA 3.22 -0.11 112 MONTENEGRO 3.94 -0.01 123 NEW ZEALAND 3.18 -0.02 113 MALTA 3.94 -0.02 124 FINLAND 3.17 0.6 114 NORWAY 3.91 -0.21 125 ESTONIA 2.68 -0.05 115 CROATIA 3.82 -0.01 Table 1: Basel AML Index 2019 - Public Edition Countries assessed with the fourth-round FATF methodology

4 Analysis of results 4.1 General trends • Some progress – but very slow: More countries showed slight improvements in their risk scores in 2019 than last year, but there have been no substantial changes indicating significant progress in tackling ML/TF. This confirms the general trend visible over the eight years since the Basel AML Index was first calculated: most countries are slow to improve their resilience against ML/TF risks. • Improvements are minor: Between 2018 and 2019, 27% of countries listed in the Public Edition (34/125) improved their scores by more than 0.1 point. However, only one country (Tajikistan) managed to improve its score by more than 1 point. • Some countries are still going backwards: The risk scores of 13% of countries (16/125) deteriorated by more than 0.1 point. Colombia, Latvia, Finland and China demonstrated the highest deterioration in risk scores. • Most countries are at significant risk: 60% of countries in the 2019 Public Edition ranking (74/125) have a risk score of 5.0 or above and can be loosely classified as having a significant risk of ML/TF. The mean average level of risk, though marginally better than 2018, remains above this (5.39 in 2019 compared to 5.63 in 2018).BASEL INSTITUTE ON GOVERNANCE 7

4.2 Lowest performing countries Mozambique, Laos and Myanmar are the lowest performing countries out of the 125 countries assessed by the Public Edition of the Basel AML Index. These three countries are listed among the US INCSR list of major money laundering countries. Only Myanmar has been assessed by the FATF fourth-round methodology, which may influence comparability between the countries. 4.2.1 Mozambique Mozambique’s overall ML/TF risk score is 8.22 out of 10. The quality of its AML/CFT framework (Domain 1) is poor (9.28), based on data from the FATF (9.08) and the US INSCR (10), which lists it as a major money laundering jurisdiction. Poor border controls and weak government institutions expose the country to cross-border crimes related to drugs and human trafficking. Mozambique is also vulnerable to other predicate offences including corruption, car theft and smuggling, robbery, cash smuggling, illicit trade in precious metals and stones, customs fraud and goods smuggling.3 Mozambique has high risks associated with corruption, which is a pervasive problem in the country. The country scores 7.11 for corruption (based on the TI CPI) and 7.70 for bribery risks (based on the TRACE Bribery Risk Matrix). In January 2019, Mozambique announced the indictment of 18 individuals in connection to the USD 2 billion “tuna bonds” scandal that plunged the country into its worst financial crisis since independence. According to the Organized Crime and Corruption Reporting Project (OCCRP), in 2013 the former finance minister Manuel Chang “approved $2 billion of government loans from Credit Suisse and Russian bank VTB Capital, partially concealing them from donors including the International Monetary Fund (IMF). The loans funded maritime projects including a state-owned tuna fishery. However, an estimated 10 percent was diverted into bribes and kickbacks”.4 Mozambique defaulted on the loans in January 2017, plunging the country into a financial crisis with debt soaring to 112% of GDP.

The country also fares poorly on Financial Transparency and Standards (Domain 3), with a score of 6.5. The country’s risk level in Domain 4 (Public Transparency) and Domain 5 (Political and Legal Risks) is medium. The country faces issues with the strength of public institutions, as well as the financial openness of political parties and the level of media freedom. 4.2.2 Laos Laos has an overall score of 8.21 and continues to face a high risk of money laundering despite leaving the FATF’s list of jurisdictions with strategic deficiencies in 2017. The country has high risks relating to the poor quality of its AML/CFT framework (Domain 1), scoring 9.12 out of 10. The country also has a low performance rating according to the FATF assessment, with a score of 8.87 out of 10. However, the latest FATF report on Laos was issued in July 2011 and the country has not gone through a fourth-round evaluation, which impacts on the validity and accuracy of its score. 3 https://esaamlg.org/index.php/Countries/readmore_members/Mozambique 4 https://www.occrp.org/en/daily/9090-mozambique-charges-18-in-tuna-bonds-scandal; see also https://www.justice.gov/opa/press-release/file/1141826/downloadBASEL INSTITUTE ON GOVERNANCE

8

The main issues noted in the 2011 report related to the general lack of awareness of AML/CFT and the lack of dedicated resources to undertake required reforms. The report also noted a high concern about drug-related illicit proceeds (estimated at about 10% of GDP or USD 750 million) as well as deficiencies in the criminalisation of ML and the absence of a freezing mechanism5. The US INCSR lists Laos as a major money laundering jurisdiction, giving it the highest risk level of 10. The main vulnerabilities relate to the cash-driven economy and limited law enforcement capacities, as well as the existence of widespread corruption, drug and human trafficking, and environmental crimes. The main sectors vulnerable to risk include the banking industry, stock market, insurance providers, casinos, the real estate industry and money exchange shops. The country’s performance in Domain 2 (Corruption and Bribery) is also poor, with a score of 6.73 under TI CPI data and 7.10 under the TRACE Bribery Risk Matrix. Corruption is a high risk for companies operating in Laos and “petty bribery is another dimension of corruption in Laos; companies are likely to encounter this when trading across borders, paying taxes or acquiring public services”.6 In June 2019, the ruling communist party announced an anti-corruption campaign.7 It remains to be seen whether this will lead to any immediate results. Laos performed poorly in Domain 3 (Financial Transparency and Standards), with a risk score of 6.16, and Domain 4 (Public Transparency and Accountability), with a score of 7. In Domain 5 (Political and Legal Risks), Laos scored 6.82, reflecting a weak and inefficient judiciary as well as a low level of press freedom. 4.2.3 Myanmar Myanmar’s overall score is 7.93. The quality of its AML/CFT framework (Domain 1) is poor, with a score of 8.6 based on data from the FATF (8.2) and US INSCR (10). The country was assessed

with the FATF’s fourth-round methodology in September 2018, and its performance in the 11 Immediate Outcomes – which measure the effectiveness of AML/CFT measures – was only 3%. Technical compliance was rated at 48%. The overall FATF score in the Basel AML Index is now 8.2, compared to 7.3 based on the previous 2011 FATF report. This does not necessarily reflect a deterioration of the country’s position in FATF data. Rather, compared to the previous year, a more accurate picture of the situation is now available as Myanmar has undergone its first assessment under the new FATF methodology (See Chapter 2, Notes and limitations). According to this latest FATF report, Myanmar is exposed to a large number of significant ML threats, including drug production and trafficking, environmental crimes (including the illegal extraction of jade, wildlife trafficking and illegal logging), human trafficking, corruption and bribery.8 5 http://www.apgml.org/members-and-observers/members/member-documents.aspx?m=a6c4a803-0e15-4a43-b03a-700b2a211d2e 6 https://www.ganintegrity.com/portal/country-profiles/laos/ 7 https://thediplomat.com/2019/07/the-only-way-to-end-corruption-in-laos/ 8 http://www.fatf-gafi.org/media/fatf/documents/reports/mer-fsrb/APG-Mutual-Evaluation-Report-Myanmar.pdfBASEL INSTITUTE ON GOVERNANCE

9

Myanmar is listed in the US INCSR as a major money laundering jurisdiction. According to the State Department report, Myanmar’s economy is underdeveloped, as is its financial sector, and the majority of currency is still held outside the formal banking system (although bank deposits have increased over the past several years). The INCSR supports the FATF findings, noting that major sources of illicit proceeds in Myanmar include narcotics, trafficking in persons, the illegal trade in wildlife, gems, and timber, as well as public corruption. Corruption and bribery (Domain 2) present a serious issue, with high scores of 6.73 (corruption) and 7.1 (bribery). The country lacks financial transparency (with a Domain 3 score of 7) and faces issues related to political and legal risks (scoring 6.44 in this category). These factors make Myanmar potentially appealing to criminal organisations. 4.3 Notable performers in 2019 While there is no country with a zero risk of money laundering, the best performing countries according to the Basel AML Index in 2019 are Estonia, Finland and New Zealand. 4.3.1 Estonia Estonia’s overall risk score is low at 2.68 out of 10. Estonia scores 2.95 in Domain 1 (Quality of AML /CFT Framework). The low risk score is largely driven by its good performance in the 2014 FATF country report, which produces a score of 3.61 and states that Estonia’s supervisory framework is “broadly sound”, and the authorities “have been effective in confiscating and seizing property in ML and drug related cases”.9 This score may worsen when Estonia is re-assessed according to the FATF fourth-round methodology focusing on the effectiveness of AML/CFT measures and not only technical compliance. Not only is it common for countries to obtain poorer scores when assessed with the latest methodology, but Estonia has been subject to recent criticism of its effectiveness in preventing ML. The Financial Secrecy Index (FSI) also ranks Estonia as a low-risk country, listing it 93rd out of 112 countries.10 The few identified ML/TF issues relate to legal entity transparency (public company ownership and corporate tax disclosure, as well as recorded company ownership). Estonia also displays good results in Domain 2 (Corruption and Bribery), scoring 2.54. Indeed, in

also ranks Estonia as a low-risk country, listing it 93rd out of 112 countries.10 The few identified ML/TF issues relate to legal entity transparency (public company ownership and corporate tax disclosure, as well as recorded company ownership). Estonia also displays good results in Domain 2 (Corruption and Bribery), scoring 2.54. Indeed, in January 2019, the TI CPI named Estonia as the least corrupt country in emerging Europe.11 The country’s scores for Domains 3, 4 and 5 demonstrate a low risk in the areas of financial transparency, public transparency and legal and political risk. It is important to note that the data does not reflect the risk of Estonia’s geographic proximity to Russia and the issues that may be associated with this. Estonia has been labelled as one of the first ports of entry for Russian money launderers wishing to gain access to the European financial market. 9 https://rm.coe.int/report-on-fourth-assessment-visit-executive-summary-anti-money-launder/168071600b 10 https://www.financialsecrecyindex.com/en/introduction/fsi-2018-results 11 https://emerging-europe.com/news/estonia-is-emerging-europes-least-corrupt-country/BASEL INSTITUTE ON GOVERNANCE

10

4.3.2 Finland Finland’s overall score is 3.17 out of 10. In Domain 1 (Quality of AML/CFT Framework) Finland achieved a score of 4.38. Of the three best performing countries, Finland is the only country that has been assessed by the FATF fourth-round methodology, which occurred in February 2019. The country achieved a 45% performance score in relation to effectiveness, and a 66% performance score in technical compliance. According to the FATF report, “Finland has an adequate level of understanding of its ML and TF risks, and especially of its main ML risks associated to the grey economy. Those risks are addressed in a well-coordinated manner and through an efficient and comprehensive set of preventive measures”.12 Despite this, the FATF high