Money laundering around the world

There is a staggering amount of money laundered in countries right around the world each year. In just 12 months, the estimated amount of money laundered globally is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars¹.

With this in mind, we wanted to take an in-depth look at which countries are most at risk of money laundering and how this compares to the current situation in the UK and the US.

Currently, The Financial Action Task Force (FATF) has ‘call for actions’ in Iran and Dem. Rep Korea². These countries are considered very high risk and are not members of any anti-money laundering (AML) organisations, meaning no laws are in place to help combat money laundering. In Iran, it is estimated that over $42 billion is laundered every year³.

According to the Basel anti-money laundering index, the top 10 countries currently facing the greatest risk of money laundering are⁴:

1. Mozambique (8.22 risk score)

2. Laso (8.21)

3. Myanmar (7.93)

4. Afghanistan (7.76)

5. Liberia (7.35)

6. Haiti (7.34)

7. Kenya (7.33)

8. Vietnam (7.30)

9. Benin (7.27)

10. Sierra Leone (7.20)

Despite being in the number one spot, Mozambique made significant progress in combating the risks of money laundering since the 2018 anti-money laundering index reducing it’s overall money laundering risk score from 8.28 to 8.22.

 In 2019, the top ten countries least at risk of money laundering² are:

1. Estonia (2.68 risk score)

2. Finland (3.17)

3. New Zealand (3.18)

4. Macedonia (3.22)

5. Sweden (3.51)

6. Bulgaria (3.51)

7. Lithuania (3.55)

8. Uruguay (3.58)

9. Slovenia (3.70)

10. Israel (3.76)

Cambodia made the second most AML progress between 2018 and 2019, documenting a change of -0.85 in their money laundering risk score. Since February 2019, when Cambodia made a high-level political commitment to work with the FATF and Asia/Pacific Group to strengthen the effectiveness of its anti-money laundering/ combating the financing of terrorism (CFT) regime and address any related technical deficiencies, Cambodia has taken steps towards improving its AML/CFT regime².

Tajikistan, Cambodia, Egypt, Indonesia and Portugal also made significant improvements in risk scores in 2019 compared to 2018⁴:

Country:Tajikistan

2019 Risk Score: 6.28 

2018 Risk Score: 8.30 

Difference: -2.02 

Country: Cambodia 

2019 Risk Score: 6.63 

2018 Risk Score: 7.48 

Difference: -0.85 

Country: Egypt 

2019 Risk Score: 4.55 

2018 Risk Score: 0.35 

Difference: -0.80 

Country: Indonesia

2019 Risk Score: 5.13

2018 Risk Score: 5.73 

Difference: -0.6 

Country: Portugal 

2019 Risk Score: 4.1 

2018 Risk Score: 4.66 

Difference: -0.56

The UK ranked 106th demonstrating a low risk of money laundering, and demonstrated an improved score from 2018 to 2019, showing the continued progress being made in anti-money laundering regulations. In the UK, the total amount of money laundered was around £325 billion in 2019⁵. High volumes of criminal money flowing through the UK results in a loss of confidence in the UK economy.

For context, this sum could buy Buckingham Palace⁶ outright 271 times, or the White House, valued at £319 million, 1,018 times.

The United States ranked far higher than the UK at 72nd in the 2019 Basel index however the US’s overall risk score has risen from 5 in 2018 to 5.03 in 2019⁴. This demonstrates an increased risk in money laundering, meaning more has to be done over the pond in order to strengthen anti-money laundering regulations.

In the US it is estimated that money laundering costs over $300 billion, $100 billion⁷ of which is through healthcare fraud. This amount of money could comfortably buy the Taj Mahal⁸ ($916 million) 327 times, the Empire State Building⁹ ($1.89 billion) 158 times or even the Emirates Palace, costing $1 billion, 300 times.

Methods commonly used for money laundering around the world:

Money laundering is a consequence of almost all profit-generating crime, meaning it can occur practically anywhere in the world. Generally speaking, money launderers tend to seek out countries or sectors where there is a low risk of detection due to weak or ineffective anti-money laundering programmes. As the objective of money laundering is to get the illegal funds back to the individual who generated them, launderers usually prefer to move funds through stable financial systems.

How does money laundering impact businesses globally?

The integrity of the banking and financial services marketplace depends heavily on the perception that it functions within a framework of high legal, professional and ethical standards. A reputation for integrity is the one of the most valuable assets of a financial institution.

If funds from criminal activity can be easily processed through a particular institution, either because its employees or directors have been bribed or because the institution turns a blind eye to the criminal nature of such funds, the institution could be drawn into active complicity with criminals and become part of the criminal network itself. Evidence of such complicity will have a damaging effect on the attitudes of other financial intermediaries and of regulatory authorities, as well as ordinary customers.

ENDS

Sources:

1. United Nations: https://www.unodc.org/unodc/en/money-laundering/globalization.html#:~:text=Because%20of%20the%20clandestine%20nature,trillion%20in%20current%20US%20dollars.

2. Financial Action Task Force: https://www.fatf-gafi.org/countries/

3. International Policy Digest: https://intpolicydigest.org/2019/01/07/money-laundering-in-iran-is-pervasive/

4. Basel AML Index 2019: https://www.baselgovernance.org/sites/default/files/2019-08/Basel%20AML%20Index%202019.pdf

5. Organised Crime and Corruption Reporting Project: https://www.occrp.org/en/daily/10979-ti-report-exposes-the-uk-as-a-money-laundering-haven

6. Buckingham Palace worth: https://www.investopedia.com/articles/investing/060915/worlds-most-expensive-mansions.asp

7. Home Treasury 2018: https://home.treasury.gov/system/files/136/2018NMLRA_12-18.pdf

8. Taj Mahal Worth: https://en.wikipedia.org/wiki/Taj_Mahal#:~:text=The%20Taj%20Mahal%20complex%20is,about%20U.S.%20%24916%20million).

9. Empire State Building Worth: https://therealdeal.com/2013/10/16/its-official-empire-state-building-worth-300m-less-in-reit/#:~:text=The%20Empire%20State%20Building%20has,the%20real%20estate%20investment%20trust.