A recent international report, the 'Basel AML Index,' highlights a persistent decline in the effectiveness of Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) systems worldwide. The report indicates a decrease in effectiveness scores from 30 percent to 28 percent over the past two years. Critical areas such as the misuse of non-profit organizations for terrorist financing, transparency in beneficial ownership, supervision, prosecution, and measures to prevent the proliferation of weapons of mass destruction are notably ineffective in AML/CFT efforts.
Challenges persist in compliance within these areas, alongside difficulties in regulating new technologies and supervising non-financial businesses and professionals. Governments face obstacles in implementing financial sanctions due to struggles in identifying beneficial company owners and combating entities facilitating money laundering and sanctions evasion.
The report highlights concerns about terrorist groups receiving millions through cryptocurrencies and fears of non-profit organizations being exploited for terrorism funding. It also points out that while countries grapple with funding climate change efforts, corruption and organized crime lead to significant financial losses, with only a fraction of stolen funds recovered.
Cryptocurrencies pose significant concerns for financial crime professionals due to billion-dollar scandals, volatility, and their use by organized crime for hiding and laundering illicit funds. The report cites instances of terrorist groups like Hamas obtaining funding through cryptocurrencies and using them to circumvent sanctions and finance nuclear weapons programs.
The report expresses dismay at the plummeting global performance in AML/CFT efforts, particularly since the Financial Action Task Force (FATF) strengthened its Recommendation 15 concerning new technologies like virtual assets and service providers. Despite this decline, there's some optimism as regulations become more stringent and consistent in major financial hubs.
Notably, while cryptocurrencies initially facilitated a substantial amount of illicit online market transactions, recent estimates suggest a decline, with illicit activities constituting less than 1 percent of total cryptocurrency transaction volume in 2022. The report emphasizes initial enforcement successes as indicators of potential in tracing illicit financial flows and recovering stolen funds.
By fLEXI tEAM