Anti-money laundering and combating the financing of terrorism compliance: Are FATF member states just scratching the surface?
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Date
2019-07-02
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Journal of Money Laundering Control
Abstract
Purpose – The purpose of this paper is to investigate how well countries comply with global anti-money
laundering and counter-financing of terrorism (AML/CFT) regulations.
Design/methodology/approach – With the help of an AML/CFT compliance index composed by the
author, this study is able to numerically quantify countries’ AML/CFT compliance levels. Countries were
selected based on their membership with the Financial Action Task Force (FATF), precisely members who
have gone through at least one round mutual evaluation and have duly submitted a report to the task force.
The AML/CFT index was composed by assigning numeric values to the individual country ratings across all
49 FATF recommendations contained in their mutual evaluation reports (MER).
Findings – Some notable findings include the yearly global level of AML/CFT compliance between the
period 2004 and 2016, as well as compliance levels across continents for the same period. Compliance levels
for the seven components of the FATF recommendations were also reported to help assess which set of
recommendations countries comply with the most and why they do. It was also found that countries’ lack of
compliance was as a result of high cost of compliance with FATF recommendations.
Research limitations/implications – The main limitation of this study was a lack of high-frequency
AML data of countries, especially less-developed countries.
Originality/value – The uniqueness of this paper lies in the fact that the AML/CFT compliance index
constructed and used in the study is the first of its kind.
Description
Research Article
Keywords
Money laundering