Follow the Money: Rethinking Geographical Risk Assessment in Money Laundering
A data-based geographical risk assessment could lead to a more targeted use of resources and thus make the fight against money laundering significantly more effective.
The new EU Money Laundering Regulation (EU 2024/1624) explicitly defines financial secrecy as a geographical risk factor that obliged entities must take into account when applying their customer due diligence obligations to customers from third countries in the future.
According to the regulation, financial secrecy arises, for example, when countries hinder the exchange of information, do not maintain registers of beneficial owners or have strict banking secrecy.
These factors overlap with the indicators of the Financial Secrecy Index, thus opening up the possibility of assessing geographical risks in money laundering prevention in a more evidence-based and less politically biased manner.
Financial secrecy arises, for example, when countries hinder the exchange of information, do not maintain registers of beneficial owners or have strict banking secrecy.
Author's summary: Rethinking geographical risk assessment in money laundering.