Anti-money laundering ratings: uncovering evidence hidden in plain sight

Abstract

Purpose This paper aims to increase the transparency of information in official anti-money laundering rating data to assist evidence-informed decision-making in compliance, policy-making and research. Design/methodology/approach This paper converts anti-money laundering rating data into information-rich visualisations, reintroduces a comparison methodology and ranks all anti-money laundering regimes evaluated to date. Findings Official anti-money laundering ratings as currently structured and presented offer surprisingly little policy-relevant information. Persistent failure to transform available data into information for knowledge and insight suggests that the risk has been realised that impressionistic judgments or politicised interests drive the policy agenda at least as much as objective evidence or substantive economic and social goals. Practical implications Any reluctance to generate policy-relevant information from the industry’s primary data set or disinclination to engage constructively with a growing body of independent critical policy effectiveness evidence calls into question whether implementing anti-money laundering controls with some prospect of achieving substantial societal benefits, or perpetuating the current system, prevails. Originality/value With a dearth of scholarship at the intersection of money laundering and policy effectiveness scholarship and practice, this paper combines elements of these disciplines and examines anti-money laundering effectiveness from a different viewpoint. Rather than seeking to measure money laundering or estimate the proportion of criminal proceeds successfully intercepted, this paper draws directly from the anti-money laundering industry’s own “main” data set.

Anti-money laundering: The world's least effective policy experiment? Together, we can fix it

“…Despite such structural design flaws there remain surprisingly few connections between anti-money laundering practice and the scholarship and practice of public policy. (Examples include de Koker and Turkington 2015; Halliday, Levi, and Reuter 2014;Levi et al 2018;McConnell 2015, 238;Pol 2018aPol , 2018bPol , 2019aPol , 2020Sharman 2011;Zoppei 2017).…”

“…(With three rounds of evaluations completed since 1990, the fourth round began in 2014 and is due to conclude in 2024.) A few months later, an influential group of global banks amplified researchers' earlier calls to engage with policy effectiveness principles (Halliday et al 2014;Levi et al 2018;Pol 2018aPol , 2018bPol , 2019aPol , 2019bPol , 2019cPol , 2020. The Wolfsberg Group (2019) reiterated calls to focus on outcomes rather than just compliance.…”

“…Anecdotal successes may not prove policy success, but individual success stories mask the reality of overall policy failure. Relevant data are also scant (Levi et al 2018;Pol 2019a) and obscured by prevailing belief systems and narratives. For instance, the perceived failure of banks and regulators "properly" or "fully" to implement existing rules is often blamed, despite countervailing evidence (noted in Section 6).…”

“…Since 2014, as well as assessing compliance with FATF's 40 recommendations promulgated in 1990 and revised many times since, a new methodology rates countries' compliance with 11 "outcomes" said to represent the goals of an "effective" anti-money laundering regime (FATF 2013a, 2013c). Universally adopted, there seems little perceived need to question the framework, despite arguments that its design and implementation fail to evaluate effectiveness as it purports (Halliday et al 2014;Levi et al 2018;Pol 2018aPol , 2019a. The new framework's terminology also suggests links between anti-money laundering practice and policy and evaluation principles, yet the evaluation processes casually use "effectiveness" and "outcomes" language mostly absent their public policy foundation.…”

“…Even irrespective an apparent paucity of independent verification, the perceived lack of international coordination does not accord with the industry's own evidence base. According to FATF ratings, international cooperation is the most highly rated of 11 "effectiveness" measures (Pol 2019a(Pol , 2020. The proposed "solution" also fails to countenance the possibility that, if banks complied fully with anti-money laundering obligations, the current policy intervention might still have almost zero impact on crime (Pol 2019c).…”