Clustering of the European Union member states based on money laundering measuring indices

Abstract

The number of enforcement actions and fines for non-compliance with anti-money laundering (AML) regulations continues climbing year after year, and the year 2021 was no exception to this tendency. Globally, authorities remain harsh, and AML fines in Europe, the United States, and the United Kingdom have been increasing (Global Anti-Money Laundering Regulations, 2021). According to the UN estimations, the amount of money annually laundered worldwide amounts to 2–5% of the world’s Gross Domestic Product (GDP), or in absolute numbers - to 800 billion-2 trillion US dollars. Such high figures indicate that national governments are indeed facing a serious problem of money laundering. In this article, clustering is employed to group the EU member states by their money laundering measuring indices in order to assess the EU legal framework in terms of money laundering prevention. State clustering could help the relevant EU institutions, such as Financial Intelligence Units (FIUs), Europol, International Monetary Fund (IMF), national governments and others, to develop the most effective measures to diminish the problem of money laundering and to complement their regulatory framework. Money laundering is usually associated with criminal activities that generate large amounts of illegal financial resources. In the most general sense, money laundering refers to the process of disguising the true origin, ownership, disposal and movement of particular proceeds, property or property rights. The results of the empirical research propose that money laundering reduction calls for a higher number of suspicious transaction reports (STRs), lower levels of corruption and improvement of the legal framework in terms of money laundering prevention in the EU. The research methods cover comparative and systematic literature analysis, and hierarchical cluster analysis. The cluster analysis of the EU member states (28 countries) uses the number of reports filled with FIU between 2006-2014, the 2012-2020 Basel AML Index and the 1998-2018 CPI data.

Interaction between decentralized financial services and the traditional banking system: A comparative analysis

“…Regulators explore how the existing financial regulations can be adapted to the DeFi space. This includes applying anti-money laundering (AML) and knowyour-customer (KYC) regulations to DeFi platforms, even though implementing these measures in a decentralized environment poses significant challenges (Zetzsche et al, 2020;Gaspareniene et al, 2022). An innovative approach involves building regulatory compliance into the DeFi protocols themselves using smart contracts.…”

Evaluation of the economic development of European Union countries

“…Its strengths are manifested in the following aspects: first, it is calculated according to a unified methodology in all countries, and therefore it is possible to compare countries with each other based on it; secondly, GDP appears as one of the most important indicators in almost all proposed systems of economic development indicators of countries; thirdly, it is sufficiently complex, as it combines many essential results of economic activity, both branch and territorial; fourth, information about this index is easily available in both national and international statistical databases (Li et al, 2018;Singh et al, 2012;Gedvilaitė, 2019;Boggia et al, 2014;Becker et al, 2017;Verbunt, Rogge, 2018). Based on this, it is claimed that GDP adequately reflects the state of the country's economic development (Androniceanu et al, 2021;Čiegis et al, 2010;Gaspareniene et al, 2022;Moldan et al, 2012;Jędrzejczak-Gas, Barska, 2019).…”

“…For all these reasons, this method of quantitative assessment of the state of economic development of countries is applied only in individual countries. International estimates are based on GDP per capita (Eurostat, 2022).…”

“…Later on, less economically developed countries -Bulgaria, Poland, Romania, Hungary and others -joined the EU. For example, Luxembourg's gross domestic product per capita (GDP), which reflects the state of the country's economic development, in 2022 was over 9.6 times, Ireland -about 8 times, the Netherlands -about 5.2 times and Denmark -about 4.4 times the GDP of Bulgaria (Eurostat, 2022). In such a heterogeneous economic community, the whole series of essential questions for its further development arise -what are the development trends of it as an economic community as a whole and of its individual members, how being part of it has affected the development of both economically developed and developing countries, etc.…”

“…The question is, which of them is in better situation? Now, it is found every year by presenting the country's economic development indicator (Eurostat, 2022). Perhaps such an assessment is one-sided, since foreign investment flows and the arrival of foreign companies largely depend on the pace of development of a country, especially an economically developing one, since it is in this case that a large part of successful business opportunities are created.…”