Financial Crime World

Here is the converted article in markdown format:

Estonia’s Financial Crime Trends and Predictions: A Look Beyond the Headlines

===========================================

In 2019, Estonia achieved a remarkable feat - it recorded the lowest risk score out of 125 countries in the Public Edition of the Basel AML Index, with a score of just 2.68 out of 10. This impressive performance has been consistent since 2012, when the index was first calculated. However, two years ago, Estonia made headlines with a massive money laundering scandal involving EUR 200 billion worth of suspicious payments channeled through Danske Bank.

Is the Basel AML Index Accurate?

Despite this high-profile incident, some have questioned the accuracy of the Basel AML Index. In response, it’s essential to understand how the index is compiled and what factors contribute to Estonia’s low risk score. The Basel AML Index Public Edition is a composite index that provides a simplified comparison of countries’ risks of money laundering and terrorist financing (ML/TF). Each country’s risk score is calculated from available data and does not represent an opinion or subjective assessment by the Basel Institute.

Factors Contributing to Estonia’s Low Risk Score

Estonia’s good scores in reputable data sources, including:

  • Financial Action Task Force (FATF)
  • Transparency International
  • World Bank
  • World Economic Forum

dealing with corruption and financial, political, and economic risks contribute to its low risk score. The country has also implemented various measures to combat money laundering and terrorist financing, such as creating a transparent beneficial ownership registry.

Future Predictions: Increased Money Laundering Schemes

Experts warn that more money laundering schemes will be uncovered in the coming years, including in countries generally regarded as low-risk. Enhanced levels of investigative journalism and data sharing, accompanied by increased public demand for open information globally, are driving this trend. Governments should respond to these positive trends by increasing their levels of transparency and supervision.

Limitations of the Basel AML Index

The Basel AML Index does not take into account case-based data on money laundering, such as high-profile scandals like the Panama Papers or Paradise Papers, due to time lags between real cases and detection, irregular updates, and the inability for countries to demonstrate progress. Instead, the index focuses on long-term measures versus short-term cover-ups.

Recommendations for Assessing ML/TF Risk

Experts recommend considering other factors when assessing ML/TF risk, including:

  • Geographic proximity to high-risk areas like Russia
  • Trade-based money laundering

The FATF identifies three main methods by which criminal organizations move money:

  • Use of the financial system
  • Physical movement of money (e.g., cash couriers)
  • Physical movement of goods through the trade system

Conclusion

While Estonia’s low risk score in the Basel AML Index may be surprising given the recent money laundering scandal, a closer look at the index’s methodology and the country’s efforts to combat financial crime reveals a more nuanced picture. As experts predict more money laundering schemes will be uncovered in the coming years, it is crucial for governments and financial institutions to prioritize transparency, supervision, and long-term measures to combat this threat.