Sri Lanka among top ten most improved in Basel AML Index 2024

By Nishel Fernando

Sri Lanka has secured a place among the top ten countries demonstrating the most progress in combating money laundering and terrorist financing, as highlighted by the 13th Basel AML Index 2024.

The country recorded an impressive 27 percent improvement in combating money laundering and terrorist financing between its mutual evaluation report (MER) and the latest follow-up report. This achievement has placed Sri Lanka among the leaders in AML/CFT reforms globally.

In the latest rankings, Sri Lanka achieved a risk score of 5.28, ranking as the 80th riskiest jurisdiction out of 164 countries. This marks a notable improvement from the previous year when Sri Lanka had a higher risk score of 5.42 and was ranked 62nd among 152 countries.

The report emphasised that countries with historically low technical compliance with Financial Action Task Force (FATF) Recommendations, including those previously grey-listed like Sri Lanka, are making significant strides. Therefore, progress made by countries such as Sri Lanka could be indicative of how being grey-listed can catalyse necessary reforms.

The Basel AML Index is an independent, data-based ranking and risk assessment tool for money laundering and related financial crime risks around the world. It provides risk scores based on data from 17 publicly accessible sources. The risk scores cover five domains relevant to assessing risks of money laundering at the country or jurisdiction level. It is developed and maintained by the International Centre for Asset Recovery (ICAR) at the Basel Institute on Governance.

Following its delisting, Sri Lanka has continued to enhance its compliance with FATF recommendations.

Sri Lanka also remained the leader in South Asia, being the only country in the region to score above the global average in the Basel AML Index 2024 despite inclusion of India and Nepal to this year’s Public Edition due to improved data availability.

Despite these gains, the region still lags behind in several domains, with average scores in areas like public transparency and accountability remaining below the global average. The report also examined global trends, noting that the average risk score in Domain 2 (corruption and fraud) increased from 5.02 in 2023 to 5.12 in 2024 following the inclusion of new fraud-related indicators.

“This increase may be influenced by this year’s larger country coverage, as well as by changes in performance in the existing indicators of corruption and bribery,” the report noted.

Nearly 44 percent of countries saw higher risk scores in Domain 2, particularly high-income nations with significant financial hubs, such as New Zealand, Switzerland, and Singapore. However, approximately 50 percent of countries—including Sri Lanka—benefited from lower risk scores due to the new indicators, positioning the nation among the top twenty beneficiaries of this methodology change.

Sri Lanka’s improved ranking bodes well for its upcoming Mutual Evaluation (ME) scheduled for 2025. The evaluation is expected to scrutinise the effectiveness of Sri Lanka’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) frameworks.