I’ve been mulling, as you do, and I’m a bit concerned about the Corruption Perceptions Index published annually by Transparency International. It is a fine index, to be sure, and one I consult regularly myself, but it’s not the answer to all ills. I mentioned it last week in a post about the FCA (unwisely, in my opinion) bandying about the (weighted) phrase “high risk jurisdictions”, and I’ve been thinking about it ever since.
The clue really is in the name: it is a index (incomplete: the 2014 edition features 175 countries, when the UN recognises 206 states) of the perceptions (not facts – perceptions) of corruption (which is only one of the many, many crimes that can lead to money laundering). Consulting the CPI is excellent practice for the MLRO, as a list of high risk jurisdictions should take inspiration from a wide range of sources, but it cannot – must not – be the only thing that counts. Indeed, the Guidance Notes from the UK’s Joint Money Laundering Steering Group make this abundantly clear, in paragraph 4.26 of Part I: “Countries may be assessed using publicly available indices from HM Treasury Sanctions, FATF high-risk and non-cooperative jurisdictions, Moneyval evaluations, Transparency International Corruption Perceptions Index, FCO Human Rights Report, UK Trade and Investment overseas country risk pages and quality of regulation.”
Given this more balanced explanation, it is alarming when the regulator – the agency that will decide whether a business’s AML regime is up to snuff – suggests that checking just one incomplete ranking of thoughts about one crime can give a reliable indicator of jurisdictional risk. Right, I’m over it.