Decoding the Basel AML Index 2025
- Dr. John Mathews
- Jan 7
- 4 min read
The Basel Institute on Governance has released the Basel Anti-Money Laundering (AML) Index1 (hereafter “the Index”), its annual independent ranking of countries’ exposure to money laundering and terrorist financing risks. Covering 177 jurisdictions, the index evaluates both vulnerability to financial crime and capacity to counter these threats, using 17 indicators drawn from FATF, Transparency International, World Bank, and other global sources.
The Index highlights persistent global vulnerabilities to money laundering and terrorist financing, ranking these countries on a key measure – their risk exposure. India remains in the medium-risk category, reflecting progress in regulatory frameworks but ongoing challenges in enforcement and financial transparency. We discuss India later in this article.
The Index comprises scores for each country from 0 (low risk) to 10 (high risk), with higher scores indicating greater vulnerability. The score is based on five key areas: how strong a country’s laws are against financial crime, how much corruption exists, how transparent its financial systems are, how accountable its public institutions are, and how stable its legal and political environment is. The index doesn’t measure how well countries enforce these laws , it laser focuses on the overall risk exposure. That’s why it’s useful for spotting weak areas in a country’s financial system, but it should be used alongside other tools like FATF evaluations to get the full picture.
Many are perhaps unsure of what the differences are between the Index, FATF’s 40 Recommendations and their 11 Immediate outcomes. They are different in their own ways.
FATF’s 40 Recommendations
Purpose: Provide the global standards, the “rulebook” for AML/CFT systems.
Nature: Prescriptive - what laws, regulations, and institutional arrangements countries should have.
Output: A compliance checklist (technical compliance).
Comparison: Basel AML Index is risk-based; FATF 40 Recommendations are rule-based. Comparing them is useful to see if countries with strong laws (40 Recommendations) still face high risk exposure (Basel).
FATF’s 11 Immediate Outcomes
Purpose: Measure effectiveness, whether AML/CFT systems work in practice.
Nature: Outcome-driven, do STRs lead to investigations, are assets confiscated, are sanctions enforced?
Output: Qualitative ratings (low, moderate, substantial effectiveness).
Comparison: Basel AML Index’s risk exposure aligns more naturally with FATF’s Immediate Outcomes, because both go beyond laws on paper to look at real-world vulnerabilities and effectiveness. We use this as a barometer to compare.
Comparative analysis between FATF’s 11 Immediate Outcomes and the Index methodology
FATF 11 Immediate Outcomes (Effectiveness Lens)
FATF’s framework is designed to measure how well AML/CFT systems work in practice. The 11 outcomes cover:
1. Risk, Policy & Coordination - national risk assessments and policy alignment.
2. International Cooperation - ability to share information and assist other jurisdictions.
3. Supervision & Preventive Measures - regulators & financial institutions applying AML rules.
4. Preventive Measures by Financial Institutions - customer due diligence, suspicious transaction reporting.
5. Legal Persons & Arrangements - transparency of beneficial ownership.
6. Financial Intelligence - FIU effectiveness in analyzing and disseminating data.
7. ML Investigation & Prosecution - whether cases are pursued and lead to convictions.
8. Confiscation - freezing and recovering illicit assets.
9. TF Investigation & Prosecution - terrorism financing cases pursued effectively.
10. TF Preventive Measures & Financial Sanctions - targeted sanctions applied and enforced.
11. PF Financial Sanctions - proliferation financing sanctions implemented.
These outcomes are fundamentally qualitative and operational showing whether AML/CFT systems actually deliver results.
Basel AML Index Methodology (Risk Exposure Lens)
The Index evaluates country risk exposure using 17 indicators across five domains. They are:
• Quality of AML/CFT Framework - (laws, FATF compliance).2
• Corruption & Bribery Risks - (Transparency International, World Bank).
• Financial Transparency & Standards - (tax compliance, offshore risks).
• Public Transparency & Accountability - (governance, press freedom).
• Political & Legal Risks - (rule of law, judicial independence).
A Comparative View
Aspect | FATF Immediate Outcomes | Basel AML Index |
Focus | Effectiveness of AML/CFT systems | Exposure to ML/TF risk |
Method | On-site evaluations, peer reviews | Composite indicators from global datasets |
Output | Qualitative ratings (low–moderate–substantial effectiveness) | Quantitative score (0–10 risk scale) * |
Strength | Shows if AML measures work in practice | Provides global comparative risk ranking |
Limitation | Resource-intensive, not updated annually | It misses enforcement outcomes, static data |
*showing relative vulnerability to ML/TF risks.
What the Index Misses (relative to FATF):
Effectiveness of enforcement: It measures risk factors but not whether AML laws are enforced or lead to convictions.
Granularity of FATF outcomes: FATF captures operational realities (e.g., are STRs leading to investigations?).
Dynamic enforcement capacity: Basel is static and data-driven; FATF is interactive and evidence-based.
Contextual nuance: Basel can penalize countries with high corruption risk even if AML enforcement is strong.
Back to the Index: Key Findings
High-risk regions: The Democratic Republic of Congo, Chad, and Equatorial Guinea top the list of countries most exposed to money laundering risks in .
Low-risk performers: Botswana, Seychelles, and Mauritius fall into the low-risk category. Countries such Tunisia show resilience, with Tunisia improving its global ranking by 13 places compared to 2024.
The usual best list of countries, continues as under:
Basel AML Index - Top Performers
Rank | Country | Score (0 = low risk, 10 = high risk) | Risk Level* |
177 | Finland | 3.03 | Very Low |
176 | Iceland | 3.04 | Very Low |
175 | San Marino | 3.08 | Very Low |
174 | Denmark | 3.18 | Very Low |
173 | Estonia | 3,25 | Very Low |
172 | Sweden | 3.48 | Very Low |
*Risk Rating: Lower Risk - < 4.70, Medium Risk - 4.70 - 6.08, Higher Risk - > 6.08
Key Insights:
Nordic countries dominate the low-risk end due to strong governance, transparency, and effective AML/CFT enforcement.
Estonia, Latvia , and Lithuania stand out in Eastern Europe, showing how digital governance and transparency reforms reduce risk.
New Zealand consistently ranks among the lowest-risk globally, reflecting robust institutions and low corruption.
These countries combine technical compliance with FATF standards and high effectiveness in practice, which is why their Basel scores are so low.
Basel AML Index - a BRICS Comparison
Among the original BRICS nations, India sits in the mid-range, showing stronger frameworks than Russia and South Africa but still facing enforcement gaps compared to China. This perhaps reflects progress in regulatory frameworks but highlights challenges in enforcement, corruption risks, and financial transparency.
Country | Risk Score (0-10) | Ranking | Risk Level |
Russia | FATF has suspended Russia’s membership, hence not included | High | |
South Africa | 5.63 | 64 | Medium |
Brazil | 5.40 | 80 | Medium |
India | 5.66 | 60 | Medium |
China | 7.26 | 12 | High |
Note: 0=low risk, 10 = high-risk
Key Narratives:
Russia: Its membership is suspended by FATF and hence not considered.
However, it has the highest risk among BRICS, reflecting systemic corruption and weak enforcement.
South Africa: Despite regional progress, its vulnerability to money laundering and terrorist financing risks, particularly regarding the practical effectiveness of its AML/CFT system and issues surrounding beneficial ownership transparency and corruption are spotlighted. It recently exited FATFs grey list.
Brazil: Persistent weaknesses in corruption and fraud controls and challenges in financial transparency. While Brazil has a strong regulatory framework and a commitment towards international standards, inconsistent enforcement and high levels of predicate crimes remain key concerns
India: Demonstrable regulatory progress but persistent enforcement gaps.
China: High risk among BRICS, it has significant weaknesses in its AML framework quality, high corruption/fraud risks and challenges with public transparency, despite potential improvements in areas like virtual assets, as the index focuses on systemic financial crime vulnerabilities, where data gaps, illicit activities exploiting regulatory gaps, and lack of accountability.
Implications: The Index is a global trust signal. For India, its score shows that while regulatory frameworks are robust, implementation and enforcement remain critical.
Reporting entities and regulators should integrate AML awareness into financial sustainability strategies to build further resilience and credibility in global markets.
India’s Position in 2025
India continues to sit in the medium-risk band, reflecting both strengths and challenges:
Strengths:
a. Stronger regulatory frameworks aligned with FATF recommendations.
b. Enhanced monitoring of suspicious transactions through the Financial Intelligence Unit (FIU-IND).
c. Progress in digitization of banking and compliance systems.
Challenges:
a. Persistent corruption risks and gaps in enforcement at state and local levels.
b. Financial transparency issues, particularly in informal sectors and cross-border flows.
c. Need for deeper integration of AML measures into emerging fintech and crypto ecosystems.
The Index is more than a ranking - it is a risk map for global finance. For India, the results highlight:
The urgency of strengthening enforcement capacity.
The need for cross-sector collaboration (banks, fintechs, regulators).
The importance of public transparency to build trust and resilience in financial systems.
India’s ranking underscores that while the country has made strides in policy and regulation, the implementation gap remains a critical hurdle. For reporting entities and regulators, this signals the importance of embedding AML awareness into governance and financial sustainability frameworks.
Closing Reflections:
The Index reminds us that money laundering is not just a financial crime but a systemic risk undermining governance, sustainability, and development. For India, the path forward lies in closing the enforcement gap, leveraging technology, and embedding AML principles into every layer of financial planning from individual institutions to national strategy. India must treat the Index not as a label, but as a diagnostic tool. By closing enforcement gaps, modernizing supervision, and embedding AML into governance, India can shift from medium risk to global resilience and lead by example in the Global South.
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