Measuring the Untraceable: A composite indicator to assess the risk of money laundering at sub-national level

• In Event: IASOC Presents: Overcoming Difficulties in Examining Organized Crime and Illicit Enterprise

Abstract

The FATF – Financial Action Task Force, in its recommendation 1, encourages countries to identify and assess the money laundering risks in their territory. The ‘risk-based approach’ has become essential in the entire AML regime but clear guidelines and operational tools of how the risks should be assessed are missing. This paper, building on the results of EU co-funded project IARM (www.transcrime.it/iarm), proposes the development of a composite indicator to measure the risk of money laundering (ML) at sub-national level, with an application across Italian provinces. For each identified ML risk-factor, it identifies a range of measures and proxies, and it combines them into a composite indicator using a variety of statistical approaches. The validity of the indicator is then tested against other indirect measures of money laundering such as STRs - suspicious transaction reports - and ML offences reported to the judicial authority. Finally, the paper provides suggestions on how these measures could be translated into prevention tools for public bodies and obliged entities (e.g. banks and auditors).

Authors

• Diana Camerini, Transcrime

• Michele Riccardi, Università Cattolica - Transcrime