Country Risk: Is the US a High Risk Country (Financial Crime)?

This Post is an extract from the USA Financial Crime Threat Assessment 2022 by FCN which can be found HERE: A PDF of this post can be found HERE: FCN:US:HRC:PBD:08:2022

The following is a review of whether the US should be regarded as a high risk country, including the opinion of Financial Crime News, and includes extracts and information from its comprehensive USA Threat Assessment 2022. The TA was produced to provide a digestible, condensed and thought-provoking summary of US ML/TF/FC and PF threats and responses for financial crime fighters to use. 

1.1 Introduction: Whether due to its economic size, population, wealth, levels & breadth of international trade or its importance as both a financial centre as well as the US dollar as a global currency, the US is considered to be a ML centre, with hundreds of billions of dollars in financial crimes generated domestically each year. Foreign illicit funds are destined to the US daily to invest in its currency, it’s securities markets or real estate, or is just transiting through the country, (for example via trade and or via correspondent banking). The US is most likely the most exposed country to illicit finance and money laundering in the world.

In December, 2021, US Treasury Secretary Janet Yellen at the Washington DC Summit for Democracy, stated  that, “in the popular imagination, the money laundering capitals of the world are small countries with histories of loose and secretive financial laws. But there’s a good argument that, right now, the best place to hide and launder ill gotten gains is actually the United States.”

Consistent with this admission the US Dept of State, included the US as a “Major Money Laundering Country” in the INCSR money laundering assessment published in March 2022 (INCSR Vol 2), along with 80 other countries.

2.1 Other Sources: The US is also rated by others as follows:

  • The Basel AML Index 2021 scores the US at 4.60/10 and ranks it at 83/110 (giving the US the 28th best score with only 8 countries having a better score than 3.5). Example, better scores include for Finland (3.06), Slovenia (3.3), Norway (3.35), Sweden (3.36), Denmark (3.46), New Zealand (3.53), Australia (3.75), Belgium (3.94) & the UK (4.05). Nevertheless, at these scores the US couldn’t be described as a higher risk country. 
  • The Organised Crime Index 2021, ranked the US on “criminality” at  5.5/10, (ranked 66th of 193 countries) and 6.58/10 on “resilience” (ranked 28th of 193 countries), and therefore overall as “High Criminality – High Resilience. Top scores for resilience were for Finland & Liechtenstein (8.42), New Zealand (8.38), Denmark (8.21), Iceland (8.04), Australia (7.96), Norway (7.92), UK (7.88), Singapore (7.71), Germany (7.67), Canada (7.25), Israel (6.00), Spain (6.63), & France (6.83). Due to the resilience scores, which mitigate the criminality scores, the US shouldn’t be described as a higher risk country compared to the above-mentioned countries. 
  • The Tax Justice Network’s, Financial Secrecy Index 2022 has the USA scored 67/100 and ranked 1st highest from 141 countries, up one from its 2021 ranking of 2nd. This ranking is based on a combination of its secrecy score and a scale weighting based on its share of the global market for offshore financial services. As far as tax crimes are concerned and crimes that benefit from financial secrecy, based on this score, the US could be considered as a higher risk country.
  • The FCN Country Index 2021/2022 rates and ranks 43 countries for both financial crime related threats and responses. The countries selected are predominantly FATF member countries which includes all G20 countries, as well as all GCC countries. In aggregate, these 43 countries represent approximately 87% of Global GDP, and most likely are the leading source, transit and destination countries in terms of financial crime proceeds and laundering illicit funds. The US is scored 35/100 for threats (with 1 being the highest threat score) & 77/100 for response (with 100 being the best response score) and a net risk score of 56/100. The US threat score is equal 7th highest of these 43 countries (Italy and UK), whilst the US response score is equal 1st (with the UK) and the overall risk ranking (including threats and responses) places the US mid-table at equal 19th (with Hong Kong, France, the UAE and the UK) out of 43 countries, with a score of 56/100.

3.1 US as a Higher Risk Jurisdiction – UK View: Whilst the UK doesn’t include the US on any of its high risk third country lists, the same appears true for almost all of those FIs regulated by the UK FCA. In data received from 1,900 regulated entities by the FCA in 2021, only 6 had the US as a high risk country, whereas 70 included the UK.

The US was one of just 20 countries that appeared on less than 10 (FIs that included the US in their list of higher risk countries), along with France (?), Germany (0), Sweden (0), Austria (1), Australia (1), Canada (1), Spain (1), Finland (1), Ireland (1),  Belgium (2), New Zealand (2), Denmark (3), Luxembourg (3), Japan (5), Slovenia (5), USA (6), NL (6), Czechia (7), Singapore (7) & Poland (8).

Interestingly, the Marshall Islands (173) Guam (145), Puerto Rico (127) ,& the US Minor outlying islands (46) fared worse. 

Leading Countries – FCN Financial Crime Index 2021-202

4.1 US as a Higher Risk Jurisdiction – FCN View: The US probably faces the greatest threats compared to any other country. That said, the response is also significant, and reflected in the FATF effectiveness ratings, the OC Index in resilience, and the Basel AML Index.

The FCN Leading Country Financial Crime Index also reflects the higher threat and higher response of the US.  These results put the US ranking mid-table at 21/45 countries. This comprehensive FCN US Threat Assessment highlights in detail the identified threats and the responses based on available information. Based on these findings, it’s unlikely that the US warrants inclusion as a high risk country in a third party’s higher risk country list, more likely moderate risk, though also unlikely low risk. Notwithstanding this, taking note of the particular predicate offences, methods and typologies, routes, sectors and channels used by bad actors should not be ignored. 

The US’s recent and timely interventions relating to identified threats do provide some measure of comfort, comparatively speaking in relation to country responses. This is not least because of President Biden’s attempts to refocus and re-energise the US approach to tackling all aspects of financial crime – is welcome and still needed. The Biden Administration has announced new strategies to combat illicit finance, corruption, fraud including cybercrime and cybersecurity, human trafficking and human smuggling, a new drug control strategy and has retained transnational organised crime as a national security priority. 

FCN Financial Crime Index 2021 – 2022 – USA

US Country Dashboard 2022

The FCN USA Financial Crime Threat Assessment is packed full of information for all financial crime fighters. To download it See: HERE.

To download the USA Financial Crime Dashboard See: HERE.

For an OPED (Opinion & Editorial) on the USA fight against Financial Crime based on the research and analysis carried out in this comprehensive Threat Assessment 2022 by FCN see HERE

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