Financial Secrecy vs Anti-Money Laundering : Legal and Regulatory Dimensions in a Digitally Driven Global Environment

Abstract

This research examines the relationships between money laundering risks and financial secrecy levels across different global jurisdictions to formulate proposals for developing effective regulatory policies in the field of financial transparency. To achieve this objective, an interdisciplinary approach was employed, involving a comparative analysis of the Basel AML Index (AMLI) and the Financial Secrecy Index (FSI) for 109 jurisdictions. Visual spatial analysis and multidimensional correspondence analysis were performed using Statistica and RapidMiner statistical packages. A statistically significant relationship was identified between the studied indices (χ² = 16.73, p = 0.04). Three primary dimensions of interaction were distinguished, explaining 99.9% of the total system inertia. It was established that the categories “low FSI” (31%) and “very high AML” (30%) make the greatest contribution to overall variability. A latent inverse relationship was identified between the highest money laundering risks and the lowest level of financial secrecy, along with associative relationships between medium levels of AMLI and FSI. The unique positioning of jurisdictions with the highest financial transparency was established, which are not associated with any AML categories. It was concluded that the complex nonlinear structure of associations between the studied phenomena requires differentiated approaches to international legal regulation and public administration of financial transparency, taking into account the specific characteristics of national anti-money laundering regimes and legal systems. International organizations can utilize the obtained results to enhance financial risk assessment systems, by national regulators to tailor anti-money laundering legislation to jurisdictional specifics, and by financial institutions to develop more effective compliance control systems and reputational risk management strategies.