Corruption perceptions index

During client screening for the Wwft, it is important that country risk is also taken into account. Practice has shown that certain countries carry a higher risk of money laundering and terrorist financing. If your client has a nationality or lives in a country with an increased risk, it is best to conduct an enhanced client screening.

The Wwft article 2b reports the following in this regard:

1) An institution shall take measures to identify and assess its risks of money laundering and terrorist financing, with the measures being proportionate to the nature and size of the institution.

(2) In determining and assessing the risks referred to in paragraph 1, the institution shall at least consider risk factors related to the type of customer, product, service, transaction, and delivery channel and to countries or geographical areas.''

Thus, a clear risk profile must be established for each client that includes country risk.

Transparency International is responsible for the Corruption perceptions index (CPI). They conduct this survey every year.

Transparency International

Several sources can be used to determine country risk. One is the Corruption Perceptions Index (CPI), a survey conducted each year by Transparency International. Transparency International is a global organization that works in more than 100 countries to end the injustice of corruption. Transparency International's mission is to end corruption and promote transparency, accountability, and integrity at all levels and in all sectors of society.

Corruption is defined as the abuse of entrusted power for personal gain. Corruption erodes trust, weakens democracy, hinders economic development, and further exacerbates inequality, poverty, social division, and the environmental crisis. Some examples include officials demanding or accepting money or favors in exchange for services, politicians misusing public money or awarding public jobs or contracts to their sponsors, friends, and family, or companies bribing officials to make lucrative deals.

CPI research

The CPI scores and ranks countries/territories based on how corrupt a country's public sector is perceived by experts and business people. It is a composite index, a combination of 13 surveys and ratings of corruption collected by various reputable institutions. The CPI is the most widely used indicator of corruption worldwide. Some highlights of the 2019 survey:

• In 2019, 180 countries/territories are ranked.
• A scale from zero to one hundred is used where one hundred represents complete transparency and zero represents highly corrupt.
• More than two-thirds of countries have scores below 50 in 2019.
• The average score in 2019 is 43.
• The average score in 2019 Western Europe and European Union is 66 points

The countries that scored best in 2019 are:

1. Denmark (87)/New Zealand (87)
2. Finland (86)
3. Singapore (85)
4. Sweden (85)
5. Switzerland (85)

The Netherlands (82) falls just inside the top ten with its eighth spot. The countries that scored lowest are Somalia (9), South Sudan (12), Sirie (13), Yemen (15), and Venezuela (16).

Over the past eight years, only 22 countries have significantly improved their CPI scores, including Greece, Guyana, and Estonia. Over the same period, 21 countries have significantly lowered their scores, including Canada, Australia, and Nicaragua. In the remaining 137 countries, there is little or no change in the level of corruption.

In CDD On Demand, the CPI, FATF country list, and the EU high risk country list are consulted. 

Country risks & CDD On Demand

In the latest update of CDD On Demand, SCOPE FinTech Solutions has expanded the country risk component with additional sources and a translation to risk classification. This provides you with a more reliable picture of your client's country risk and also allows you to see at a glance what this country risk of your client is. In addition to the CPI, the FATF country list and the EU high risk country list are also consulted.

While performing a compliance check within CDD On Demand, you can enter a country, which can be either a nationality or the country in which your client resides. If there are multiple countries, the experience is that nationality is more likely to be known to compliance sources, so it is best to enter this country. In addition, Curious about how this works? Request your demo account today and try it yourself.