An approach to the use of indices-based analysis subject to money laundering and terrorist financing national risk assessment

Abstract

The core aim of this study is to propose an approach to quantitate estimation of indices-based information subject to necessities of the National Risk Assessment (NRA) of money laundering and terrorist financing (ML/TF) risks. Mathematical formalization analysis for Ukraine based on 11 indices and indicators for years 2011-2015 subject to core areas of the overall situation in a country considered within its National Risk Assessment was carried out. Authors’ contribution covers scientific novelty that is a first-time analysis of a general situation in a jurisdiction in light of the National Risk Assessment’s requirements based on joint consideration of various indices and setting priority to areas of the overall country’s situation in the framework of conducted calculations. It was concluded that proposed approach is a valuable instrument for assessing priority of areas of the overall situation in the country for the National Risk Assessment’s purposes through a formalized mechanism ensuring high objectiveness. Practical significance of this study is a possibility to reach higher efficiency in allocation of available resources for the participants of the National Risk Assessment, to reduce some costs considering flexibility of the approach allowing consideration of significant volumes of information, its updating and comparison. This research could become a starting point for further research. Considering complexity of existing indices, there is a necessity to study a mechanism of their correlation and mutual influence, analyze elasticity and joint behavior, and discover the areas of preferable influence on large range of purposes not only limited to the MRA of ML/TF risks.