THE CHALLENGE: In an especially limited information environment, identify the sources and underlying causes of money laundering and assess the vulnerabilities of banking systems to those threats.
THE SOLUTION: We used a graphical modeling technique and captured the knowledge of banking and legal experts about the complex relationships among the following sets of variables: country (governance, culture, regulations, law enforcement), industries/sectors (insurance, banking, casinos), money launderers (local and international proceeds), and the geopolitical environment. Using a probabilistic approach to assess vulnerabilities, threats, and risks, we created a web-based tool that allows decision-makers to understand sources of vulnerability in the banking sector and to iteratively observe and analyze the effects of various policy options.
THE IMPACT: The tool has been successfully used in many countries including Namibia, Ukraine and Malaysia to inform policymakers at central banks. This tool enables central bankers to better understand the specific risks of money laundering within their countries and to take the necessary actions to strengthen their systems and mitigate those risks. This project was awarded a 2012 World Bank/International Finance Corporation Financial & Private Sector Development award for innovation, responsiveness, and collaboration.