August 11, 2025JOURNAL OF INTERNATIONAL STUDIES7 citationsOpen Access

Toward tailored AML/CFT strategies: Clustering countries by FATF compliance and effectiveness

AKAleksandra Kuzior TVTetiana Vasylieva ĽSĽuboš Smutka

Key Points

Four distinct clusters reveal significant variations in aml and cft compliance and effectiveness across countries, emphasizing tailored approaches.
Advanced economies exhibit high compliance rates, highlighting the importance of technology and effective regulatory frameworks in aml and cft efforts.
Hierarchical clustering and principal component analysis were applied to fatf data, utilizing effectiveness metrics from immediate outcomes and recommendations.
The findings stress the need for context-specific aml and cft strategies to address global disparities and improve financial integrity.

Abstract

Addressing global disparities in Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) compliance and effectiveness is increasingly critical due to escalating financial crime risks. This study aims to identify natural clusters of countries based on their performance in FATF technical compliance and effectiveness assessments, thereby facilitating tailored AML/CFT support strategies. The study utilised hierarchical clustering, Principal Component Analysis (PCA), and ANOVA tests, employing FATF assessment ratings data for Immediate Outcomes (IO1-IO11) and Recommendations (R.1-R.40). Four distinct clusters were identified, highlighting significant variations in AML/CFT compliance and effectiveness. Advanced economies demonstrated high compliance and effectiveness, emphasising the strategic use of technology, cybersecurity, and effective regulatory oversight. Developing and transitional countries exhibited mixed or low performance, reflecting institutional, socio-economic, and governance-related challenges, including weaker institutional frameworks, higher corruption rates, and socio-economic pressures driving financial crime. The research also underscores persistent global challenges in adapting to new technologies and adequately supervising non-financial sectors. These clusters underline the necessity of differentiated, context-specific AML/CFT strategies, emphasising targeted interventions, technology integration, ethical frameworks, and regional cooperation to enhance global financial integrity. Additionally, these findings differ from the FATF’s traditional grouping approach, which typically classifies countries primarily based on risk assessments and geopolitical factors rather than performance-based data analysis.

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