Legal Dimensions of Global AML Risk Assessment: A Machine Learning Approach

Olha Kovalchuk (), Ruslan Shevchuk (), Serhiy Banakh, Nataliia Holota, Mariana Verbitska and Oleksandra Lutsiv
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Olha Kovalchuk: Department of Theory of Law and Constitutionalism, West Ukrainian National University, 46009 Ternopil, Ukraine
Ruslan Shevchuk: Department of Computer Science and Automatics, University of Bielsko-Biala, 43-309 Bielsko-Biala, Poland
Serhiy Banakh: Department of Criminal Law and Process, West Ukrainian National University, 46009 Ternopil, Ukraine
Nataliia Holota: Department of Law and Humanities, Vinnytsia Education and Research Institute of Economics, West Ukrainian National University, 46009 Ternopil, Ukraine
Mariana Verbitska: Department of Administrative Law and Judicial Procedure, West Ukrainian National University, 46009 Ternopil, Ukraine
Oleksandra Lutsiv: Department of Public Law, Yuriy Fedkovych Chernivtsi National University, 58012 Chernivtsi, Ukraine

Risks, 2026, vol. 14, issue 1, 1-27

Abstract: Money laundering poses a serious threat to financial stability and requires effective national frameworks for prevention. This study investigates how the quality of legal and institutional frameworks affects the effectiveness of national anti-money laundering (AML) systems and their implications for financial risk management. We conducted an empirical analysis of 132 jurisdictions in 2024 using the Basel AML Index (AMLI) and the WJP Rule of Law Index (RLI). The Random Forest method was employed to model the relationship between rule-of-law indicators and AML risk levels. Findings reveal a significant inverse relationship between rule-of-law indicators and AML risk levels, with an overall classification accuracy of 69.6%. The model performed best for low-risk countries (precision 75%, recall 92.31%), moderately for medium-risk countries (precision 65.22%, recall 78.95%), but failed to identify high-risk jurisdictions, suggesting a legal institutional “threshold” necessary for effective AML functioning. Key predictors included protection of fundamental rights and mechanisms for civil oversight, with strong negative correlations between AML risk and criminal justice impartiality (−0.35), civil justice fairness (−0.35), and equality before the law (−0.41). These results show that legal factors strongly affect AML risk and can guide regulators in improving risk-based standards, enhancing regulatory certainty, and managing financial risk.

Keywords: anti-money laundering; Basel AML Index; WJP Rule of Law Index; legal regulation; financial risks; corruption risks; risk assessment; machine learning; Random Forest; international comparative analysis (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2026
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