Nepal is the second most vulnerable country in South Asia to money laundering risks, according to the Basel Anti-Money Laundering (AML) Index, an annual ranking of countries assessing their money laundering risk.

Out of 149 countries, Nepal with a score of 7.57 points ranks 12th, trailing behind Afghanistan in South Asia. In 2014, Nepal was ranked 14th on the AML Index featuring 162 countries.

The 2016 edition of the index, published last week by the Basel Institute on Governance, shows that Sri Lanka with a score of 7.16, Pakistan with 6.62, Bangladesh with 6.40 and India with 5.69 are behind Nepal in the region.

To assess a nation’s money laundering risk, the AML index assigns each country a score on a zero-to-10 scale based on a framework that aggregates and weights data from sources such as the World Bank, the Financial Action Task Force and the World Economic Forum. High scores indicate a country is more vulnerable to money laundering.

The index does not assess the amount of illicit financial money or transactions but is designed to assess the risk of money laundering to indicate the vulnerability of a country to money laundering and terrorism financing.

The Basel Institute said that although a majority of countries legally comply with international standards, they fall short in the implementation and enforcement of their laws.

The 10 countries posing the highest risk for money laundering, according to the 2016 Basel AML index, are Iran, Afghanistan, Tajikistan, Guinea-Bissau, Mali, Cambodia, Mozambique, Uganda, Swaziland and Myanmar. Finland is the safest country, followed by Lithuania and Estonia.

Recently, the US Department of State in its annual report titled “Country Reports on Terrorism 2015” has expressed concern that terrorists might use informal money transfer systems such as hundi and hawala—rampant in Nepal—for money laundering and terrorism financing.

The report also mentioned that Nepal’s open border with India and weak security controls at Kathmandu’s Tribhuvan International Airport continued to underpin concerns that international terrorist groups could use Nepal as a transit and possible staging point.

In April, the Department of Money Laundering Investigation (DoMLI) and the Metropolitan Police Crime Division of Nepal Police signed a memorandum of understanding for effective coordination to control money laundering and terrorist financing activities in the country.

They also formed a coordination committee, represented by DoMLI Director General, chief of MPCD and information officers of DoMLI and the Crime Division.