INFLUENCE OF EU’S ANTI-MONEY LAUNDERING DIRECTIVES ON NON-EU DEVELOPING COUNTRIES MONEY LAUNDERING RISKS: A COMPLIANCE-FRAMEWORK PYRAMID ANALYSIS

Abstract

Money laundering (ML) and terrorist financing (TF) continue to pose considerable threats to the global economy landscape, compromising financial stability and governance. This research analyzes the extraterritorial reach of European Union (EU) Anti-Money Laundering Directives (AMLDs) on non-EU developing nations, applying the Hierarchical Compliance Pyramid to embed technical FATF conformity, substantive EU convergence, and behavioural efficacy. The mixed-methods design combines panel data from 100–140 countries (2014–2023) with FATF mutual evaluations report (MER) scores, Basel AML Index rankings, and EU transposition measures, and merges these with qualitative case studies of Pakistan, Ghana, and Georgia. Fixed-effects regression findings show that technical compliance with FATF greatly decreases ML risk, but EU AMLD alignment contributes incremental benefits—particularly in those countries with high-quality FATF foundations. Still, behavioural effectiveness (Tier 3) is the exception due to capacity and governance limitations. The conclusions provide tier-level policy guidance to the EU, developing nations, and external funders, adding both to compliance theory and to useful strategies for improving AML/CTF effectiveness worldwide.