What is the size of underground economies around the world?

Underground economies—often referred to as shadow economies—comprise all unreported and untaxed economic activities that escape government oversight. These economies often coexist alongside legitimate systems and are driven by financial crime. Understanding their scale is vital for policymakers, financial institutions, and businesses aiming to mitigate financial crime risks. The Napier AI / AML Index 2024-2025 found that global economies could save $3.13 trillion annually using AI to detect and prevent money laundering and terrorist financing.

In this article, we explore the top 10 largest underground economies globally, based on the amount of money laundered, as a percentage of GDP, of the countries included in the Napier AI / AML Index.

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10. United Kingdom

Money laundering losses to GDP in 2023 (ratio): 5.39%

With its capital, London, often referred to as the financial crime capital of the world, as a large financial hub, the UK has a higher risk exposure to financial crime. Nevertheless, the leading financial supervisor, the Financial Conduct Authority (FCA), has a lot of controls in place that successfully protect a great amount of GDP from flowing into the black market. The UK should focus next on AI implementations across the industry, beyond just traditional banks.

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9. Malaysia

Money laundering losses to GDP in 2023 (ratio): 5.44%

Home to the booming Fintech hub, Kuala Lumpur, Malaysia is one of the largest economies in Southeast Asia. With increasing use of QR and cashless payments, the face of financial crime is changing, and financial institutions are working hard to adapt to new typologies. The country spends a lot of money on financial crime compliance, and loses a lot of GDP to the shadow economy. Due to its high risk exposure, Bank Negara Malaysia (BNM) is working hard to increase financial crime compliance innovation. In light of this regulatory environment, financial crime compliance teams operating in the jurisdiction should focus on taking the right steps towards responsible AI usage.

Read Napier AI’s regulatory response to the HM Treasury’s consultation on improving the effectiveness of the ‘Money Laundering, Terrorist Financing and Transfeer of Funds (Information on the Payer Regulations 2017 (the ‘MLRs’), which places requirements onto a range of businesses to identify and prevent money laundering and terrorist financing.

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8. Russia

Money laundering losses to GDP in 2023 (ratio): 5.56%

According to data from the Napier AI / AML Index, insufficient investment is being directed toward anti-financial crime controls in Russia. To combat systemic risks and modernise compliance frameworks, Russian institutions must prioritise scalable AI solutions and align with global anti-money laundering (AML) best practices.

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7. Mexico

Money laundering losses to GDP in 2023 (ratio): 5.56%

The evolving face of financial crime in Mexico is linked to its geographic position and the significant flow of goods and people across its borders. According to the data behind the Napier AI / AML Index, there is substantial opportunity to strengthen anti-financial crime controls. Financial institutions operating in Mexico should focus on adopting advanced AI tools to address these risks effectively, enhance regulatory compliance, and mitigate systemic vulnerabilities.

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6. Saudi Arabia

Money laundering losses to GDP in 2023 (ratio): 5.73%

The spend on financial crime compliance in Saudi Arabia is low compared the amount of GDP lost to financial crime, according to the Napier AI / AML Index. The country’s regulator has put the right steps in motion to foster innovation, the next step will be for financial institutions to follow. Saudi financial institutions have long been open to innovative technologies and are ready to adapt to the more flexible regulation in an increasingly competitive market, partly due to the innovation-centric approach to mandates from the regulator.  

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5. Croatia

Money laundering losses to GDP in 2023 (ratio): 6.6%

Croatia has been on the Financial Action Task Force (FATF) grey list since 2023, which indicates jurisdictions under increased monitoring for AML deficiencies. The country is focused on tightening its AML regulations.

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4. Hong Kong

Money laundering losses to GDP in 2023 (ratio): 6.7%

A booming economy and global financial hub, Hong Kong is the third highest market in the Napier AI / AML Index for money laundering losses as a share of the country’s GDP. Its regulator, the Hong Kong Monetary Authority (HKMA), is one of the most innovative, and is collaborating with the market to make efficiencies with AI in financial crime compliance. Implementing these improvements in AML strategy will be onerous, but once in place, Hong Kong will be well on its way to becoming a leader in AI for AML, and preserving its economy from financial crime.

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3. Romania

Money laundering losses to GDP in 2023 (ratio): 6.89%

The EU’s AI Act came into effect in Romania in August 2024, and AI transparency and explainability will be embedded in any future AI implementations. Romania is working to fill the gaps in its customer due diligence (CDD) requirements, especially concerning non-bank financial institutions and payment services.

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2. Brazil

Money laundering losses to GDP in 2023 (ratio): 8.74%

Brazil’s central bank has been successful in modernising the country’s payments system, resulting in wider access to financial services. However, the AML controls in the market are playing catch-up. Banco Central do Brasil is making the right steps to empower financial crime compliance with AI and drive down financial crime in the future.  

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1. United Arab Emirates

Money laundering losses to GDP in 2023 (ratio): 8.74%

Spending on financial crime compliance in the United Arab Emirates remains low relative to the GDP lost to financial crime. Much like Saudi Arabia's Vision 2030 initiative, the UAE’s regulator is actively fostering innovation and adopting a more flexible, business-friendly regulatory approach. However, for this progress to fully take effect, financial institutions in the UAE must embrace these reforms and align with the regulator’s vision. The potential for AI adoption in support of financial crime compliance innovation is bright in the UAE.

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Photo by Nathan Dumlao on Unsplash