Denmark’s AML/CFT Regulations Face Challenges: FATF Report Highlights Key Issues

Subtitle

The Financial Action Task Force (FATF) publishes damning report on Denmark’s AML and CTF measures.
Concerns raised over effectiveness and compliance with international standards.

Date: August 2017

Title Overview

The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, has released a comprehensive report on Denmark’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) measures. We present the key findings below.

Report Summary

Denmark’s Risk Assessments

Denmark’s understanding of AML and CTF risks is ‘moderate’.
Denmark has sectoral and national risk assessments but lacks coordination.
Limited statistics on AML system effectiveness negatively impacts ML NRA.

Strategy and Coordination

No national AML/CTF strategy or policy in place.
Individual competent authorities’ priorities determine focus.
Coordination and cooperation occur informally and on an ad hoc basis.

Functioning of the Financial Intelligence Unit (FIU)

MLS lacks human resources and operational autonomy.

Legal Framework

Strong legal framework but insufficient penalties for money laundering.
No law for self-laundering or ordinary money laundering.

Terrorist Financing

Strong legal framework with multiple indictments and convictions.
Lenient sanctions dampen the dissuasiveness of high penalties.

Targeted Financial Sanctions (TFS)

Poor understanding and implementation of TFS by reporting entities.
Limited monitoring of TFS compliance by supervisory authorities.

Addressing Challenges and Recommendations

Risk-based approach to AML/CTF supervision is important.
Additional resources and support needed to tackle deficiencies.

FATF Key Findings: Denmark’s AML/CFT Regulations

Risk Assessments

Denmark’s risk assessments of money laundering (ML) and terrorism financing (TF) are considered ‘moderate’ by the FATF. While Denmark has sectoral risk assessments and national risk assessments (NRAs), they were not carried out in a well-coordinated, whole-of-government manner. Moreover, Denmark’s statistics on the effectiveness and efficiency of their AML systems are limited, which negatively affected ML NRA.

National Strategy and Coordination

Denmark has no national AML/CTF strategy or policy, meaning that individual competent authorities determine their objectives and activities independently. Coordination and cooperation between these authorities occur informally and on an ad hoc basis.

Functioning of the Financial Intelligence Unit (FIU)

The effective functioning of Denmark’s financial intelligence unit (FIU), the Money Laundering Secretariat (MLS), is hindered by a lack of human resources and operational autonomy.

Legal Framework

Denmark’s existing legal framework covers handling of stolen goods offenses which apply to all criminal proceeds, including money laundering. Despite this, there is no law specifically addressing self-laundering or ordinary money laundering. Danish authorities have shown little interest in serious money laundering cases, and the criminal penalty for ordinary money laundering is only 1.5 years of maximum imprisonment, which is not dissuasive.

Terrorist Financing

Denmark has a strong legal framework for investigating and prosecuting TF. From 2011 to 2016, there were 16 TF indictments and seven convictions. Authorities apply more lenient sentences compared to the high penalties, however.

Targeted Financial Sanctions (TFS)

There are several challenges in implementing TFS for both terrorism financing and proliferation financing. The report emphasizes the need for better understanding and implementation of TFS, particularly for Designated Non-Financial Businesses and Professionals (DNFBPs). Additionally, there is limited monitoring of TFS compliance by supervisory authorities.

AML/CTF Supervision and Needed Resources

The report highlights the importance of a risk-based approach to AML/CTF supervision in both the public and private sectors. Furthermore, it stresses the need for additional resources to effectively address the current deficiencies in Denmark’s AML/CTF framework.

Conclusion

The FATF report outlines several areas where Denmark can improve its AML/CTF regulatory framework, including better coordination, more effective monitoring, and stronger penalties. It also emphasizes the significance of a risk-based approach to AML/CTF supervision and the need for increased resources to address these challenges.

For more information, you can visit the FATF website (https://www.fatf-gafi.org/en/) or the report’s webpage (https://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-denmark-2017.html).

Denmark cover photo