Swedish Counter-Terrorism Financing Regulations in Need of Improvement, Says Global Financial Watchdog
The Financial Action Task Force (FATF) has recently highlighted areas where Sweden’s counter-terrorism financing regulations need to be strengthened. Despite making significant strides in tackling money laundering and terrorist financing risks, the country still faces several challenges that require attention.
National Policy Coordination
Sweden’s lack of a national anti-money laundering (AML) and counter-terrorist financing (CFT) coordination mechanism hinders its ability to effectively respond to these risks. Different authorities do not share the same understanding of the risks, leading to a disjointed approach in addressing them.
Terrorist Financing Risks
Sweden faces terrorist financing risks, particularly associated with the Islamic State (ISIL) and foreign terrorist fighters. While authorities prioritize combating terrorist financing and integrate it with other counter-terrorism work, there are legal and practical weaknesses in implementing targeted financial sanctions to freeze terrorist assets. These weaknesses need to be urgently addressed.
Money Laundering Risks
Sweden’s role as a regional financial centre and domestic crimes such as tax evasion contribute to its money laundering risks. The country’s new money laundering offence, introduced in 2014, has improved the potential for investigation and prosecution of money laundering activity. However, it is unclear whether criminal sentences are effective and dissuasive.
Financial Intelligence
Sweden’s financial intelligence is used systematically, but weak IT tools and a lack of strategic analysis hinder its ability to utilize financial intelligence effectively in pursuing complex cases of money laundering.
AML/CFT Supervision
The country’s AML/CFT supervisory system is in place, but there are weaknesses in applying risk-based supervision. Financial institutions and designated non-financial businesses and professions (DNFBPs) have generally complied with their obligations, but smaller institutions and DNFBPs need to improve their understanding of the risks they are exposed to.
Recommendations for Improvement
To bring its regulations up to standard, Sweden needs to:
- Improve national policy coordination
- Strengthen implementation of targeted financial sanctions
- Enhance use of financial intelligence
- Update AML/CFT regulations to reflect 2012 FATF standards
In conclusion, while Sweden has made significant progress in combating money laundering and terrorist financing, it is essential that the country addresses these areas of concern to ensure its regulations are effective in preventing these risks.