Financial Crime World

FATF Assessment: Faroe Islands’ AML/CFT Measures Under Scrutiny

The Financial Action Task Force (FATF) recently conducted an assessment of the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) measures of the Faroe Islands. This assessment was part of FATF’songoing efforts to identify countries with strategic deficiencies in their legal and regulatory frameworks in combating financial crimes.

Reasons for Assessment

The self-governing Danish territory in the North Atlantic Ocean, Faroe Islands, came under FATF’s scrutiny due to:

  • Banking secrecy rules
  • Lack of transparency in the financial system

Concerns Raised by FATF

The FATF team found some risks that criminals could exploit in the islands’ regulatory framework, although not used intentionally for money laundering. Issues identified include:

  1. Limited availability of beneficial ownership information
  2. Lack of sufficient customer due diligence procedures
  3. Inadequate regulation of trusts and foundations
  4. Problems with the legal framework for confiscating and freezing assets
  5. Absence of a centralized financial intelligence unit

International Sanctions and Response

After the assessment, the Faroe Islands were given a deadline to address these concerns. Failure to comply could lead to international sanctions and isolation from the global financial system.

Faroe Islands’ Response to FATF Concerns

In response to the assessment results, the Faroe Islands Government announced several measures to enhance its AML/CFT capabilities:

  1. Establishment of a new financial intelligence unit
  2. Adoption of a legal framework for confiscating and freezing assets
  3. Strengthening of customer due diligence procedures

International Commitments

To strengthen the global fight against financial crimes, the Faroe Islands have also signed up to several international conventions and agreements:

  1. UN Convention Against Transnational Organized Crime
  2. UN Convention Against Corruption
  3. EU’s Fifth Anti-Money Laundering Directive

Global Focus on Financial Crimes

The FATF assessment comes as the global community places increasing focus on combating various forms of financial crimes:

  1. Complex financial structures
  2. Digitally-enabled crimes

Robust regulatory frameworks are essential in preventing criminals from exploiting weaknesses in financial systems. The assessment of the Faroe Islands is a reminder of the need for constant vigilance and improvement in this area.