Financial Crime Investigation Process Under Scrutiny in the Faroe Islands: FATF Issues Warning
The Financial Action Task Force (FATF) has issued a warning regarding the anti-money laundering (AML) and counter-terrorism financing (CTF) measures of the Faroe Islands, a self-governing Danish territory in the North Atlantic Ocean. The assessment was conducted as part of FATF’s ongoing efforts to identify countries with strategic deficiencies in their legal and regulatory frameworks in combating financial crimes.
Reasons for the Assessment
The reasons for the assessment were twofold:
- Banking secrecy rules
- Lack of transparency in the financial system
According to FATF, these factors posed risks that criminals could exploit in the islands’ regulatory framework, although not used intentionally for money laundering.
Issues Identified by FATF
The FATF team identified several issues, including:
- Limited availability of beneficial ownership information
- Lack of sufficient customer due diligence procedures
- Inadequate regulation of trusts and foundations
- Problems with the legal framework for confiscating and freezing assets
- Absence of a centralized financial intelligence unit
These concerns were raised as part of an ongoing effort to strengthen global efforts against financial crimes.
Government Response
In response to the assessment results, the Faroe Islands Government has announced several measures to enhance its AML/CTF capabilities, including:
- Establishment of a new financial intelligence unit
- Adoption of a legal framework for confiscating and freezing assets
- Strengthening of customer due diligence procedures
The country has also signed up to several international conventions and agreements, including:
- UN Convention Against Transnational Organized Crime
- UN Convention Against Corruption
- EU’s Fifth Anti-Money Laundering Directive
Global Focus on Combating Financial Crimes
The FATF assessment comes as the global community places increasing focus on combating various forms of financial crimes, including complex financial structures and digitally- enabled crimes. The need for robust regulatory frameworks in preventing criminals from exploiting weaknesses in financial systems has never been more apparent.
Importance of Constant Vigilance
With international sanctions and isolation from the global financial system looming if compliance is not met, the Faroe Islands’ response to FATF concerns highlights the importance of constant vigilance and improvement in this area.