Iceland’s Directorate of Internal Revenue Enhances AML/CFT Supervision with Risk-Based Approach

Reykjavik, Iceland - In a significant move to strengthen its anti-money laundering and combating the financing of terrorism (AML/CFT) supervision, Iceland’s Directorate of Internal Revenue (DIR) has established a new supervisor responsible for overseeing all Designated Non-Financial Businesses and Professions (DNFBPs), including lawyers and the gaming sector.

Establishment of New Supervisor

Prior to the establishment of the new supervisor, the Financial Supervisory Authority (FSA) provided extensive guidance to obligated entities on the intended requirements. The DIR, now equipped with access to information safeguarded by other authorities, has taken several steps to deepen its understanding of risks in the sectors it supervises.

Risk-Based Approach

Since its inception, the DIR has conducted numerous on-site and off-site inspections, seminars, and presentations for DNFBPs, as well as published extensive guidance materials. The supervisor has also developed a comprehensive sectoral risk assessment of sectors subject to its supervision, categorizing them into four risk categories:

• High
• Significant
• Medium
• Low

Risk assessments are updated annually or biannually depending on the level of risk, with those considered high-risk being reassessed every year. The DIR’s individual risk assessments consider various factors, including:

• EU risk assessment
• National risk assessment
• Sectoral risk assessment
• Calculation of an obligated entity’s (OE) risk score
• Information from other competent authorities
• Media coverage

AML/CFT Supervision

The DIR has three full-time employees dedicated to AML/CFT supervision, with additional divisions within the agency trained to assist as needed. The supervisor has also developed a surveillance plan and strategy in collaboration with other domestic authorities.

Money Laundering Investigations

Iceland’s priority on money laundering investigations has led to a significant increase in ML cases from 2016 to 2018 (511%). This surge is attributed to increased focus, resources, and training for investigators. The number of investigators/specialists investigating ML and predicate offenses has also risen by 8% since 2017.

The high-quality investigations have led to nearly all prosecutions resulting in convictions, demonstrating the effectiveness of Iceland’s AML/CFT efforts.

Ongoing Monitoring

The DIR continues to monitor DNFBPs’ compliance with AML/CFT requirements, conducting regular on-site and off-site inspections. The supervisor is committed to updating risk assessments regularly and providing guidance materials to obligated entities.

Conclusion

As the agency continues to refine its risk-based approach, it remains poised to ensure a robust AML/CFT framework in Iceland.