Iceland Establishes New Supervisory Body for DNFBPs, Enhances AML/CTF Measures
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Strengthening Supervision Over Designated Non-Financial Businesses and Professions
The Directorate of Internal Revenue (DIR) in Iceland has made significant strides in strengthening its supervision over Designated Non-Financial Businesses and Professions (DNFBPs), including lawyers and the gaming sector, since its establishment in 2018.
Risk-Based Approach
Prior to implementing new requirements, the FSA provided extensive guidance to obliged entities on the expected measures. The DIR has taken a proactive approach to deepening its understanding of risks within the sectors it supervises, visiting sister authorities in Scandinavia, cooperating with domestic authorities, and preparing extensive guidance materials for DNFBPs.
Sectoral Risk Assessment
As part of its risk-based approach, the DIR has developed a comprehensive sectoral risk assessment and individual risk assessments for most obliged entities. The sectors are categorized into four risk levels:
- High
- Significant
- Medium
- Low
For high-risk sectors, the DIR has concluded assessing risks for obliged entities until updates are required.
Individual Risk Assessments
The DIR’s individual risk assessments consider various factors, including:
- EU risk assessments
- National risk assessments
- Sectoral risk assessments
- Information from other competent authorities
The agency is currently working on automating its risk assessment process using an IT tool.
Frequency of Updates
According to the DIR’s procedures, risk assessments for high-risk and significant-risk obliged entities will be updated annually or upon changes that may affect their risk scores. Medium-risk obligations will have biannual updates, while low-risk sectors will receive updates every three years.
Inspections
The agency has conducted numerous on-site and off-site inspections since the requirement to conduct a risk assessment took effect in June 2019. As of October 2019, the DIR had carried out:
- 13 on-site inspections
- 38 traditional off-site inspections
- 60 topic-specific off-site inspections
Money Laundering Investigations and Prosecutions
Iceland has prioritized money laundering investigations since 2017, resulting in a significant increase in ML investigations from 2016 to 2018. The number of investigators/specialists investigating ML and the underlying predicate offense has also increased by 8% since 2017.
Convictions
According to statistics, prosecution almost always leads to conviction, demonstrating high-quality investigations. The DIR’s efforts have contributed to a significant rise in convictions, with the number of ML investigations increasing by 511% from 2016 to 2018.
Conclusion
The establishment of the DIR and its enhanced AML/CTF measures demonstrate Iceland’s commitment to combating money laundering and terrorist financing. As part of its ongoing monitoring, the agency will continue to assess risks, conduct inspections, and work towards strengthening its supervision over DNFBPs.