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Iceland Takes Major Steps in Combating Money Laundering and Terrorist Financing

In a significant move, Iceland’s Financial Supervisory Authority (FSA) and Directorate of Internal Revenue (DIR) have implemented comprehensive risk assessments to combat money laundering and terrorist financing (ML/TF).

Enhanced Supervision

The FSA has developed a risk-based approach to supervision, assessing each entity’s exposure to ML/TF risks based on factors such as:

• Business model
• Customer types
• Distribution channels
• Products/services
• Geography

This approach considers internal controls, including: + Corporate governance + Risk assessment + Employee training + CDD (Customer Due Diligence) + STRs (Suspicious Transaction Reports) + PEP monitoring + TFS compliance + Record keeping

Sectoral Risk Assessment

The FSA has implemented a sectoral risk assessment of all obliged entities under its supervision, dividing them into four categories: * Low * Medium low * Medium high * High

These assessments are updated annually or when changes occur that may affect an entity’s risk score.

DIR’s Role

The DIR has established a new supervisor to oversee the entire DNFBP (Designated Non-Financial Businesses and Professions) sector, including law professionals and the gaming industry. This supervisor is strategically located within the Directorate of Internal Revenue, which also supervises: + Business registries + Beneficial ownership + Annual accounts + Tax control

The DIR conducts individual risk assessments for each obliged entity, considering factors such as: * Nature, scale, and complexity * Customer types * Distribution channels * Products/services + Geography

These assessments evaluate internal controls, including: + Corporate governance + Risk assessment + Employee training + CDD (Customer Due Diligence) + STRs (Suspicious Transaction Reports) + PEP monitoring + TFS compliance + Record keeping

On-Site and Off-Site Inspections

Since the requirement to conduct a risk assessment entered into force on June 1, 2019, the DIR has carried out: * 13 on-site inspections * 38 traditional off-site inspections * 60 topic-specific off-site inspections

Increased Focus on AML/CTF

Money laundering investigations have been a priority in Iceland since 2017, with a significant increase of 511% from 2016 to 2018. Prosecution rates are also high, with almost all cases resulting in conviction.

The increased focus on AML/CTF demonstrates Iceland’s commitment to combating financial crime and maintaining the integrity of its financial system.