Financial Crime World

Iceland Cracks Down on Money Laundering and Terrorist Financing: An Overview of the Central Bank’s Role and the New Legislation

Iceland, known for its transparent economy, is taking serious steps to combat money laundering and terrorist financing. These illicit activities pose significant threats to the stability and integrity of financial systems, both domestically and internationally. In response, the Icelandic government and the Central Bank of Iceland (CBI) have strengthened their efforts to prevent and combat these crimes.

Money Laundering: A Growing Concern

  • Definition: Money laundering is the process of concealing or disguising the origins of illegally-gained proceeds and integrating them into the financial system.
  • Negative Consequences: Money laundering enables organized crime, damaging the financial system, hindering free competition, and disrupting market forces.
  • Importance of Supervision: Governments must maintain visible supervision and ensure that obligated entities establish effective systems against money laundering.

Terrorist Financing: A Deadly Threat

  • Definition: Terrorist financing refers to the provision of financial resources for terrorist activities or criminal organizations.
  • Objective of Terrorists: Terrorists aim to commit, support, or incite acts of terrorism, and they rely on funding to carry out their plans.

Iceland’s Response: Act No. 140/2018

To address these challenges, Iceland enacted Act No. 140/2018 on Measures Against Money Laundering and Terrorist Financing. The Act imposes obligations on parties engaging in activities that can be exploited for money laundering or terrorist financing:

  1. Customer Identification: Identify customers and keep records.
  2. Transaction Monitoring: Monitor transactions for suspicious activity.
  3. Suspicious Activity Reporting: Report any suspicion or knowledge of unlawful activities to competent authorities.

The Central Bank of Iceland’s Role

  • Supervision: The CBI supervises obligated entities to ensure adherence to legislation.
  • Enforcement: The CBI can impose penalties, including administrative fines, dismissals, revocation of licenses, and application of sanctions.

Conclusion

By implementing stringent regulations and effective supervision, Iceland aims to eliminate money laundering and terrorist financing activities within its borders. These measures underscore Iceland’s commitment to ensuring the safety and integrity of its financial system while protecting its citizens and international partners from their detrimental consequences.