Iceland’s Economic Crime Crisis: A Call for Regulatory Reform and Improved Enforcement

In the aftermath of Iceland’s devastating economic crisis, triggered by a series of bank collapses, the suspicion of financial criminality has mounted. This article explores the development of Iceland’s business environment, recent economic crime trends, and the role and effectiveness of regulatory agencies in the Nordic country.

The Economic Downturn and the Role of Financial Crimes

The Icelandic economy, hard hit by the global economic recession, is currently in a severe crisis following the collapse of banking empires Glitnir, Kaupthing, and Landsbanki. The result of a rollercoaster ride of deregulation and greed, the nation is left in the rubble, seeking answers.

Corporate Crimes in Iceland: Rapid Growth and a Profit-Oriented Culture

• In a previous study, Snorri Orn Arnason identified the rapid growth of Iceland’s business environment as a significant factor for corporate crime risks.
• Findings supported Sutherlands’ theory suggesting that pressure from within organizations and favorable definitions of behavior, motivated by an anomic condition with unclear guidelines, can lead individuals to breach the law.

Probing the Icelandic Business Environment

• This article intends to explore the development of Iceland’s business environment and recent trends in economic crime.
• Interviews were conducted with seven current and former employees of regulatory authorities in Iceland and the Economic Crime Division of the National Commissioner of the Icelandic Police.

An Open Market Economy: Changing Times and New Challenges

• Until the late 1990s, the Icelandic government controlled the financial system directly with politics and business industries intertwined.
• The introduction of competition laws in 1993 marked a turning point, with the formation of The Competition Authority, lifting of restrictions on interstate commerce, and financial markets.

The Privatization of Banks: Changing the Game

• The privatization of banks in 2002, an essential milestone in the liberalization of the financial market, led to unprecedented growth.
• However, this freedom came with its challenges, leading to weak regulatory oversight and a lack of communication and cooperation between different authorities.

Confronting System Failures: Reforming Economic Crime Prevention

• Following the collapse of banking empires, the Icelandic nation is faced with the daunting task of assessing the failures of their regulatory system and addressing systemic issues that helped perpetuate economic crimes.
• The article concludes by proposing crime-preventive measures and improvements to the regulatory system, taking inspiration from successful programs in other Scandinavian countries.