Iceland’s Fight Against Financial Crime: Commitment Lacking in Key Areas

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Reykjavik, Iceland - Despite showing a high level of commitment to tracing and seizing the proceeds of crimes, Icelandic law enforcement authorities (LEAs) are falling short in key areas.

Tracking Assets

Iceland has provided examples of successful cases where assets have been frozen or seized and confiscated. However, the country does not maintain complete statistics on assets recovered and confiscated, making it difficult to assess its effectiveness in this area.

Coordination and Awareness

There appears to be a lack of coordination and awareness among authorities regarding the increased risk of cross-border transportation or movements of currency.

Terrorist Financing

The report highlights that Iceland has no criminal investigations or prosecutions related to terrorist financing (TF). This may be due to the country’s size, culture, geographical location, and other circumstances. However, intelligence was shared with other countries, particularly the Nordic nations.

Targeted Financial Sanctions

Iceland amended its legal framework in 2016 to implement targeted financial sanctions (TFS) in response to UN Security Council Resolution 1267. However, in practice, it is unclear whether TFS are implemented without delay due to a lack of clarity among competent authorities and the private sector on when the freezing obligation enters effect.

Implementation Mechanisms

The report notes that Iceland has the legal basis to implement UNSCR targeted financial sanctions regarding financing proliferation of weapons of mass destruction. However, the mechanism for implementing UNSCRs related to the Democratic People’s Republic of Korea (DPRK) allows for sanctions to take immediate effect upon enactment by the UN Security Council, while those related to Iran are implemented through the EU legal framework.

Supervision and Compliance

In addition, supervisory authorities do not monitor or ensure compliance with TFS for TF and proliferation financing (PF), other than issuing an alert following each update to the government’s targeted financial sanctions list. There is a very low level of awareness among designated non-financial businesses and professions (DNFBPs) and certain financial institutions (FIs) of their responsibilities related to TFS for PF, and to a lesser extent for TF.

Preventive Measures

The report highlights that preventive measures, such as customer due diligence (CDD) and record-keeping requirements, are reasonably understood by large commercial banks but not implemented effectively by other FIs and DNFBPs. Technical deficiencies in relation to preventative measures have an impact on effectiveness, particularly in relation to politically exposed persons (PEP) and suspicious transaction reports (STRs).

Supervision Framework

The report notes that Iceland’s supervision framework is comprehensive, but inspections and supervisory measures are not conducted using a risk-based approach.

Conclusion

The lack of coordination, awareness, and effective implementation of financial regulations in Iceland highlights the need for greater attention to these issues by authorities.