Iceland’s Fight Against Financial Crimes: Efforts Fall Short
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Reykjavik, Iceland - A recent report by the International Cooperation Review Team has revealed that Icelandic law enforcement authorities have shown a high level of commitment to tracing and seizing the proceeds of crimes both domestically and abroad. However, despite some notable successes, the country’s efforts in this area are hindered by a lack of coordination among authorities and limited awareness of the increased risk of cross-border financial transactions.
Combating Terrorist Financing and Proliferation Financing
The report highlights Iceland’s struggles in combating terrorist financing (TF) and proliferation financing (PF). While there have been no criminal investigations or prosecutions related to TF in the country, Icelandic authorities have demonstrated effective cooperation with other nations’ security services. However, a lack of consideration for TF vulnerabilities by law enforcement agencies and limited financial investigative expertise may hamper Iceland’s ability to tackle these issues effectively.
Targeted Financial Sanctions
Iceland has amended its legal framework to implement targeted financial sanctions (TFS) in response to United Nations Security Council resolutions, but the implementation process is unclear among authorities. The private sector also lacks clarity on when the freezing obligation enters into effect.
Supervision and Compliance
The report notes that supervisory authorities do not monitor or ensure compliance with TFS for TF and PF, other than issuing alerts following updates to the government’s targeted financial sanctions list. Additionally, there is a 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 TF.
Preventive Measures
In terms of preventive measures, while some large commercial banks have a basic understanding of money laundering (ML) risks, their understanding is not based on structured risk assessments. Most DNFBPs and FIs do not assess ML/TF risks or demonstrate an understanding of these risks. The requirements for customer due diligence (CDD) and record-keeping are also reasonably understood by large commercial banks, but implementation among other FIs and DNFBPs is basic.
Recommendations
The report concludes that Iceland’s supervision framework is comprehensive, but inspections and supervisory measures are not conducted using a risk-based approach. Additionally, DNFBP supervisors have limited resources and expertise to effectively supervise these entities.
To improve its fight against financial crimes, the country must:
- Take a more proactive approach in combating financial crimes and implementing effective preventive measures
- Improve coordination among law enforcement agencies
- Increase awareness among DNFBPs and FIs of their responsibilities related to TFS
By addressing these shortcomings, Iceland can strengthen its efforts to combat financial crimes and protect its financial system.