Iceland’s Financial Crime Risk Assessment Methods Under Scrutiny

A recent report by the International Consortium of Investigative Journalists (ICIJ) has shed light on Iceland’s methods for assessing financial crime risk, highlighting both strengths and weaknesses in its approach.

FATF Recommendations: A Global Standard

According to the Financial Action Task Force (FATF) Recommendations, countries are required to implement a risk-based approach to assessing financial crimes. Unfortunately, Iceland has been found to be “partially compliant” with this requirement, indicating that while it has made some progress, there is still room for improvement.

Assessment of Terrorist Financing Risks: A Strength

One area where Iceland has scored well is in its assessment of terrorist financing risks. The country has implemented targeted financial sanctions related to terrorism and terrorist financing, and its financial intelligence unit provides effective support to the government’s efforts to combat these threats.

Weaknesses in Implementing Measures Against Money Laundering and Terrorist Financing

However, Iceland has been criticized for its lack of progress in implementing measures to prevent money laundering and terrorist financing through the misuse of new technologies such as digital currencies. Additionally, the country has been found to be “non-compliant” with requirements related to:

• Regulation and supervision of financial institutions
  • Powers of supervisors
  • Regulation and supervision of DNFBPs (Designated Non-Financial Businesses and Professions)
• Targeting higher-risk countries

National Cooperation and Coordination: A Cause for Concern

Iceland’s record on national cooperation and coordination has also been called into question, with some critics arguing that there is a lack of clarity around who is responsible for what in the country’s efforts to combat financial crime.

Implementation of Confiscation and Provisional Measures: Challenges Remain

While Iceland’s implementation of confiscation and provisional measures has been found to be “largely compliant”, it still faces challenges in this area, particularly in terms of its ability to effectively freeze and confiscate assets linked to criminal activity.

Areas for Improvement

The report highlights several areas where Iceland needs to improve, including:

• Customer due diligence practices
• Record keeping systems
• Approach to targeting higher-risk countries

Additionally, the report calls for greater transparency around the country’s beneficial ownership regime and its regulation and supervision of financial institutions.

Conclusion

While Iceland has made some progress in implementing measures to combat financial crime, there is still much work to be done if it is to meet its international obligations and protect its financial system from the risks posed by money laundering and terrorist financing.