Financial Crime World

Iceland’s Obligated Entities: A Comprehensive Guide to Financial Crime Risk Assessments

Amidst the global war on financial crime, Iceland’s legislative framework mandates that its obliged entities conduct thorough [money laundering and terrorist financing (ML/TF) risk assessments](bg-color:#f6f6f6; border:1px solid #ccc; padding:10px;). This comprehensive guide sheds light on the assessment process, as outlined in Act No. 140/2018.

The Assessment Process

The process begins with a business-wide assessment, where entities must identify potential ML/TF risks within their operations. These assessments aim to:

  • Identify significant vulnerabilities and threats
  • Specify methods to manage and mitigate risks

Both new and existing obliged entities in Iceland are required to perform risk assessments before introducing new products, services, or technologies. The assessment’s scope depends on the size, nature, and complexity of these entities’ activities.

To carry out a risk assessment, obliged entities need to document their methodologies for transparency. This documentation includes:

  • Identification of risk factors
  • Data source acquisition
  • Risk classification
  • Applied criteria

The approach for undertaking these assessments must be substantiated and updated regularly.

Essential Elements of a ML/TF Risk Assessment

The assessment process focuses on the following key elements:

1. Inherent Risk

An evaluation of the inherent potential for financial crimes within specific contexts.

2. Risk Classification

Assignment of individual risk factors into classes based on their potential impact on ML/TF risks.

3. Quality of Controls

The effectiveness of measures taken to mitigate risks.

4. Residual Risk

The risks remaining despite implemented controls.

European Banking Authority Guidelines

The European Banking Authority (EBA) has published guidelines on risk factors for obliged entities in the financial sector. These guidelines must be taken into account when preparing the risk assessment.

Resources for Further Information

For more in-depth information, examine the following resources:

  1. Regulation No. 545/2019 on risk assessment (Icelandic) - Lög Om Áthöfnun
  2. Risk assessment of the National Commissioner of the Police (Icelandic) - Strafráðslögmálsmunður Íslands, Áthöfnun um peningapóðun og hjálmarútlan
  3. EBA Risk Factors Guidelines - EBA Guidelines on Risk Factors for Obliged Entities
  4. Informative material of the steering group on measures against money laundering and terrorist financing (Icelandic) - Ritstjórnin um peningapóðun og hjálmarútlan
  5. Risk factors in the banking sector (Icelandic) - Áthöfnun um peningapóðun
  6. Risk factors in the securities and fund market (Icelandic) - Áthöfnunum við sjálfgefundna völuvesla og samfælla eignarfonds
  7. Risk factors in the life insurance market (Icelandic) - Áthöfnun um kjöldforsikunarmarkað
  8. Risk factors due to the issuance and handling of electronic money (Icelandic) - Áthöfnun um utgáfan efni af peninga og hjálmarútlan efnisa
  9. Risk factors related to money remittance (Icelandic) - Áthöfnun um austrulan peninga
  10. Risk factors in the provision of payment services (Icelandic) - Áthöfnun um að gjaldast á tjänstum peninga