Lack of Coordination Hampering Iceland’s Fight Against Money Laundering and Terrorist Financing

Reykjavik, Iceland - Despite having a robust legal and institutional framework in place, Iceland’s efforts to combat money laundering (ML) and terrorist financing (TF) are being hindered by a lack of coordination among authorities, the private sector, and with international organizations.

Coordination Challenges

According to a recent report, Icelandic authorities have only recently begun to coordinate their efforts in the context of anti-money laundering and counter-terrorist financing (AML/CFT). However, this coordination is largely limited to preparing a National Money Laundering and Terrorist Financing Risk Assessment. There is no overarching strategy or mechanism to ensure domestic coordination at the ministerial level or among competent authorities.

Consequences for Private Sector

As a result, the private sector has reported receiving very limited guidance from authorities on ML/TF threats, vulnerabilities, and risks in Iceland. Furthermore, there appears to be a lack of consideration of TF vulnerabilities by law enforcement agencies (LEAs), which may hamper Iceland’s ability to effectively combat TF.

Limitations within Law Enforcement

The report highlights that while LEAs show a high level of commitment to tracing and seizing the proceeds of crime, both domestically and abroad, there is no coordination or awareness among authorities of the increased risk of cross-border transportation or movements of currency. Additionally, there is limited financial investigative expertise allocated to TF matters within the Icelandic police, which may also hinder efforts to combat TF.

Private Sector Challenges

The lack of coordination and awareness is also evident in the private sector, where many financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs) do not assess the ML/TF risk to which they are exposed. Many DNFBPs and FIs appear to have a basic understanding of customer due diligence (CDD) requirements, but there are technical deficiencies in relation to preventative measures, particularly with regards to Politically Exposed Persons (PEPs) and suspicious transaction reports (STRs).

Recommendations for Improvement

The report concludes that while Iceland has made progress in implementing targeted financial sanctions, there is still much work to be done to ensure effective implementation and enforcement. The lack of coordination and awareness among authorities and the private sector is a significant obstacle to overcoming these challenges.

• Immediate action is needed from Icelandic authorities to address these issues and strengthen their efforts to combat ML/TF.
• A comprehensive national strategy for combating ML/TF should be developed, with clear goals and objectives.
• Authorities should prioritize improving coordination and awareness among law enforcement agencies, the private sector, and international organizations.
• The private sector should be encouraged to assess its ML/TF risk exposure and implement effective preventative measures.