Swedish Financial Regulator Proposes Widening Scope of Financial Institution Registration to Combat Money Laundering and Terrorist Financing

Sweden’s Financial Supervisory Authority (SFSA) is considering expanding the scope of financial institution registration under the Swedish Currency Exchange and Other Financial Activities Act (CEFA Act) to strengthen the fight against money laundering and terrorist financing. This article outlines the current regulations and the proposed changes.

Current Regulations

The CEFA Act currently requires registration for the following financial activities, conducted on a professional basis:

• Extending or intermediating loans
• Providing financing through factoring or leasing

Regarding the registration requirement, the following entities are exempt:

• Banks
• Insurance companies
• Securities firms
• Other entities already regulated under different financial legislation

Registered financial institutions are obligated to follow stringent anti-money laundering (AML) legislation, including risk assessments, customer awareness measures, transaction monitoring, and suspicious activity reporting. The Swedish Financial Supervision Authority (SFSA) oversees these institutions, ensuring they comply with AML regulations and intervenes when necessary.

Proposed Amendments: Key Aspects

The proposed amendments include requiring financial institutions to register even if the regulated activities are not their primary business. This change aims to address demarcation difficulties and simplify the decision-making process for entities planning to carry out such activities.

Exemptions

The draft proposal alleviates concerns regarding ancillary services, such as financing in connection with the provision of services or goods. These services are not covered by the registration obligation, maintaining exceptions for credit institutions and consumer credit institutions.

Additional Provisions

Moreover, the amendments propose:

1. Financial institutions must report changes to their registration application details.
2. An extended appropriateness requirement for financial institutions’ owners with qualifying holdings of at least 10% in share capital or votes or material influence.

The SFSA’s role in ensuring AML compliance will be explicitly stated in this proposal.

Additional Context

These amendments would primarily affect currency traders but also apply to individuals conducting other financial activities. Small businesses may be significantly impacted due to the increased administrative burden and costs.

If the proposed amendments are adopted, all natural or legal persons conducting relevant financial activities, regardless of business size or core operations, would be obligated to register as financial institutions with SFSA. The stated objective is to expand the reach of AML legislation.

The proposal aims to enhance the efficiency and appropriateness of supervision by increasing transparency and accountability for currency traders and other entities engaging in financial activities. Transitional provisions allow for existing businesses not currently subject to the rules to continue their operations until January 1, 2025.

SFSA’s Perspective

The Swedish Financial Supervision Authority supports the proposed amendments, believing they will facilitate efficient and appropriate supervision of currency traders and other financial institutions. However, concerns remain regarding the extended appropriateness requirement and the potential impact on the competitiveness of registered financial institutions compared to new entrants.

Uncertainties and Questions

The implementation of these amendments and their potential impact on the parties involved remain unclear at this time. For further information on this topic, please contact Andreas Malmberg at Wigge & Partners by phone (+46(0)72 062 60 86) or email ([email protected]). The Wigge & Partners website is accessible at www.wiggepartners.se.