Sweden’s Financial Institutions Failing to Effectively Report Suspicious Transactions

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A recent review has raised concerns over the effectiveness of Sweden’s system for reporting suspicious transactions (STRs) by financial institutions. Despite laws requiring institutions to report any circumstances that may be indicative of money laundering or terrorist financing, limitations on the terrorist financing offense have led to a lackluster reporting obligation.

Reporting Suspicious Transactions

The report notes that while some financial institutions are required to file STRs, many do so without providing sufficient information about what makes the transactions suspicious. This lack of transparency hampers efforts to combat money laundering and terrorist financing.

Recommendations

• Continue to work with the financial sector to improve the quality and quantity of reports filed.
• Identify red flag indicators and provide guidance on what constitutes a helpful and informative STR.

Internal Procedures and Policies

Sweden’s financial institutions are required to establish internal procedures and policies to prevent money laundering and terrorist financing. These procedures include:

Customer Due Diligence, Detection of Unusual Transactions, and Reporting Obligations

However, the report notes that some financial institutions have failed to designate an Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) compliance officer, as required by law. Furthermore, there is a lack of adequate screening procedures for employees.

Recommendations

• Increase focus on AML/CFT supervision, particularly for smaller financial institutions and those deemed high-risk.

Supervision and Enforcement

Finansinspektionen is responsible for licensing and supervising most financial institutions in Sweden. The authority conducts on-site inspections to ensure compliance with AML/CFT regulations. However, the report notes that the number of inspections focused solely on AML/CFT remains low.

Recommendations

• Increase focus on AML/CFT supervision, particularly for smaller financial institutions and those deemed high-risk.

Designated Non-Financial Businesses and Professions

Sweden’s AML Act requires certain non-financial businesses and professions (DNFBPs) to implement AML measures. However, the report notes that there are concerns over the scope of the Act, which does not cover company service providers or accountants who are not auditors.

Recommendations

• Bring DNFBPs under the scope of the CFT Act and develop adequate AML/CFT regulations for these sectors.

Conclusion

Sweden’s financial institutions must do more to effectively report suspicious transactions. The country’s authorities should work closely with the financial sector to improve reporting quality and quantity, while also increasing supervision and enforcement efforts. Additionally, Sweden should consider expanding its AML/CFT regulations to cover more businesses and professions.