Sweden's Blind Spot Exposed

Sweden, known for its strong democratic institutions and robust financial system, has a surprising blind spot when it comes to foundation registration. Unfortunately, some foundations operating in the country are not obligated to register, leaving authorities vulnerable to financial crimes such as money laundering and terrorist financing.

Misuse of Legal Persons

The Swedish Financial Intelligence Unit (FIU) has identified the misuse of legal persons as a significant vulnerability in the country’s anti-money laundering and counter-terrorist financing efforts. Criminals often use false identities, corporate structures, and straw persons to conceal their activities, making it difficult for authorities to track and prevent illicit transactions.

Limitations and Challenges

While some beneficial ownership information can be obtained from company registers or financial institutions, there are limitations, particularly when dealing with foreign legal persons. The lack of a national mechanism for ensuring adequate cooperation and coordination between ministries and operational agencies is also a major concern.

FATF Assessment

The Financial Action Task Force (FATF) has highlighted several areas where Sweden needs to improve its anti-money laundering and counter-terrorist financing measures, including:

Introducing legal powers for targeted financial sanctions
Establishing a central register of beneficial ownership
Conducting a full risk assessment of the misuse of all legal persons
Developing measures to mitigate the use of straw-men and corporate structures

Urgent Action Required

The Swedish authorities have been urged to prioritize international cooperation, particularly in tracing money abroad and collaborating with foreign counterparts. The country’s Financial Supervisory Authority (FSA) has also been called upon to improve its understanding of risks in specific sectors and develop a risk-based approach towards supervising reporting entities.

Conclusion

Sweden’s failure to register some foundations operating in the country has created a blind spot that must be addressed urgently. The authorities must take immediate action to plug this loophole and ensure that all legal persons are subject to effective supervision and regulation. Only then can Sweden effectively prevent financial crimes and maintain its reputation as a responsible member of the international community.

Key Recommendations

Introduce legislation requiring all foundations to register
Establish a central register of beneficial ownership
Conduct a full risk assessment of the misuse of all legal persons
Develop measures to mitigate the use of straw-men and corporate structures
Prioritize international cooperation in tracing money abroad and collaborating with foreign counterparts
Improve understanding of risks in specific sectors and develop a risk-based approach towards supervising reporting entities