Iceland’s Banking Crisis Exposes Widespread Fraud: UK Authorities Play Key Role in Investigation
In a significant development, leading Icelandic prosecutors met with members of the Serious Fraud Office (SFO) in London to discuss the investigation into widespread and substantial frauds exposed in Iceland’s dramatic banking meltdown 11 months ago.
A Growing Web of Investigations
The meeting underscored the significant British dimension in the ongoing probe. Special prosecutor Olafur Hauksson, who is leading a specialist unit set up to investigate financial crimes emerging from last October’s banking collapse, hinted that a large number of cases may lead back to the UK. When asked about individual cases, Hauksson refused to comment, but emphasized “a lot of roads lead to the UK”.
The Investigation So Far
The investigation has already resulted in 35 cases under scrutiny and is expected to grow rapidly to between 60 and 70, covering areas such as:
- Loan fraud
- Market manipulation
- Document fraud
- Embezzlement
- Bank fraud
Critics of the Icelandic banking system have long pointed to an extraordinary boom over the last decade, which saw balance sheet assets at three major banks balloon to nine times Iceland’s GDP. The large loan exposure of these banks to individuals, some of whom held interests in the ownership of the banks, has raised concerns.
Complexities of the Investigation
A mix of light loan collateral and complex corporate cross-holdings made it difficult for investigators to determine true asset values in many cases. Hauksson confirmed that criminal investigators are focusing on all these issues, while Eva Joly, a veteran French fraud prosecutor, emphasized “it is just not an excuse to say everyone was hiding debt in tax havens or falsely inflating assets”.
Collaboration Between Authorities
An SFO spokesman stated that director Richard Alderman is keen to see how the SFO and Icelandic authorities can work together efficiently, sharing information. Further meetings and exchanges are planned, including a visit by SFO investigative and intelligence specialists to Reykjavik.
Next Steps
The investigation is expected to continue growing, with a focus on uncovering the truth behind Iceland’s banking crisis. As the probe unfolds, it remains to be seen what revelations will emerge about the UK’s involvement in the scandal. One thing is clear: the collaboration between authorities will play a crucial role in bringing those responsible for fraud to justice.