Iceland - fatf-gafi.org

1 April 2018 Anti-money laundering and counter-terrorist financing measuresIcelandAnti-money laundering and counter-terrorist financing measuresIcelandMutual Evaluation Report The Financial Action Task Force (F ATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CTF) standard. For more information about the FATF, please visit the website: This document and/or any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

2 This assessment was adopted by the FATF at its February 2018 Plenary meeting. Citing reference: 2018 FATF. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue Andr Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: FATF (2018), Anti-money laundering and counter-terrorist financing measures - Iceland , Fourth Round Mutual Evaluation Report, FATF, Paris Anti-money laundering and counter-terrorist financing measures in Iceland 2018 Table of contents Executive Summary .. 3 Key Findings .. 3 Risks and General Situation .. 5 Overall Level of Effectiveness and Technical Compliance .. 5 Priority Actions .. 9 Effectiveness & Technical Compliance Ratings.)

3 11 Mutual Evaluation Report .. 13 CHAPTER 1. ML/TF RISKS AND CONTEXT .. 15 ML/TF Risks and Scoping of Higher-Risk Issues .. 16 Materiality .. 20 Structural Elements .. 21 Background and other Contextual Factors .. 22 CHAPTER 2. NATIONAL AML/CFT POLICIES AND CO-ORDINATION .. 33 Key Findings and Recommended Actions .. 33 Immediate Outcome 1 (Risk, Policy and Co-ordination) .. 34 CHAPTER 3. LEGAL SYSTEM AND OPERATIONAL ISSUES .. 41 Key Findings and Recommended Actions .. 41 Immediate Outcome 6 (Financial intelligence ML/TF) .. 44 Immediate Outcome 7 (ML investigation and prosecution) .. 50 Immediate Outcome 8 (Confiscation) .. 60 CHAPTER 4. TERRORIST FINANCING AND FINANCING OF PROLIFERATION .. 67 Key Findings and Recommended Actions .. 67 Immediate Outcome 9 (TF investigation and prosecution) .. 69 Immediate Outcome 10 (TF preventive measures and financial sanctions).

4 72 Immediate Outcome 11 (PF financial sanctions) .. 75 CHAPTER 5. PREVENTIVE MEASURES .. 79 Key Findings and Recommended Actions .. 79 Immediate Outcome 4 (Preventive Measures) .. 80 CHAPTER 6. SUPERVISION .. 91 Key Findings and Recommended Actions .. 91 Immediate Outcome 3 (Supervision) .. 93 CHAPTER 7. LEGAL PERSONS AND ARRANGEMENTS .. 107 Key Findings and Recommended Actions .. 107 Immediate Outcome 5 (Legal Persons and Arrangements) .. 108 2 Anti-money laundering and counter-terrorist financing measures in Iceland 2018 CHAPTER 8. INTERNATIONAL CO-OPERATION .. 113 Key Findings and Recommended Actions .. 113 Immediate Outcome 2 (International Co-operation) .. 114 TECHNICAL COMPLIANCE ANNEX- .. 121 Recommendation 1 Assessing risks and applying a risk-based approach .. 121 Recommendation 2 National co-operation and co-ordination.

5 123 Recommendation 3 - Money laundering offence .. 123 Recommendation 4 Confiscation and provisional measures .. 125 Recommendation 5 Terrorist financing offence .. 126 Recommendation 6 Targeted financial sanctions related to terrorism and terrorist financing .. 128 Recommendation 7 Targeted financial sanctions related to proliferation .. 131 Recommendation 8 Non-profit organisations .. 132 Recommendation 9 Financial institution secrecy laws .. 135 Recommendation 10 Customer Due Diligence .. 137 Recommendation 11 Record-keeping .. 142 Recommendation 12 Politically Exposed Persons (PEP) .. 143 Recommendation 13 Correspondent Banking .. 144 Recommendation 14 Money or value transfer services (MVTS) .. 145 Recommendation 15 New technologies .. 146 Recommendation 16 Wire transfers .. 147 Recommendation 17 Reliance on third parties.

6 150 Recommendation 18 Internal controls, foreign branches and subsidiaries .. 151 Recommendation 19 Higher risk countries .. 152 Recommendation 20 Reporting of suspicious transactions .. 153 Recommendation 21 Tipping-off and confidentiality .. 154 Recommendation 22 DNFBPs: Customer Due Diligence .. 155 Recommendation 23 DNFBPs: Other measures .. 157 Recommendation 24 Transparency and beneficial ownership of legal persons .. 158 Recommendation 25 Transparency and beneficial ownership of legal arrangements .. 163 Recommendation 26 Regulation and supervision of financial institutions .. 164 Recommendation 27 Power of supervisors .. 167 Recommendation 28 Regulation and supervision of DNFBPs .. 169 Recommendation 29 Financial intelligence units .. 171 Recommendation 30 Responsibilities of law enforcement and investigative authorities.

7 172 Recommendation 31 Powers of law enforcement and investigative authorities .. 173 Recommendation 32 Cash couriers .. 174 Recommendation 33 - 176 Recommendation 34 Guidance and feedback .. 177 Recommendation 35 Sanctions .. 178 Recommendation 36 International instruments .. 179 Recommendation 37 Mutual legal assistance .. 180 Recommendation 38 Mutual legal assistance: freezing and confiscation .. 181 Recommendation 39 - Extradition .. 182 Recommendation 40 Other forms of international co-operation .. 183 Summary of Technical Compliance Key Deficiencies .. 187 Glossary of Acronyms .. 193 Anti-money laundering and counter-terrorist financing measures in Iceland 2018 Executive Summary 1. This report provides a summary of the AML/CFT measures in place in Iceland as at the date of the on-site visit from 28 June 2017 to 12 July 2017.

8 It analyses the level of compliance with the FATF 40 Recommendations and the level of effectiveness of Iceland s AML/CFT system, and provides recommendations on how the system could be strengthened. Key Findings Iceland has taken initial steps to understand its ML/TF risks, with the completion of its first national risk assessment (NRA) in January 2017. Nevertheless, this assessment appears to be based on assumptions or a theoretical understanding of general ML/TF risks rather than information on factual ML/TF vulnerabilities and threats specific to Iceland . Similarly, there is limited evidence that this national assessment was coordinated with previous targeted risk assessments conducted by the National Police Commissioner. Co-ordination in the context of AML/CFT is relatively recent and largely limited to preparation of the NRA.

9 Although co-ordination has been discussed and may occur informally and on an ad hoc basis, there is not yet an overarching strategy or functioning mechanism to ensure domestic co-ordination at the ministerial level or among competent authorities. This lack of co-ordination negatively affects Iceland s entire AML/CFT regime. Iceland has a good legal framework for investigation and prosecution of ML and investigative and prosecutorial authorities have developed expertise in investigating financial crimes following the 2008 bank crisis. Financial investigations are conducted in many cases and multidisciplinary teams are formed to investigate more complex cases. However, ML has not been a priority for Icelandic authorities. The lack of resources allocated to identifying, investigating and prosecuting ML results in a lower level of effectiveness in pursuing ML.

10 There is evidence that financial intelligence is being used to some extent to successfully develop and prosecute major cases related to tax evasion, drug smuggling, and to a lesser extent ML/TF. Feedback from prosecutors and law enforcement authorities (LEAs) also suggests that the quality of financial intelligence has improved since 2015. Nevertheless, there are several impediments to the effective use of financial intelligence more generally, including (i) limited STR filing outside of the main commercial banks and payment institutions and (ii) lack of information sharing among competent authorities in relation to cross-border movement of currency and assets, Anti-money laundering and counter-terrorist financing measures in Iceland 2018 4 EXECUTIVE SUMMARY information on NPOs and beneficial ownership information.