Anti-money laundering and counter-terrorist financing measures financing counter-terrorist and laundering Anti-money Anti-money laundering and counter-terrorist financing measures Iceland Mutual Evaluation Report Iceland April 2018 The Financial Action Task Force (FATF) 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: www.fatf-gafi.org 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. This assessment was adopted by the FATF at its February 2018 Plenary meeting. Citing reference: FATF (2018), Anti-money laundering and counter-terrorist financing measures - Iceland, Fourth Round Mutual Evaluation Report, FATF, Paris http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-iceland-2018.html © 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 André Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: [email protected]). 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 ................................................................................ 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) ...................................... 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 Anti-money laundering and counter-terrorist financing measures in Iceland – 2018 2 │ 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 ...................................................... 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 ............................................................................. 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 ..................................