Iceland is not considered a regional financial center. Money laundering in Iceland is related primarily to narcotics smuggling and trading and is not considered a major problem. Criminal proceeds tend to derive from domestic organizations with some linkages to foreign groups. In 2011, investigators continued to look into the 2008 collapse of Iceland‘s financial system and to re-examine allegations that its banks may have been involved in money laundering. The collapse of the Icelandic banks continues to affect the activities of the Financial Intelligence Unit (FIU), not least in connection with foreign interaction and information exchange with its counterparts abroad due to investigation into cases relating to the collapse.

KNOW-YOUR-CUSTOMER (KYC) RULES:

Enhanced due diligence procedures for PEPs:

A PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

• Foreign PEP: YES
• Domestic PEP: NO

Iceland – KYC covered entities

The following is a list of Know Your Customer entities covered by Icelandic Law:

• Banks
• Currency exchanges
• Attorneys
• Auditors
• Real estate dealers
• Trust, safekeeping, and company service providers
• Life insurance companies and pension funds
• Insurance brokers and intermediaries
• Securities brokers
• Dealers in vessels or any high-value items

Iceland – Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 414 in 2010

Number of CTRs received and time frame: Not applicable

The following is a list of STR covered entities covered by Icelandic Law:

• Banks
• Currency exchanges
• Attorneys
• Auditors
• Real estate dealers
• Trust, safekeeping, and company service providers
• Life insurance companies and pension funds
• Insurance brokers and intermediaries
• Securities brokers
• Dealers in vessels or any high-value items

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: One in 2010
Convictions: One in 2010

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Iceland (GOI) has improved its anti-money laundering/counter-terrorist financing (AML/CFT) system through the enforcement of existing laws, and review and implementation of international standards. A domestic mechanism should be implemented to allow designation of terrorists at a national level as well as to give effect to designations and asset freeze requests from other countries. Iceland does have a legal framework that allows authorities to freeze terrorist assets in a timely manner; however, all orders to freeze assets must have prior judicial approval. The country does not have asset sharing capabilities. The GOI should continue to enhance its AML/CFT program, as appropriate.

The Economic Crime Unit at the National Commissioner of the Icelandic Police and the Office of the Special Prosecutor, which is responsible for investigating the banking collapse, merged on January 1, 2012. As a result of the merger, both the investigation and prosecution of cases that have been dealt with at the Police‘s Economic Crime Unit are now the responsibility of the Special Prosecutor. The National Commissioner of the Icelandic Police will only be involved in receiving announcements and tip offs based on money laundering and terrorist financing laws – not in investigating potential legal violations. In addition, a committee will be appointed to review the organization and arrangement of investigations and prosecutions, and make suggestions for future improvements. Several new positions are being moved and established as a result of the merger.

The authorities’ collaborative committee on measures against money laundering continues to educate reporting parties, including those who have not received education or training regarding measures against money laundering. According to the FIU, considerable achievements have been made in this area and most reporting parties should now be able to comprehend the importance of such measures in their activities. A shortage of reports from non-financial institutions, however, indicates that more still needs to be done.