Anti-money laundering and combating the financing of terrorism and proliferation financing
The Central Bank of Iceland is responsible for supervising compliance with anti-money laundering and combating the financing of terrorism and proliferation financing requirements. Entities engaged in activities that may be used for money laundering, terrorist financing or proliferation financing are required to identify and verify the identity of their customers and understand the nature of their business activities. They are also required to report to competent authorities if they suspect, or become aware of money laundering, terrorist financing or proliferation financing, or other related criminal activity.Definitions
Money laundering is any kind of receipt, handling or transfer of gains (profits or assets) obtained by illicit means, whether in violation of the Penal Code or special laws.
Money laundering is a key prerequisite for organised crime to thrive within society and across borders. Money laundering has a negative impact on society's financial system, hampers free competition, and hinders the proper functioning of market forces. This is why it is vital for the state to have reliable and visible supervision and to ensure that obliged entities have an appropriate supervision system in their operations. This discourages criminals from preying on the financial system of the relevant state.
The financing of terrorism is the conduct of raising funds for the purpose or with the knowledge that the money is to be used to commit a crime that is punishable under the provisions of Article 100 (a-c) of the General Penal Code no. 19/1940, i.e. commit terrorism, support a party who commits such acts or encourage them. The objective of a terrorist or group of terrorists is to incite, support or carry out acts of terrorism and in many cases they do so with funding.
Proliferation financing is is the provision or collection of funds, by any means, directly or indirectly, with the intention or knowledge that such funds will be used, in whole or in part, for the development, manufacture, acquisition, stockpiling, transfer, brokering, trading in, transport, possession or use of weapons of mass destruction in violation of international sanctions, cf. Act No. 68/2023 on the Implementation of International Sanctions and the Freezing of Funds.
Anti-Money Laundering and Terrorist Financing Act
In Iceland, Act No. 140/2018 (in Icelandic) on measures against Money Laundering and Terrorist Financing is in force.
The purpose of this Act is to prevent money laundering and terrorist financing by imposing an obligation on parties engaging in activities, which could be used for money laundering or terrorist financing, to know the identity of their customers and their activities and to notify the competent authorities if they have a suspicion or knowledge of such illegal activities.
More detailed information on the legislation, regulations and guidelines relating to anti-money laundering measures is available on the page Legislation, regulations and guidelines.
The role of the Central Bank of Iceland
The role of the Central Bank of Iceland (CBI) is to supervise these parties and ensure that they comply with the provisions of the above-mentioned laws. The CBI has the authority to impose penalties if it becomes apparent that the provisions of the Act or regulations on the basis thereof are not enforced, e.g. through administrative fines, dismissal of the board and managing director, revocation of operating licences and the application of sanctions.
Obligations of obliged entities under Act No. 140/2018
Obliged entities are required to implement preventive and risk-based measures to prevent their activities from being misused for money laundering, terrorist financing and proliferation financing. These measures include, among other things, conducting a business-wide risk assessment, establishing policies, controls and procedures, providing appropriate staff training, carrying out customer due diligence, risk assessing their customers, conducting ongoing monitoring of business relationships, and investigating and reporting suspicions of money laundering, terrorist financing and proliferation financing.
A visual overview of the obligations of obliged entities is available on the page AML Measures of obliged entities.