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The objective of financial supervision is to promote an efficient and secure financial market with the aim of reducing the risk of activities of regulated entities causing damage to the public and to promote confidence in the financial market.

In simple terms, money laundering is said to occur when money obtained from illicit activities is made to appear as legitimate money. The purpose of money laundering is to conceal the trail of ill-gotten funds so that criminals can use them for personal consumption or investment.

A regulated entity is a company or institution that has been issued with an operating licence by the Central Bank of Iceland and, where applicable, other public authorities to conduct activities in the financial market or which the Financial Supervisory Authority has been instructed to supervise by law.

The supervision of securities markets is part of the Central Bank's financial supervision and supervises trading in the securities market, disclosure by issuers, and the activities of stock exchanges, multilateral trading facilities, central securities depositories, and other entities that fall under its supervision.

The Central Bank of Iceland supervises the business practices of regulated entities towards consumers of financial services and provides information and guidance services.

The Financial Supervisory Authority makes various decisions regarding financial supervision, such as the application of sanctions.