04 September 2023

Regional report on financial flows analysis, AML/CFT supervision, and financial stability published

The IMF Regional Nordic-Baltic Technical Assistance Report on “Financial Flows Analysis, AML/CFT Supervision, and Financial Stability” has been published.

In a first-of-its-kind technical assistance project on anti-money laundering, Iceland partnered with the IMF and Denmark, Estonia, Finland Latvia, Lithuania, Norway, and Sweden to continue enhancing the effectiveness of the AML/CFT frameworks at the country and regional level. The IMF used machine learning technology, on a country specific and regional level, to better understand cross-border money laundering risks, analyzed the sensitivity of AML/CFT supervisory tools to respond to these risks and developed recommendations to increase their effectiveness, and explored quantifying the impact of money laundering shocks on financial stability.

The report notes that continuous efforts to strengthen AML/CFT frameworks is a clear priority in the region and that coordinated action and innovative solutions are key in keeping pace with evolving financial integrity risks. More specifically, it recommends the ongoing monitoring of cross-border flows, with regional information exchange on macro-trends, and better identification of countries with potential money laundering risks to the Nordic Baltic region. To bolster AML/CFT risk-based supervision, the report calls for increased collection of cross-border data and complementary investments in advanced data analytic tools, as well as coordinated supervisory action for the highest risk banks. Finally, it recommends continued analysis of the impact of financial integrity breaches on financial stability to fortify the financial system against money laundering shocks.

The Central bank of Iceland welcomes the analysis and outcome of the project and hopes that through publication of this report, the private sector and other countries can take key learnings from the experiences and good practices of the region.

The Central bank´s ongoing work is aligned with the recommendations of the IMF report with action already underway on several topics, notably: further development of the banks risk assessment and risk-based supervision, utilization of information on financial flows in risk assessments as well as further analysis of information on cross-border financial flows.

Based on high-level guidance, the Nordic-Baltic financial stability and AML/CFT experts will collaborate on the implementation of recommendations to reinforce the region’s position on combating financial crime and promoting transparency and accountability in the financial sector.

A panel discussion with senior representatives from each country on questions related to this work is broadcast along the publication: The broadcast can be found here