Report on the Observance of Standards and Codes: FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism

This paper examines Iceland’s Observance of Standards and Codes on the Financial Action Task Force Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism. Iceland’s legal requirements in place to combat money laundering and terrorist financing are generally comprehensive. The penalties for money laundering appear low, and the number of money laundering prosecutions and convictions has decreased. The terrorist financing offence is generally broad, although it does not fully cover the financing of acts listed in the Terrorist Financing Convention.


This paper examines Iceland’s Observance of Standards and Codes on the Financial Action Task Force Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism. Iceland’s legal requirements in place to combat money laundering and terrorist financing are generally comprehensive. The penalties for money laundering appear low, and the number of money laundering prosecutions and convictions has decreased. The terrorist financing offence is generally broad, although it does not fully cover the financing of acts listed in the Terrorist Financing Convention.

1. Background Information

1. This Report on the Observance of Standards and Codes for the FATF 40 + 9 Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism was prepared by the Financial Action Task Force (FATF). This report provides a summary1 of the AML/CFT measures in place in Iceland as of the date of the on-site visit and shortly thereafter, the level of compliance with the FATF 40+9 Recommendations, and contains recommendations on how the AML/CFT system could be strengthened. The views expressed in this document have been agreed by the FATF, but do not necessarily reflect the views of the Boards of the IMF or World Bank.

2. Overall, Iceland’s legal requirements in place to combat money laundering and terrorist financing are generally comprehensive; however, the evaluation team had concerns about the system’s effectiveness. The penalties for money laundering appear low, and the number of ML prosecutions and convictions has decreased. The terrorist financing offence is generally broad, although it does not fully cover the financing of acts listed in the Terrorist Financing Convention. While Iceland has generally adequate provisional and confiscation measures, they could be enhanced to be more effective; Iceland also needs to adopt a comprehensive mechanism to freeze assets in the context of S/RES/1373. The financial intelligence unit (FIU) operates as part of the Economic Crime Unit within the National Commissioner of Police and performs the basic function of receiving, processing and disseminating suspicious transaction reports (STRs). However, at the time of the on-site visit the evaluation team concluded that the FIU was not effective, due mainly to insufficient structural independence and inadequate resources. A new regulation (of July 2006) strengthening the FIU’s structure, when fully implemented, should improve the situation. Measures for international cooperation are generally comprehensive, although there are concerns about dual criminality, and there is currently no ability to share seized assets with other governments.

3. At the time of the on-site visit (24 April—5 May 2006), the Icelandic authorities were in the process of adopting legislation to implement the 3rd EU ML Directive; the legislation was passed by the parliament on 2 June and came into force in 22 June 2006. While the new legislation expands upon previous AML requirements from 1993 and 1999, it should be noted that the effectiveness of the new measures cannot yet be measured. While the new legislation includes stronger CDD measures, more comprehensive measures are needed, especially as regards beneficial ownership. Record-keeping measures are comprehensive. The scope of the suspicious transaction reporting requirements is generally sufficient, with the clear obligation to report STRs related to terrorist financing included in the new Act; however, there were some concerns regarding the effectiveness of the system.

4. The supervisory powers including the power to issue sanctions are generally broad; however, Iceland should strengthen administrative sanctions for directors and managers of financial institutions. At the time of the on-site visit, there were concerns about the overall effectiveness of the supervisory system—there had not been enough attention paid to AML/CFT matters. Since then, the Financial Supervisory Authority (FSA) has since hired an additional resource to specialise in AML/CFT issues, as planned. The same AML/CFT requirements now apply to all designated non-financial businesses and professions (DNFBPs) in Iceland.

5. Icelandic authorities indicate that the general crime rate in Iceland is low, due generally to the small and close-knit population (approximately 300,000) and geographic isolation. But the situation may be changing with growing globalisation in all fields, and authorities report an increased influence of foreign criminal groups. The number of narcotics cases has more than doubled between 2000 and 2004. The FIU considers that narcotics smuggling and trading together with various kinds of economic crimes including tax evasion continue to be the most significant sources of illegal proceeds in Iceland. The Icelandic bank notes (the Icelandic krona—ISK2) are not traded abroad, and many STRs are tied to the purchase of foreign currency. Authorities suspect that the exchanges may be of illegal funds intended for purchasing narcotics, and in several cases such indications have led to the capture and prosecution of drug smugglers. There are some indications that a growing number of criminal operators may be avoiding regulated operations in Iceland by using cash carriers to transfer funds for laundering or other illegal activity abroad. Authorities report that the financing of terrorism has not so far been a problem in Iceland.

6. Over the last decade, there has been a significant increase in the size of the Icelandic financial sector. In 2005, financial services became the largest contributor to GDP. Iceland joined the European Economic Area (EEA) on 1 January 1994. The current financial sector includes three commercial banks, 24 savings banks, and various credit undertakings such as credit card companies, leasing companies, and investment banks, as well as securities companies and brokerage firms, and life insurance companies. These entities are all licensed and supervised by the Financial Supervisory Authority (FSA), and covered by the AML/CFT legislation. Known money remittance activity takes place directly through banks, through Western Union and MoneyGram, which operate out of Icelandic banks, and through a domestic branch of a foreign bank (Forex). Known foreign exchange also takes place through Icelandic banks as well as one domestic business. This domestic business is not supervised.

7. The DNFBP sector includes 203 authorised real estate dealers, approximately 360 practicing lawyers, approximately 300 authorised public auditors, and an unknown number of retail dealers in precious metals and stones (there is only one wholesale dealer). All of these sectors are covered under the new Act No. 64/2006 on measures against money laundering and terrorist financing, of 22 June 2006. Casinos, including internet casinos, are prohibited in Iceland.

2. Legal System and Related Institutional Measures

8. Money laundering is criminalised through Section 264 of the General Penal Code and as “any action by which anyone accepts or acquires for itself or others, gain from an offence criminalised in the Penal Code, as well as stores or moves such gain, assists in the delivery thereof or does in other comparable manner support securing for others the gain of such an offence. The preparatory works clarify that this includes concealing, converting, and disguising. Participation in an organised criminal group or racketeering is not separately criminalised; and ancillary offences do not appear otherwise to cover adequately “participation” in the profit-generating crimes of organised criminal groups. Arms trafficking, insider trading and market manipulation are not money laundering predicates.

9. It is not clear whether the money laundering offence may apply to the person who also commits the predicate offence (i.e., self-laundering). Legal practice has been based on the principle that it is not possible to convict the same individual for the further exploitation of the gains of a criminal act, and in particular an offence of an economic nature, following a conviction of that individual for the original offence. However, Icelandic authorities believe that it is possible under the current legislation to convict someone at the same time of both of the predicate offence and money laundering, although no judicial rulings have been passed resolving this point finally.

10. The ancillary offences of attempt, aiding and abetting, facilitating and counselling the commission of the money laundering offence are adequately covered in the Penal Code. However, conspiracy is not fully covered.

11. The offence applies to those who intentionally or negligently engage money laundering. Under the basic concepts of Icelandic law, intention can be inferred from objective factual circumstances. Knowledge, according to the explanations provided, encompasses direct intention, probable intent, and also wilful blindness and dolus eventualis. Criminal liability of legal persons exists for money laundering related to corruption, but otherwise is too narrow.

12. Penalties of a maximum of two years apply for the basic money laundering offence; four years for aggravated offences. In cases involving narcotics trafficking, a penalty of up to 12 years is available. Penalties appear to be too low, especially in comparison with penalties for similar types of offences (e.g. enrichment offences (6 years)) and do not seem to be effective, proportionate and dissuasive.

13. In general, it appears that the offence is not effectively implemented. There have been a limited number of prosecutions and convictions; these numbers have sharply decreased since 2000, despite a corresponding increase in reported narcotics trafficking, STRs filed, and the large expansion of the financial sector which would appear to offer additional opportunities for money laundering. Actual penalties applied have been low, even in cases involving narcotics trafficking where much higher penalties are available.

14. The terrorist financing offence is generally comprehensive and is defined in Section 100 (b) by penalising anyone who contributes funds or grants other financial support, procures or gathers funds or making funds available to individuals or groups who have the purpose of committing “terrorist acts” as defined in Section 100 (a). However, Iceland should broaden its definition of terrorist act to include all those activities referred to by Article 2 (1)(a) and (b) of the CFT Convention. Penalties of up to 10 years apply; criminal penalties also apply to legal persons. It was also a concern that the legislation does not specifically cover the financing of a terrorist act. There has not yet been any terrorist financing prosecution.

15. A general provision on confiscation is contained in Section 69 of the Penal Code, which covers proceeds from and instrumentalities used in or intended for use in any criminal offence, including the money laundering offence. Prosecutors and police have broad authority to seize assets, objects or documents accordance with Section 78 of the Code of Criminal Procedure. While the framework provides investigators and prosecutors with basic confiscation and provisional measures, the main issue is framework’s effectiveness. The burden of proof turns out to be too high for prosecutors, since it appears that in practice they have to prove, beyond any reasonable doubt, that the accused has knowledge of the specific criminal origin of the proceeds. Provisions on confiscation should also be strengthened especially when the offender is not in possession of the assets, which are held by a third party.

16. Public Announcements which implement Act No. 5/1969 “Concerning the implementation of decisions taken by the United Nations Security Council.” aim to implement S/RES/1267(1999) and S/RES/1373(2001) and successor resolutions. The Announcements make it an offence to release funds to individual terrorists and groups or to provide them with other form of support. A more direct freezing obligation has been introduced by Sec. 16(a) of the Act 87/1998 on financial supervision (as amended in 2003). As a practical matter, the only lists that can be enforced are those from the UN 1267 designation committee. Iceland does not have effective laws and procedures to give effect to freezing designations in the context of S/RES/1373; a domestic mechanism should be implemented to be able to designate terrorists at a national level as well as to give effect to designations and requests for freezing assets from other countries. Iceland should also issue additional guidance to the financial sector and adopt procedures for evaluating de-listing requests, for releasing funds or other assets of persons or entities erroneously subject to the freezing and for authorising access to frozen resources pursuant to S/RES/1452(2002).

17. The Icelandic FIU is a unit within the Economic Crime Unit at the National Commissioner of the Icelandic Police (Ríkislögreglustjórinn). The FIU has sufficient access to a wide range of financial, administrative, and law enforcement information. The FIU also appears to have a good network of informal relationships within the police and the banking sector. However, the evaluation team had concerns regarding the FIU’s effectiveness, which appears to be hampered by insufficient independence and resources (one dedicated staff). There was no pro-active analysis of STRs, periodic reports including statistics or AML/CFT trends/typologies, nor written guidelines or standardised STR forms, although the FIU plans to address these issues since the passage of new AML/CFT legislation in June 2006. Finally, it was not clear that the FIU has shown adequate results: while authorities indicated that STRs are forwarded to the national and local police when relevant, the number of ML prosecutions has dramatically decreased during a period of increased drug crimes, STRs filed, and a vast increase in the financial sector.

18. Major ML investigations and prosecutions are generally conducted by the Economic Crime Unit, which is headed by a public prosecutor and comprised of 14 police officers, another prosecutor and 3 police attorneys. The Director of Public Prosecution’s office also prosecutes ML related to serious narcotics and other serious offences. These units would also investigate and prosecute terrorist financing cases, although no such cases have yet arisen. Authorities have a broad and sufficient range of access to customer identification information and any other relevant documents from financial institutions or other persons during the course of an investigation or prosecution.

19. There are no current statistics available concerning the number of ongoing ML investigations. The number of prosecutions has decreased since 2000, when there were 5 cases which included 12 indictments, to zero, one or two cases in each year after that. Icelandic authorities should take a more proactive approach to investigating and prosecuting money laundering and should also receive more specific ML/FT training to deal with these types of matters.

20. A new Customs Act No. 88/2005 (which entered into force in January 2006) requires arriving and departing passengers to declare amounts of cash which they have in their possession exceeding an amount equal to EUR 15,000. However, the system does not cover the majority of issues in SR.IX. In addition, the evaluation team did not view that the current system for detecting and preventing cross border movements of currency or bearer negotiable instruments related to money laundering or terrorist financing is effective. No currency declaration has been made.

3. Preventive Measures - Financial Institutions

21. The Act on Measures to counteract Money Laundering, No. 80/1993 (as updated in 1999) (hereafter “the MLA 1999”) covers the full range of financial institutions listed in the FATF Recommendations. New legislation aimed at implementing the 3rd EU Money Laundering Directive and updating the AML/CFT regime, Act. No. 64/2006 on Measures against Money Laundering and Terrorist Financing (hereafter “AML/CFT Act 2006”), came into force on 22 June 2006. The legislation also covers a broad range of financial institutions, but is more specific than the previous legislation. The legislation extends the AML/CFT requirements to the full range of designated non-financial businesses and professions, as described below. This summary will refer to the new legislation, since the requirements are broader, although it should be noted that the effectiveness of the new requirements cannot yet be assessed.

22. Anonymous accounts and accounts in fictitious names are not permitted under Icelandic law. CDD is required when commencing business relationships, for occasional transactions of EUR 15,000 or more, for foreign exchange transactions of EUR 1,000 or more, when there is a suspicion of money laundering or terrorist financing, although not yet for wire transfers in circumstances covered by Special Recommendation VII. With regard to legal persons, the new legislation requires identification of “beneficial owners”, defined as the “natural persons who ultimately own or control a legal person through direct or indirect ownership of more than a 25% share in the legal person or control more than 25% of the voting rights...” However, there is no general requirement to identify beneficial owners for all customers. Financial institutions are not required to determine actively if the customer is acting on behalf of someone else. In addition, exemptions from CDD appear overly broad. There are no general requirements to apply CDD measures other than ongoing due diligence to existing customers on the basis of materiality and risk.

23. Iceland has not yet implemented any provision regarding the establishment and maintenance of a customer relationship with politically exposed persons (PEPs). Article 12 of the new legislation covers most aspects of PEPs; however, these provisions will only enter into force on 1 January 2007. While the requirements in the new legislation regarding correspondent relationships are generally broad and based on the requirements of Recommendation 7, there are some significant deficiencies. They do not apply to relationships in other countries within the European Economic Area (EEA); there is not a requirement to ascertain that the respondent institution’s AML/CFT controls are adequate and effective. Iceland has implement requirements for non-face to face transactions in the old and new legislation when establishing business relationships.

24. Article 16 of the AML/CFT Act 2006 introduces provisions on the use of third parties and introduced business; however, some provisions are unenforceable, in case of a third party outside Iceland, since the obligations are placed on the third party to provide information upon request.

25. Financial secrecy laws do not inhibit the full implementation of the FATF Recommendations.

26. Icelandic legislation generally requires financial institutions to pay attention to all complex, unusual transactions and transactions which have no apparent economic or lawful purpose, make written findings of these examinations and make them available to competent authorities. Financial institutions must also pay special attention to transactions and customers from states or geographical regions which do not follow international AML/CFT standards. However, there are no provisions dealing with the possibility to apply appropriate counter-measures where a country continues not to apply or insufficiently applies the Recommendations.

27. The Regulation for the new AML/CFT legislation was issued on 27 June 2006. It further details article 17 of the law and indicates that any suspicion that a transaction can be traced to money laundering or terrorist financing, shall be reported to the Economic Crime Unit of the National Commissioner of Police (which houses the FIU.) The obligation in relation to money laundering applied under the old legislation. The obligation applies regardless of amount and regardless of whether they involve tax matters. Attempted transactions are not specifically covered in the law, although in practice financial institutions report them. The legislation provides an adequate “safe harbor” for good faith reporting, and penalises unauthorised “tipping off”.

28. Competent authorities have not established guidelines to assist financial institutions to implement and comply with STR requirements, and while the number of the number of STRs has increased from 112 in 2000 to 283 in 2005, the evaluation teams had concerns about the effectiveness of the STR system. While there is acknowledgment of STRs received, there is no substantive general feedback such as statistics on the number of disclosures and results, information on techniques, methods and trends, or sanitised case examples.

29. Financial institutions are required to maintain internal controls and written rules to combat money laundering and terrorist financing. However, the law does not specify that their procedures should cover, inter alia, CDD, record retention, the detection of unusual and suspicious transactions and the reporting obligation. The new legislation also clarifies that persons under the obligation to report shall nominate a person at the managerial level to be generally responsible for notification and practices supporting implementation of the Act; however, there is no requirement that the AML compliance officer and other appropriate staff have timely access to CDD, transaction, and other relevant information.

30. There is a general requirement in the financial institutions legislation to maintain an internal audit function; however, the requirement does not apply to the three securities brokerages currently operating, and the requirements do not specify an independent audit function to test compliance (including sample testing) with AML/CFT procedures, policies and controls. Financial institutions must provide training to combat ML and FT and comply with the Act. Financial institutions are also required to put in place screening procedures to ensure high standards when hiring employees.

31. The new AML/CFT Act 2006 also requires Icelandic institutions to ensure that their branches and subsidiaries outside the EEA take equivalent measures regarding CDD or as similar as the legislation of the state in question will permit. These requirements do not apply to AML/CFT requirements other than CDD.

32. It is not possible to establish a shell bank in Iceland. According to Article 13 of the AML/CFT Act 2006 (“Correspondent banking business with shell banks”), credit institutions are prohibited from entering into correspondent relationships with shell banks or with institutions that allow their facilities to be used by shell banks.

33. The FSA is the designated competent authority to license and supervise a wide range of financial institutions, according to Act No. 161/2002 on Financial Undertaking, including: commercial and savings banks, insurance companies, insurance brokers, securities companies and brokerage, mutual funds, stock exchanges and other regulated markets, an pension funds. Known money remittance takes place through Icelandic banks and a local subsidiary of a foreign bank. Money exchange activities must be licensed; foreign exchange takes place through banks as well as one domestic entity, which is not supervised. At the time of the on-site visit, the FSA had 35 employees, although no dedicated AML/CFT resources. In general, the FSA should give more attention to AML/CFT matters; Icelandic authorities are already taking steps to do this and since the on-site visit have hired one person to focus on AML/CFT issues. While this is a positive development, it is not year clear if this will be sufficient.

34. For supervised entities, the FSA has comprehensive inspection and surveillance powers and access to information, which are not predicated on the need to obtain a court order. Financial institutions are obliged to furnish all information that the FSA may require. On-site inspections can include the review of policies, procedures, books and records and sample testing.

35. Criminal sanctions are available for violations of provisions of the AML/CFT Act 2006. The FSA also has the authority to apply a range of administrative sanctions including warnings, insisting on corrective action, daily fines, and more severe financial penalties. However, there are no administrative penalties which can be imposed against directors and controlling owners of financial institutions directly for AML/CFT breaches, only indirectly by not meeting fit and proper criteria. Available sanctions for other senior management appear more limited. The available sanctions do not include the possibility to directly bar persons from the sector, unless they are convicted of an offence. In addition, sanctions do not include the general possibility to restrict or revoke a license for AML/CFT violations.

36. The requirements for fitness and properness of directors of institutions subject to the Core Principles are generally comprehensive. However, while fit and proper tests apply for directors and board members, they do not apply to other senior management.

37. According to Article 8 of the Act on Foreign Exchange, natural and legal persons providing currency exchanging services must be licensed by the Central Bank. There is no general requirement for money or value transfer services to be licensed or registered, nor have the other main requirements of SR VI been implemented. Although money exchange and remittance businesses that operate outside of banks are subject to the provisions of the revised AML/CFT Act, these entities are not subject to any system for monitoring and ensuring compliance with the AML/CFT requirements.

38. No specific AML or AML/CFT inspections have been conducted. The FSA indicated that it has inspected AML provisions as part of the general inspections process; FSA has conducted 50 on-site inspections from July 2003 to June 2004, and 41 on-site inspections from July 2004 to June 2005. However, there was no break down in terms of which financial institutions were covered or which ones also involved AML issues.

4. Preventive Measures - Designated Non-Financial Businesses and Professions (DNFBPs)

39. The Money Laundering Act of 1993 (as updated in 1999) also applied to real estate dealers and dealers in precious metals and stones. The new AML/CFT Act 2006, which came into force on 22 June 2006, covers a broader scope of DNFBPs in items, including attorneys, auditors, real estate dealers, and trust and company service providers, when they engage in the range of activities and the thresholds listed in the FATF Recommendations for these sectors, and dealers in any high-value items over EUR 15,000.

40. These DNFBPs are “reporting entities” and have the same obligations as financial institutions and activities described in the Act, and as such have the same strengths and deficiencies as previously described for financial institutions. However, the provisions have just begun applying to the full range of DNFBPs, and therefore their effectiveness cannot yet be assessed. A key area of concern in order to ensure effective implementation is the lack of adequate monitoring of DNFBPs. Icelandic authorities have not designed any authority to have the responsibility for the AML/CFT regulatory and supervisory regime for DNFBPs. Adequate AML/CFT guidelines and guidance will also need to be provided to assist the various sectors to comply with their new obligations.

41. Icelandic authorities have applied AML requirements to other non-financial businesses and professions since the MLA was amended in 1999 and expand upon these in the new AML/CFT Act 2006, which also covers: shipping brokerage (i.e., the buying and selling of ships), licensed lotteries and raffles, and natural or legal persons who, in the course of their work, perform the various activities where lawyers are covered (i.e., buying and selling real estate, managing client money, etc.) The law provides as examples tax consultants or other external consultants.

5. Legal Persons and Arrangements & Non-Profit Organisations

42. The vast majority of legal persons in Iceland are Private Limited Companies (approximately 24,600), followed by Public Limited Companies or “hlutafélag” (approximately 950). There are also branches of foreign companies, and partnerships. These are generally registered in a national Register of Enterprises located at the Tax Directorate. Information on business names, addresses and directors are registered and available to the public. Similarly, information on several types of foundations is also recorded and made available to the public. Trusts cannot be formed under Icelandic law.

43. While the registration system allows for some information on control to be recorded and made readily available regarding these legal persons and arrangements, access to beneficial ownership does not appear to be adequately available in a timely fashion. Directors and shareholders may be nominees. Access appears more limited in the case of foreign entities.

44. Iceland has not yet reviewed the adequacy of domestic laws and regulations that relate to nonprofit organisations (NPOs) for the purpose of identifying the features and types NPOs that are at risk of being misused for terrorist financing by virtue of their activities or characteristics. Authorities report that generally there are two types of entities that fit into the category of “NPO” as defined by FATF: commercial foundations and non-commercial foundations. Both of these types of entities must be registered, and therefore some kinds of information on their structures, purpose and managers are recorded and made available to the public. They must also keep accurate accounting records and generally file annual accounts. However, the other elements of SR.VIII have not yet been implemented.

6. National and International Co-operation

45. Iceland has a generally comprehensive system for national and international co-operation. Domestic co-operation is enhanced by the small size of the government and informal networks of cooperation which appear effective among all relevant AML/CFT authorities. Iceland has ratified the 1988 Vienna Convention and the 1999 Terrorist Financing Convention. Iceland has signed the 2000 Palermo Convention but not yet ratified it; preparations to ratify and implement it are underway.

46. Icelandic authorities are able to provide a wide range of mutual legal assistance; measures apply equally for ML and FT requests. In order to gather evidence for use in criminal proceedings in another state, the provisions in the Code of Criminal Procedure shall be applied in the same way as in comparable domestic proceedings. This would thus include the production, search and seizure of information, documents, or evidence (including financial records) from financial institutions, or other natural or legal persons; the taking of evidence or statements from persons, and the identification, freezing, seizure, or confiscation of assets laundered or intended to be laundered. Requests are sent to the Ministry of Justice except in the case of Nordic countries, where communication flows directly through the National Police Directorates.

47. The mutual legal assistance legislation requires dual criminality (except for most requests from Nordic countries), and it is therefore not clear that non-coercive measures could be applied in the cases where there is not dual criminality. Iceland has no legal or practical impediment to rendering assistance where both countries criminalise the conduct underlying the offence.

48. The general requirements for enforcing foreign criminal judgements are found in the International Co-operation on Enforcement of Criminal Judgements Act 56/93, as amended in 1997, which implements the 1970 Council of Europe Convention on the International Validity of Criminal Judgements. However, foreign judgments cannot be executed if the person is not domiciled in Iceland. Iceland has not considered an asset forfeiture fund or authorising the sharing of confiscated assets with other countries when confiscation is directly or indirectly a result of co-ordinated law enforcement action.

49. Act 13/1984 on Extradition of Criminals and other Assistance in Criminal Proceedings allows for extradition if the concerned offence is equivalent in substance to a crime punishable under Icelandic law with imprisonment of one year or more, which therefore includes both money laundering and terrorist financing. The legislation prohibits the extradition of Icelandic nationals, except under certain circumstances to Nordic countries. For Icelandic nationals, a special request must be made to the Icelandic authorities to institute proceedings domestic proceedings, and if this is received, then the same procedural rules apply to the case as would apply to comparable cases in Iceland. Extradition also requires dual criminality; however, Iceland has no legal or practical impediment to rendering assistance in extradition requests where both countries criminalise the conduct underlying the offence. The limitations on the scope of “acts of terrorism” as defined in Iceland also present some concerns about Iceland’s ability to effectively provide assistance in cases involving the financing of acts not defined as terrorist acts in Iceland.

50. In general law enforcement, the FIU, and supervisors can engage in a wide range of international co-operation. Icelandic authorities attempt to render assistance to foreign authorities as expeditiously as possible; however, given the complete lack of statistical data, the evaluation team was not able to determine that the mechanisms for international cooperation are fully effective.

The rating of compliance vis-à-vis the FATF Recommendations should be made according to the four levels of compliance mentioned in the 2004 Methodology (Compliant (C), Largely Compliant (LC), Partially Compliant (PC), Non-Compliant (NC)), or could, in exceptional cases, be marked as not applicable (NA).

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Table 1:

Ratings of Compliance with FATF Recommendations

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Table 2:

Recommended Action Plan to Improve the AML/CFT System

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A copy of the full Mutual Evaluation Report can be found on the FATF website:


At the time of the on-site visit, the exchange rates were as follows: 1 ISK = 0.011 EUR or 0.014 USD; 1 EUR = 91 ISK; 1 USD = 72 ISK.

Iceland: Report on the Observance of Standards and Codes: FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism
Author: International Monetary Fund