Money Laundering In Iceland, And How We’re Fighting It

Guðrún Árnadóttir and Björn Þorvaldsson do not have the most glamorous jobs in the world. In fact, chances are you never heard of them before if you haven’t been following the Icelandic news for the past ten years now. And yet these two Icelanders, who comprise two-thirds of all the employees at the Money Laundering Office of Iceland, are diligently working every day to fight some of the worst financial excesses in this country.

“This office was originally at the National Commissioner’s office and had been there since 1997,” Guðrún explains. “Iceland joined the Financial Action Task Force (FATF) in 1991 and if you want to take part in FATF, you have to establish an Financial Intelligence Unit (FIU). Originally, there was one employee, who worked for the FIU. One of the results that came forward in an FATF Mutual Evaluation from 2006 was that the FIU needed further support. This was followed by legislative changes made in 2015, and the office was moved over to the District Prosecutor’s office in July 2015. Now there are three employees working here.”

The daily grind

So what is it these two do all day? Rapel by helicopter into the office windows of shady financiers? Sadly, no.

“We receive suspicious transaction reports from reporting entities who are legally obligated to report,” Guðrún says. “Reporting entities are required to notify the FIU if transactions are considered to have any links to money laundering or terrorist financing.”

“If a friend transfers money into your account saying, “I’m just going to deposit 15 million in your account”, then you’re legally obliged to ask where this money is coming from.”

The folks who are legally obliged to report suspicious financial activity “can be financial services companies, pension funds and insurance companies, lawyers and barristers, accountants, real estate agents, car dealerships,” and others, Guðrún says. “We receive these reports and analyse the information. We have access to systems wherein we can ask for additional information regarding the information in the reports. We then analyse the information we’ve received, and we have authority to disseminate the results to the police, the tax authorities, and to customs.”

Who’s washing their money in Iceland anyway

“Money laundering can be from a variety of sources,” Björn explains. “It can be tax evasion, it can be organised crime or unorganised crime.”

So we’re not necessarily talking about drug lords. It could also be someone living in Iceland just trying to avoid paying taxes?

“Yes. Of course, there are serious cases of people engaged in crime who are laundering money, but it is in no way limited to this,” Björn says.

Whoops, I laundered some money

When asked what the most serious case of money laundering in Iceland over the past ten years has been, Björn is pensive for a moment.

“Difficult to say what is the most serious one,” Björn says. “The latest one was a case that Reykjavík District Court ruled on just last Tuesday, regarding the financial crimes of the former heads of Kaupthing bank, and other involved parties. One of them, Skúli Þorvaldsson, was found guilty of money laundering by negligence.”

Wait, how is it possible to engage in money laundering without realising you’re doing it?

“If you should have known,” Björn explains. “Like in this case, he had a company [Marple Holding] that had an account, and he knew that high amounts of money were transferred to the account. It came to light that he should have at least suspected that there was something illegal going on. And the amount of money laundered in that case was the highest in a money laundering case in Iceland.”

“The capital controls that were in place made it more difficult to bring money into and out of the country. Now those controls have been lifted, so things could change.”

There is actually a legal obligation to ask where the money is coming from in these instances,” Guðrún adds. “Like if a friend transfers money into your account saying, ‘I’m just going to deposit 15 million in your account,’ then you’re legally obliged to ask where this money is coming from. Otherwise you could be convicted of money laundering by negligence.”

Björn says that if you’re just a regular employee on the job, working behind the counter of a candy shop, for example, and you witness something fishy going on but don’t report it, you could end up being investigated, too, depending on how involved you were.

How are we doing against money laundering?

When asked if Iceland’s business environment is good for shady deals, Björn is sceptical.

“Actually, on the contrary,” he says. “The capital controls that were in place made it more difficult to bring money into and out of the country. Now those controls have been lifted, so things could change. On the other hand, this office and the FME have been building themselves up more.”

The both of them add that banks and other financial institutions have actually done a good job when it comes to reporting suspicious financial activity, in no small part because their profits rest on their reputation; failure to report could cost them clients and investors.

“It bears mentioning, though, that others—for example, car dealerships and real estate agencies—could stand to be doing a better job,” Björn adds. “If someone comes to buy something with a million in cash, that’s rather suspicious. And it should be reported. People who are selling expensive things—they ought to be reporting suspicious activity, and they could be doing a better job of that.”