Iceland
Last updated: 17/06/2009
CENTRAL AUTHORITY FOR REPORTING
Financial Intelligence Unit (FIU), named Ríkisssaksóknari (RLS).
The FIU, which is a member of the Egmont Group, operates as part of the Economic Crime Unit within the National Commissioner of Police in Iceland and performs the basic function of receiving, processing and disseminating suspicious transaction reports (STRs).
OTHER ANTI-MONEY LAUNDERING REGULATOR(S)
HAVE THE ICELANDIC PROVISIONS BEEN HARMONISED WITH THOSE OF THE THIRD EU MONEY LAUNDERING DIRECTIVE? IF NOT, IS IT EXPECTED TO HAPPEN?
Yes, the Icelandic authorities have adopted Act No. 64/2006 to harmonise their domestic AML framework with the Third EU Money-Laundering Directive.
The new legislation was passed by the Parliament on 2 June 2006 and came into force on 22 June 2006. It expands upon previous AML requirements from 1993 and1999 and includes stronger client due diligence measures, comprehensive record-keeping measures and a clear obligation to report suspicious transactions related to terrorist financing.
Amendments were made to the Anti-Money Laundering Act no. 64/2006 in 2008 (Act no. 77/2008) due to remarks in FATF’s report on Iceland, dated 13 October 2006.
LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.
ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?
Visiting lawyers are subject to the penal laws prohibiting money laundering and terrorist financing.
According to Article 4 paragraph 3 of the General Penal Code, penalties shall be imposed in accordance with the Act on account of offences against section 264 committed within the Icelandic State, even if the original offence from which the gain has been derived, was committed abroad and irrespective of who caused it.
LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.
Adequate AML/CFT guidelines will need to be provided to assist lawyers to comply with their various obligations under AML/CFT Act 2006.
The Icelandic Bar Association has published guidance for it’s members in accordance to the anti-money laundering Act No. 64/2006.
IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?
The Bar Association has a general authority of supervision, the Lawyers’ Disciplinary Committee.
DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.
Pursuant to the AML/CFT Act 2006, lawyers have the same Client due diligence (CDD) obligations regarding ML/CT due diligence as financial institutions.
CDD is required when entering into a business relationship, for occasional transactions of EUR 15,000 or more, for foreign exchange transactions of EUR 10,000 or more and when there is suspicion of money laundering or terrorist financing.
With regard to legal persons, the AML/CFT Act 2006 requires identification of “beneficial owners”, defined as the “natural persons who ultimately control a legal person through direct or indirect ownership of more than 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 clients.
Under article 10 of the AML/CFT Act 2006, lawyers are under further obligations when clients carry out “distant selling”. It requires that when customers are not present to prove their identity, additional information should be obtained about the customer if necessary and the first payment should be made in the name of the customer and through an account established by the customer in a credit institution.
Article 14 of the Act also requires lawyers to show caution in the case of products or transactions that might favour anonymity, and to take measures, if needed, to prevent the use of such businesses for money laundering or terrorist financing purposes.
DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?
There are no general requirements to apply CDD measures other than ongoing due diligence to existing customers on the basis of materiality and risk.
ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS (PEPs)?
Yes, Article 12 of the AML/CFT Act 2006 covers PEPs.
In relation to PEPs, lawyers are required to:
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Determine whether the client is a politically exposed person, which includes natural persons who are or have been entrusted with prominent public functions and immediate family members, or persons known to be close associates, of such persons;
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Obtain senior management approval before entering into business transactions with such persons;
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Take appropriate measures to verify the source of funds that are involved in the business relationship or transaction;
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Conduct regular monitoring of the business relationship.
However, there is no requirement to obtain senior management approval to continue a business relationship, where a client has already been accepted and the client or recipient of funds in a transaction is subsequently found to be, or subsequently becomes a PEP.
ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?
Yes, according to Articles 15 and 15a of the AML/CFT Act 2006.
ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.
Yes, Art 16 of the AML/CFT Act 2006 states that a reporting entity is not required to conduct due diligence if corresponding due diligence data is revealed through a financial institution which has been granted an operating license in Iceland or in the EEA.
The same applies for information revealed through a financial institution from outside the EEA which is subject to similar requirements as those from the 2006 Money Laundering Act.
Icelandic authorities have clarified that ‘revealed’ means that the information must be obtained from the foreign financial institution before the Icelandic institution nay accept the introduced business.
In the case of reliance on information or due diligence provided by a third party, obligations are placed on the third party to provide the information upon request. Furthermore, lawyers and financial institutions are not required to take adequate steps to satisfy themselves that copies of the relevant documentation will be made available from the third party upon request and without delay.
There is also no requirement to ensure that the third party is regulated and supervised or that it has measures in place that comply with CDD standards.
WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS (STRs)?
Article 17 of the AML/CFT Act 2006 indicates that lawyers are required to have any transactions suspected of being traceable to money laundering or terrorist financing carefully examined and notify the police of any transactions which are considered to have such links.
This applies in particular to any transactions which are unusual, large or complex in the light of the normal business of the customer, or which have no apparent economic or visible lawful purpose.
Article 23 (3) further specifies that lawyers must prepare written reports on all suspicious and unusual records that occur in the course of effecting transactions in their business activities and keep these records for five years.
The reporting obligations do not cover transaction relating to insider trading/ marked manipulation, arms trafficking and participation in an organised criminal group as these are not predicate offences for money laundering in Iceland.
DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?
Article 17(3) of the AML/CFT Act 2006 which creates STRs obligations does not apply to information obtained by legal professionals in the course of ascertaining the legal position of their client, including advice on instituting or avoiding proceedings, or information obtained before, during or after the conclusion of judicial proceedings, if the information is directly related to such proceeding.
The same applies to parties specified in Paragraph 1, Article 2 of the legislation (e.g. auditors, tax consultant, real estate brokers) when they are providing advice to a legal professional before, during or after the conclusion of judicial proceedings.
Article 22 of the Act of Professional Lawyers No. 77/1999 states that a lawyer has the duty of maintaining confidentiality with respect to any matter confided to him in the course of his functions. A lawyer’s employee is also under the duty of maintaining silence with respect to such confidential matters he may become aware of in his work.
Article 21 of the AML/CFT Act 2006 carves out an exemption from STR requirements for professional secrecy. Despite this, the legal profession have asked that the rules surrounding the exemption be clarified as there is a concern that the broad professional secrecy requirement for lawyers might conflict with their STR obligations.
DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?
Article 21 of the AML/CFT Act 2006 provides that a disclosure in good faith to the police by a natural or legal person under an obligation to file an STR or give information pursuant to the act shall not make such person or their employees, criminally liable or liable for civil damages.
ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?
No information available.
IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.
Yes, there is a tipping-off prohibition. Tipping-off a client or any third party in connection with reporting an STR or informing them that an investigation is in progress or notifying them that information has been provided to the National Commissioner of Police is prohibited.
There is an exemption to the tipping-off prohibition for lawyers where both parties belong to the same profession category, the case concerns a natural or legal person who is a client of both parties, and concerns a transaction relating to both parties, where both parties are subject to the same professional secrecy requirements and the information is used solely for the purposes of preventing ML/FT.
DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.
Lawyers must comply with all CDD measures in the AML/CFT Act 2006 (outlined above) before accepting a new client.
ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.
There are no general requirements to apply CDD measures other than ongoing due diligence to existing customers on the basis of materiality and risk.
DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.
No information available.
HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?
No information available.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
Yes, the FATF released a Mutual Evaluation Report for Iceland on Anti-Money Laundering and Combating the Financing of Terrorism in October 2006.
The report found that Iceland’s AML/CFT framework was comprehensive and generally compliant with the FATF 40+9 Recommendations but the evaluation team had concerns about the system’s effectiveness.
The FATF report highlighted that penalties for money laundering were low and the number of prosecutions and convictions for money-laundering had decreased.
The FATF also noted the inefficiency of the FIU stemming from insufficient structural independence and a lack of resources.
At the time of the FATF evaluation, most of the provisions relating to lawyers and other Designated Non-Financial Businesses and Professions had just been put into practice. As such, the assessment team could not accurately evaluate their effectiveness.
Information supplied by:
Mr Heimir Örn Herbertsson
Lex Law Offices
Borgatúni 26
105 Reykjavik
Official Website: www.lex.is
General Email: lex@lex.is
Sources:
- FATF Mutual Evaluation Report for Iceland, October 2006