Supervision of anti-money laundering and combating the financing of terrorism

Money laundering is any kind of receipt, handling or transfer of gains (profits or assets) obtained by illicit means, whether in violation of the Penal Code or special laws.

Money laundering is a key prerequisite for organised crime to thrive within society and across borders. Money laundering has a negative impact on society's financial system, hampers free competition, and hinders the proper functioning of market forces. This is why it is vital for the state to have reliable and visible supervision and to ensure that obliged entities have an appropriate supervision system in their operations. This discourages criminals from preying on the financial system of the relevant state.

The financing of terrorism is the conduct of raising funds for the purpose or with the knowledge that the money is to be used to commit a crime that is punishable under the provisions of Article 100 (a-c) of the General Penal Code no. 19/1940, i.e. commit terrorism, support a party who commits such acts or encourage them. The objective of a terrorist or group of terrorists is to incite, support or carry out acts of terrorism and in many cases they do so with funding.

Anti-Money Laundering and Terrorist Financing Act

In Iceland, Act no.140/2018 on measures against Money Laundering and Terrorist Financing is in force.
The purpose of this Act is to prevent money laundering and terrorist financing by imposing an obligation on parties engaging in activities, which could be used for money laundering or terrorist financing, to know the identity of their customers and their activities and to notify the competent authorities if they have a suspicion or knowledge of such illegal activities.

The role of the Central Bank of Iceland

The role of the Central Bank of Iceland (CBI) is to supervise these parties and ensure that they comply with the provisions of the above-mentioned laws. The CBI has the authority to impose penalties if it becomes apparent that the provisions of the Act or regulations on the basis thereof are not enforced, e.g. through administrative fines, dismissal of the board and managing director, revocation of operating licences and the application of sanctions.