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#Anti Money Laundering

A closer look at Denmark’s anti money laundering efforts

International Compliance Association

AML , Denmark

Denmark sits at the enviable position as the ‘cleanest’ country in Transparency International’s Corruption Perception Index (CPI). As previously discussed in ICA Insights, although deemed to be the cleanest, Denmark isn’t free from all financial crime woes.  

People in Denmark not only benefit from living amongst low levels of corruption – they also live in a country that is also routinely noted as being one of the happiest countries in the world. Denmark’s impressive position at the top of such indices can mean it is perceived as being free from issues that plague countries lower in the index, but this is not the case.

Financial Action Task Force

No country is perfect in its efforts to tackle financial crime. The mutual evaluation of Denmark by the Financial Action Task Force (FATF), published in August 2017, highlighted a number of deficiencies in Denmark’s efforts and abilities to tackle money laundering and terrorist financing.

Through its mutual evaluation process, FATF assesses a country’s technical compliance with the 40 FATF recommendations and the effectiveness of their AML measures.

Denmark received a mixed response from FATF, with the organisation noting that whilst Denmark ‘has the foundations for a sound regime to tackle money laundering and terrorist financing’, improvements are still needed.

The efforts to tackle terrorist financing, including ensuring that for every terrorist investigation potential terrorist financing is also investigated, were praised, as was the cooperation with foreign counterparts. FATF urged Denmark to apply the same level of priority to money laundering investigations to terrorist financing investigations. 

Tackling money laundering is hampered by a number of factors, including uncoordinated risk assessments, lack of national strategies and insufficient resourcing at the financial intelligence unit (FIU).

For those operating outside of Denmark it may come of a surprise to read that the maximum prison sentence for ‘ordinary’ money laundering is 1.5 years; for ‘aggravated’ money laundering the sentence is 6 years. FATF doesn’t believe that such low sentences provide an adequate deterrent. 

The scores are in…

In their report, FATF score 11 different categories for their effectiveness rating, scoring high, substantial, moderate or low. Of these, none were rated as ‘high’ and three were rated as ‘substantial’: international cooperation, terrorist financing investigation and prosecution and proliferation financing financial sanctions. Two categories were rated as low: supervision and preventative measures and the remaining six categories were rated as moderately effective.  

The technical compliance ratings are rated against each of the 40 recommendations; 4 were deemed to be compliant, 17 largely compliant and 19 partially compliant.

As a comparison, another Nordic country recently subject to the same evaluation process was Sweden, who rated highly effective in one of the 11 categories, international cooperation. No categories were given the rating of low.

Of the technical compliance ratings, Sweden were deemed to be compliant in 9 recommendations; 21 were deemed to be largely compliant and the remaining 10 were partially compliant.

Unfortunately, Denmark is falling behind its neighbour in its AML efforts.

Moving forwards

Denmark is making a number of changes to its anti money laundering regime, including raising the penalty for the money laundering offence to eight years. The supervisory authorities will also be given additional powers and resources, addressing some of the key issues highlighted during the FATF review. 

The updated Anti-Money laundering Act, transposing the EU’s Fourth Money Laundering Directive, became effective 26 June 2017. One of the key changes that this will bring about is the move from rule-based regulation to a risk-based approach, consistent with the FATF recommendation.

In a statement, Denmark’s business minister Brian Mikkelson made it clear that banks must do more to ensure that they are not laundering criminal proceeds, or face stricter sanctions.

No country is perfect in its anti money laundering efforts, but we must recognise areas of strength and strive towards addressing weaknesses.

 

How can ICA help?

The ICA International Diploma in Anti Money Laundering helps you develop best practice initiatives and prepares you to face present and future challenges, reducing risk. 

You can study this qualification by online learning from anywhere in the world.

 


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