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Nordic countries not resting on their laurels over money laundering.

IF there is one region where high standards in fighting money laundering and terrorist finance are expected, it is surely the five Nordic states: Norway, Sweden, Denmark, Finland and Iceland. Notwithstanding the criticism leveled at Iceland's financial regulators during the credit crunch, all five countries have admirable traditions of public openness, government efficiency and international cooperation, especially amongst themselves. In a recent demonstration of functional regional cooperation, the five Nordic states plan to collaborate in tightening their money laundering and tax evasion systems against the backdrop of several high profile cases, and a general rise in money laundering crimes.

The 'money laundering cooperation review initiative', in which the Nordic Council of Ministers (NCM) (a regional intergovernmental body) will play a key coordinating role. The will to reinforce Nordic anti-laundering regulations and systems is partly driven by plans strengthen economic and political links with the neighbouring Baltic economies of Estonia, Latvia and Lithuania, whose anti-money laundering (AML) and combating the financing of terrorism (CFT) is deemed weaker than the Nordic club.

As a result, reviews are under way. Discussions on how to firm-up cooperation and close existing loopholes vulnerable to launderers were confirmed on May 18 when Icelander Helgi Hjorvar, president of the Nordic Council (the NCM's parliamentary wing), met for talks with the NCM's Copenhagen-based Tax Evasion and Money Laundering Coordinating Unit (TEMLU). This unit has a pivotal function in preparing and executing policy and agreements on money laundering and tax evasion legislation within Nordic countries. Its role was underlined the following day (May 19) when its member states signed bilateral tax and money transfer information exchange agreements with the Caribbean island countries Antigua & Barbuda, Dominica, Grenada and St Lucia.

"The Nordic states have entered into a very large number of information exchange agreements since 2007, as part of our ongoing battle to combat money laundering and tax evasion. We are continuing to cooperate, and this level of cooperation is increasing," said Hjorvar.

These information exchange agreements give Nordic tax authorities and state anti-laundering policing agencies legal access to data on capital investments and incomes in partner countries signing these agreements.

In the first quarter of 2010, the Nordic countries entered into similar agreements with four other small states: St Vincent & the Grenadines; St Kitts & Nevis; The Bahamas; and Andorra. In total, the Nordic states have signed 110 such agreements with countries, with a focus on tax haven island states, in the last four years. There are good reasons for all this activity. Nordic countries are rich and open societies and so targets for money launderers. And there have been a clutch of recent cases. One has involved Denmark's Jyske Bank. In May, Spanish authorities fined it Euro EUR 1.7 million through charges that claimed the Danish bank had violated Spain's money laundering regulations when handling money transfers made by the bank's subsidiary offices in Spain and UK dependent territory Gibraltar.

Family-controlled Jyske Bank, Denmark's third largest, has appealed against the decision. It claims the situation arose due to "disagreements between supervisory authorities in Spain and Gibraltar". A court hearing is expected this autumn.

"We must pay fines now, but we will retrieve the money should we win the appeal," said Peter Stig Hansen, Jyske Bank's legal director. "We regard this as a political matter. For our part we have complied with all European Union [EU] rules, and therefore also to those pertaining to Spain," said Hansen.

Spanish authorities had claimed Jyske Bank Gibraltar had refused to comply with requests for information, and described the situation as "a very serious breach" of regulations. Moreover, the Servicio Ejecutivo de la Comision de Prevencion del Blanqueo de Capitales e Infracciones Monetarias (SEPBLAC), Spain's anti-money laundering commission, criticised Jyske Bank for employing inadequate controls, deficient reporting systems and an unwillingness to investigate certain transactions.

"Our bank in Gibraltar is supervised by the authorities in Gibraltar and has reported to them, but the Spanish authorities believe that they too are entitled to get information. We have not engaged, and nor have we participated or contributed to any money laundering activities," said Hansen.

Meanwhile, in a second high-profile case, the NBI, Finland's national bureau of investigation, opened a money laundering inquiry, coordinated with the Italian authorities, to investigate suspicions that over EUR 1 billion may have laundered through figurehead dummy corporations incorporated by Italian crime organisations in Finland.

The Italian-lead investigation resulted in arrest warrants issued in March, in a publicised broad sweep that included the Italian Senator Nicola di Girolamo.

The investigation has focused on two Italian-owned telecommunications companies registered in Finland. "Our investigations are ongoing, and we are making good progress. Compared with other European countries, Finland is not the kind of country that could be used very easily for money laundering," said Markku Ranta Aho, the head of the NBI's anti-money laundering unit.

It says the telcos under investigation are suspected of involvement in a money laundering operation run by the Calabria Mafia, or the 'Ndrangheta. Italy has issued arrest warrants for the unnamed England-based owners, both British citizens, of the two Finnish shell companies.

The NBI confirmed that neither of the two telecom companies conducted "real" business activities in Finland, and operated for merely to launder money from Italy and Britain. Information available to the NBI indicates that EUR 600 million passed through one of the companies, and up to EUR 500 million through the second telecom enterprise.

The NBI believes the two companies were incorporated off-the-shelf in 2004, using the services of different Helsinki-based law firms, who have denied complicity or knowledge of laundering. Meanwhile, the Finnish government reported on May 14 it expects to obtain a final report in June from a working group established to consider changes in money laundering legislation. The working group was established last autumn after the Organisation for Economic Cooperation & Development (OECD) described Finland's Preventing and Clearing Money Laundering Act as insufficient to deal with all money laundering. It impedes bringing cases against the associates of money launderers, while the act does not prevent the spending of laundered monies by a launderer's family or close friends.

Over the Gulf of Bothnia, a report published in March by Finanspolisen, Sweden's financial markets police authority, noted a sharp rise in Swedish money laundering activity and cases in 2008, the latest full year figures available, although this could be because of better monitoring. Data for 2009 will be published in August. Finanspolisen operates as a division of the National Criminal Police's Economic Intelligence Division.

According to Finanspolisen data, a total of 13,048 cases of suspected money laundering covering Swedish Krona SEK 9 billion (EUR 920 million) were reported in 2008. The figure represents a seismic increase of 116% compared to corresponding data for 2007. Reports filed by banks also increased from 1,310 cases in 2007 to 7,232 in 2008.

"What we see is real evidence that the banks have implemented better procedures, and have also built intelligent detection systems," said Thomas Palmberg, Finanspolisen's deputy director.

The surge in reported money laundering activities had less to do with an "explosion" of new illegal activity, and more to do with improved monitoring and anti-money laundering detection systems, said Palmberg.

This improved level of reporting is also noticeable from the country's financial intermediaries, who have also stepped up their surveillance of suspected crimes. "The problem areas still remain companies operating in cash intensive industries like auto dealerships, real estate brokerages, and casinos. These continue to be less forthcoming with reports of suspected money laundering," said Palmberg.

In the light of intelligence reports suggesting that Sweden is at risk of becoming a centre for financing Islamic terrorist groups, more of Finanspolisen's resources are targeting this area, which includes Hawala banks.

They have come under closer scrutiny from Swedish anti-fraud and tax authorities: 90% of Somali citizens resident in Sweden, in a Riksbank (Swedish central bank) survey published in February, use Hawala bank transfers.

However, Sweden's tax and banking regulatory authorities have warned if Hawala banks fail to maintain accurate records, pay tax, or conduct regular audits and money laundering controls, they will be closed.

Such warnings are becoming more common from the country's Financial Supervisory Authority (FSA). Its bite was, for instance, felt by Forex in 2008, when Sweden's biggest foreign exchange operator was fined SEK 55.4 million (EUR 5.6 million) for failing to employ adequate money laundering systems and controls. Norway, which is expected to pass a new money laundering act that will incorporate the EU's third anti-money laundering directive in the autumn, also had a recent high profile case. This involved the indictment of an Oslo trader alleged to have used Norwegian Krone NOK 260 million (EUR 32 million) in laundered funds to buy and sell climate quotas through his employer GCT.

The male trader, who has been remanded in custody, has been charged on 24 counts of money laundering and tax fraud and evading taxes worth NOK 17.8 million (EUR 22 million). GCT, which denied all knowledge of the trader's activities, also faces tax avoidance charges. Trial dates have yet to be set.

Meanwhile Iceland's under-siege financial regulations are being reviewed: in February, the ministry of economic affairs proposed 14 new bills, including one that introduces new measures against money laundering.

The money laundering bill elevates compliance requirements to a higher new standard, as requested by the Financial Action Task Force (FATF) in a 2006 assessment, and should help deal with the widespread concerns about Icelandic financial controls emerging from the recession.
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Author:O'Dwyer, Gerard
Publication:International News
Date:May 1, 2010
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