Will Iceland be Gray-Listed?

By the end of the week, Iceland could land on a gray list of countries, which have failed to take sufficient measures to combat money laundering and the financing of acts of terrorism, Fréttablaðið reports.

The list is prepared by the Financial Action Task Force, FATF, an intergovernmental organization, founded in 1989 to develop policies to combat money laundering. In 2001 its mandate expanded to include terrorism financing.

This week, FATF has been holding a meeting in Paris, attended by representatives from 205 countries. Iceland’s status will be discussed there on Friday. Already on the gray list are countries such as Afghanistan, Yemen, Iraq and Uganda.

Fréttablaðið’s sources report that although Iceland enjoys the support of the European Union at the meeting, (since the EU is opposed to having a European Economic Area country on the gray list), the US and the UK would like to see Iceland on that list.

These two countries find it important that a precedent be set for countries that fail to combat this serious threat of money laundering. Punishing Iceland, in their view, would set a sample for other countries. Iceland’s small size, they believe, means the cost of being gray-listed would be relatively low.

If Iceland ends up on the gray list, that would be a severe condemnation of Icelandic administration. Despite numerous warnings, Icelandic authorities have reportedly failed to adequately act.

FATF published a follow-up report on Iceland in September, which, while noting some progress, still states: “However, deficiencies have not been fully addressed, as authorities still do not have adequate or proportionate sanctions for violations of oversight measures by nonprofit organisations (NPOs) or persons acting on behalf of these NPOs.” You can read the full report here.