National risk assessment and action plan on money laundering and terrorist financing
Highest risk sectors are money remittances and provision of virtual currencies
Obliged entities, which are entities with reporting and other obligations, do not always examine the background to customers' transactions or the source of funds adequately enough for the purpose of preventing money laundering. Finland’s national risk assessment of money laundering and terrorist financing finds that all sectors experience challenges in identifying signs of terrorist financing.
The Government, on Thursday 29 April, adopted a government resolution concerning Finland’s national risk assessment and action plan on money laundering and terrorist financing.
The risk assessment examines the risk of money laundering and terrorist financing in Finland by sector. The sectoral division is based on the sectors of obliged entities referred to in the Act on Preventing Money Laundering and Terrorist Financing. A general risk level is defined for each sector on a scale of one to four (1 = low risk, 4 = very significant risk).
Source of funds difficult to determine in money remittances and virtual currencies
The sectors with the highest risk of money laundering include money remitters (hawala operators) and virtual currency providers. In international money remittances, the risk is particularly linked to the difficulty of tracing money transfers and determining the source of the money.
Anonymity enabled by some virtual currency services makes it difficult to trace funds and determine their source. The risk is intensified by the high number of transactions and their real time nature.
Credit institutions and payment service providers are at risk level three. Although credit institutions’ risk of money laundering is elevated due to the large volume of payment transactions, the risk is also diminished by the risk management expertise of such institutions.
In many sectors, obliged entities place too much trust in the procedures of credit institutions in regard to customer identification and due diligence. Where funds originate from a domestic credit institution, many obliged entities do not themselves adequately examine the customer’s business transactions or the source of the funds.
Money can also be transferred to conflict countries
The sector with the highest risk of terrorist financing is that of money remitters (hawala operators), as their services can also be used to transfer money to conflict countries.
All sectors find it challenging to identify and understand signs of terrorist financing. This makes it difficult to detect suspicious activity.
Risks can be reduced through greater information exchange and digitalisation
Finland’s national action plan sets out measures to reduce the risks of money laundering and terrorist financing. The plan covers the period 2021–2023.
The strategic priorities of the action plan are to:
- raise general awareness of money laundering and terrorist financing
- enhance information exchange and statistical compilation and further develop the national legislation
- ensure that registers used by public authorities and obliged entities are up to date and have appropriate content
- reduce the most significant individual risks highlighted in the risk assessment
- further develop digitalisation in supervising the prevention of money laundering and terrorist financing and in risk management.
The Ministry of Finance and the Ministry of the Interior have coordinated the preparation of the national risk assessment and national action plan. The risk assessment is based on the Act on Preventing Money Laundering and Terrorism Financing. Both the EU and the Financial Action Task Force (FATF) have recommended the preparation of a risk assessment and an action plan.
In the Government Programme, the Government, for the purpose of combating money laundering and terrorist financing, undertakes to secure sufficient resources for the authorities concerned, improve the exchange of information and intensify surveillance.
Maarit Pihkala, Senior Ministerial Adviser, Ministry of Finance, tel. 0358 2955 30310, maarit.pihkala(at)vm.fi
Janne Häyrynen, Senior Ministerial Adviser, Ministry of Finance, tel. +358 2955 30346, janne.hayrynen(at)vm.fi
Essi Isoaho, Coordinator, Ministry of Finance, tel. +358 2955 30424, essi.isoaho(at)vm.fi
Sami Ryhänen, Assistant Police Director, Ministry of the Interior, tel. +358 2954 88291, sami.ryhanen(at)intermin.fi