What is money laundering?
Drug traffickers and other criminals throughout the world use the banking system to channel the proceeds of illegal transactions into the economy in a manner that makes them appear to have been honestly acquired.
Money laundering is the activity whereby an individual or legal entity acquires or receives for itself or others' gains from a criminal offence according to the General Penal Code or other legislation. It is also regarded as money laundering if an individual or legal entity undertakes to convert, transport, send, store, assist in delivering, conceal such gains or information pursuant to its origins, nature, location, disposal or transport of such gains or in any similar manner participates in ensuring other parties gains from such criminal offences.
Terrorist financing refers to the collection of funds with the intention that they be used, or the knowledge that they are to be used, to carry out an offence punishable under subparagraphs a) to c) of Article 100 of the General Penal Code.
Before a business relationship can be established, due diligence must always be carried out on customers. Due diligence must also be performed in the following instances:
- For individual transactions amounting to EUR 15,000 or more according to current and official exchange rates, whether the transaction is carried out in a single operation or in several operations which appear to be linked.
- For FX transactions amounting to EUR 1,000 or more according to current and official exchange rates, whether the transaction is carried out in a single operation or in several operations which appear to be linked.
- When there is a suspicion of money laundering or terrorist financing, regardless of any derogation or exemption.
- When doubt exists as to the accuracy or reliability of customer information data.
Due diligence involves knowing the customer, obtaining information on the intended transactions and verifying the above information through identification and certificates.
Information gathered in relation to due diligence is updated as appropriate; for instance, the customer must present valid identification again if previously presented identification expires while the business relationship is on-going.
Traceability of transactions
One of the key conditions for detecting money laundering and terrorist financing is to ensure the traceability of transactions in order to establish the origin of funds.
All business transactions, regardless of the amount, must therefore be recorded in such a manner as to ensure traceability. For this reason, the following information must be made available:
a) names of customers and their addresses, as well as the names of the authorised signatories and proxies involved in the transaction in the case of a legal entity;
b) legal domicile / residence;
c) identity number (kennitala) and other personally identifiable information;
d) information on the type and nature of the transaction;
e) information on the amounts of the transactions and the currencies concerned;
f) information on what accounts were used for the transactions;
g) point in time of the transactions; and,
h) name of the recipient of funds, if applicable.
Due diligence for individuals
Due diligence involves gathering information about customers, including the customer's a) name, b) Id. No., c) legal domicile, d) telephone, e) place of birth and nationality, and f) employment, position and/or name of employer. Information is also obtained on the customer's residence if this differs from the legal domicile.
Customers prove their identity by showing valid personal identification, issued or recognised by public authorities, e.g. a passport, driver's licence or ID card. The personal identification may not have expired and shall include a photo.
To remove all ambiguity, payment cards are not valid personal identification for the purpose of these rules.
Due diligence for legal entities/corporates
Legal entities are required to provide information on their a) name (registered company name), b) Reg. No. (kennitala), c) legal domicile, d) activities, e) telephone and f) legal form. Information is also gathered on the board of directors, major owners/shareholders and parties authorised to sign for a legal entity.
Legal entities registered in Iceland prove their identity by providing an original certificate from the Enterprise Register of the Director of Internal Revenue (Fyrirtækjaskrá Ríkisskattstjóra). Non-Icelandic legal entities must provide further information, i.e. a) an original certificate from the enterprise register or similar in the relevant country, b) the company's Articles of Association, and c) a bank reference or, as appropriate, the company's annual financial statement.
Persons authorised to sign for legal entities and those who hold special authority to represent a legal entity in its dealings with financial undertakings, including managing directors and board members, must verify their identity. These parties shall also confirm the validity of the origin of their authorisation to sign or special authorisations.
Due diligence for directors, managing directors and authorised signatories
Persons authorised to sign for legal entities and those who hold special authority to represent a legal entity in its dealings with financial undertakings, including managing directors and board members, must verify their identity by showing valid identification. These parties shall also confirm the validity of the origin of their authorisation to sign or special authorisations.
Information on proposed transactions
A party seeking to establish a lasting business relationship shall provide details about the proposed transactions. A special questionnaire is used to obtain information from customers about intended transactions, including about the purpose of the business relationship, as well as the nature of the transactions for which Landsbankinn is to serve as an intermediary. If a specific transaction will benefit a third party, the customer shall be required to provide information as to who the third party is. A party seeking to establish a business relationship shall be asked to state the origin of the financial assets which will pass through the bank in the proposed transactions.
Customer not present upon establishing a business relationship
If the customer requesting a business relationship is not physically present to prove his/her identity when commencing such a relationship, increased requirements shall be made concerning information about the customer.
If the customer has not previously presented his/her identification and had it scanned to the bank's database, the customer must provide a copy of valid personal identification certified by a notary public or similar officially approved party in the country in question; the certified document itself shall be delivered to the bank.
The initial payment shall be made in the name of the customer from an account which he/she has previously established in an approved credit institution or financial undertaking.
Furthermore, Landsbankinn reserves the right to request that the customer provide a bank reference from a bank in his/her home country and a copy of an invoice that confirms his/her address.
Due diligence not carried out upon the establishment of a business relationship
If a customer did not provide proof of identity when the business relationship commenced, it is important that he/she do so as promptly as possible.
Preservation of information
According to rules on measures to prevent money laundering and terrorist financing, copies of personal identification and other particulars on the customer which have been gathered must be preserved for at least five years from the time occasional transactions or a permanent business relationship concludes.
Bank employees are obliged to examine all transactions and intended transactions whenever there is a suspicion of money laundering or terrorist financing and report to the police any transactions where this appears to be the case. This applies in particular to transactions that are unusual, very extensive or complicated, having regard to the customer's normal activities, or which do not appear to have a financial or legitimate purpose.
Information provided to the police in good faith in accordance with legislation on money laundering shall not be regarded as a violation of confidentiality as defined by laws on financial enterprises. Such information provision shall neither make the bank or its employees concerned subjects to criminal sanctions nor liable for damages.
Internal rules on actions to prevent money laundering and terrorist financing
Landsbankinn has adopted rules on actions to prevent money laundering and terrorist financing, based on Icelandic law and international rules and guidelines. The objective of these rules is to seek to prevent the use of Landsbankinn's operations and activities, or those of its subsidiaries, for the purpose of money laundering or terrorist financing.
Landsbankinn’s Rules on Measures to Combat Money Laundering and Terrorist Financing