Reference should be made to the Denmark country report for further information (see below): -

FATF Status​

Denmark is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations​

The latest follow up to the Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Denmark was undertaken in February 2021. According to that Evaluation, Denmark was deemed Compliant for 6 and Largely Compliant for 32 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 3 of the Effectiveness & Technical Compliance ratings.

Mutual Evaluation Report Recommendation Ratings

Conclusion from last Follow-up Report (2021)

FATF has re-rated Recommendations 6,7,8,25 and 26 from Partially Compliant to Largely Compliant.

Recommendation 15 was re-rated from Largely Compliant to Partially Compliant.:

Conclusion from last Follow-up Report (2019)

Overall, Denmark has made progress in addressing the technical compliance deficiencies identified in its MER, sufficient to justify upgrading three Recommendations.

Denmark will remain in enhanced follow-up and will report back to the FATF on progress in October 2020.

Conclusions from follow-up report – November 2018

Overall, Denmark has made good progress in addressing the technical compliance deficiencies identified in its MER and has been re-rated on ten Recommendations. Nine Recommendations remain PC. Denmark fully addressed the deficiencies in Recommendation 12 which is re-rated as C. Denmark has also addressed most of the technical compliance deficiencies identified on R.2, 10, 15, 16, 17, 18, 22, 24 and 33, such
that only minor shortcomings remain and these Recommendations are re-rated as LC. Recommendation 3 and 23 remained rated LC. While Denmark complies with the revised requirement of R.7, outstanding deficiencies remain, meaning Denmark remains PC. Denmark complies with the updated requirements of R.18 and R.21. R.18 is being re-rated to LC as noted above and R.21 will maintain its C rating.

Key Findings ​from latest Mutual Evaluation Report

Overall, Denmark has a moderate level of understanding of its money laundering and terrorist financing (ML/TF) risks; with TF risks being better understood by authorities. Denmark’s assessment of ML risk is comprised of a number of sectoral risk assessments, which underpin the ML national risk assessment (NRA).​

The TF NRA was separately prepared. The NRAs were not conducted in a coordinated, whole-of-government manner, and suffered from several methodological deficiencies in terms of inputs, design and scope. Denmark does not maintain comprehensive statistics on matters relevant to effectiveness and efficiency of their AML systems, and this negatively impacted the ML NRA. Overall, while some risk-based actions have been taken in response to the NRAs, it is limited and variable and does not adequately correspond to the risks identified.​

Denmark does not have national AML/CFT strategies or policies. The objectives and activities of individual competent authorities are determined by their own priorities and are not coordinated. Coordination and cooperation tends to occur informally and on an ad hoc basis.​

The effective functioning of the Money Laundering Secretariat (MLS), Denmark’s financial intelligence unit (FIU), is hampered by its lack of human resources and operational autonomy.​

Denmark has a handling of stolen goods offence that extends to all criminal proceeds thus encapsulating the laundering of all predicate offences. Based on Danish legal tradition, the offence does not cover self-laundering. In practice, the police focus on prosecuting the predicate offence and information provided suggests that serious ML is not actively pursued. As the ML offence also includes traditional handling of stolen goods, it is not possible to obtain separate data on ML. The criminal penalty of 1.5 years of maximum imprisonment for ordinary ML is not fully proportionate or dissuasive, and though aggravated ML carries a higher penalty of six years, the average of penalties imposed in practice were low and in many cases resulted in suspended imprisonment.​

Denmark has a robust legal framework for investigating and prosecuting TF. Every counterterrorism investigation includes an investigation into potential TF. Between 2011 and 2016, Denmark indicted 16 persons with TF offences, resulting in seven convictions. This appears to be in line with the TF risks of Denmark. The maximum penalty for TF is ten years’ imprisonment. However, in practice, more lenient sanctions are applied, which limits the dissuasiveness of the relatively high sanctions.​

Denmark has a legal system to apply targeted financial sanctions (TFS) [both TF and proliferation financing (PF)]. Implementation of TFS related to UNSCR 1267, 1988, and 1373 (and their successor resolutions) has technical and practical deficiencies due to delays at the European Union (EU) level on the transposition of designated entities into sanctions lists and the absence of any specific measures to freeze the assets of EU internals. Understanding and implementation of TFS by reporting entities is varied and limited, particularly outside the banking sector. With a few exceptions, TFS knowledge and compliance by designated non-financial businesses and profession (DNFBPs) is poor. There is some, but insufficient, compliance with obligations by reporting entities. There is limited monitoring of TFS compliance by supervisory authorities.​

Overall, there is an inadequate understanding of risk and weak implementation of AML/CFT measures in almost all segments of the financial sector. With the exception of casinos, DNFBPs’ understanding of risk and implementation is also generally poor. The legal framework of preventive measures also includes a number of gaps which negatively impact the effectiveness of the system. ​

With the exception of the casino sector, a risk-based approach to AML/CFT supervision is limited, and where it exists is in the early stages of implementation. Further, the frequency, scope and intensity of supervision are inadequate. There are also serious concerns related to the severe lack of resources available for AML/CFT supervision in Denmark. The range of supervisory powers to enforce compliance and sanction breaches are insufficient, with referrals to police for investigation and prosecution being the principal used to ensure compliance by financial institutions (FIs). The sanctions that have been applied are not proportionate and dissuasive. ​

Denmark’s extensive system of registers, for both natural (CPR) and legal persons (CVR) provides a solid foundation for obtaining ownership and other information. Beneficial ownership information is relatively easily traced through the Central Business register (CVR) in less complicated structures and where no foreign ownership or control is involved. In these cases (complex and foreign ownership), competent authorities have to obtain beneficial ownership information from FIs/DNFBPs (where the legal person is a customer). However, implementation of AML/CFT measures, including with respect to beneficial ownership, is generally weak. New legislation enacted in 2016, and coming into force in May 2017, will require all legal persons to obtain and hold beneficial ownership information and make it publicly available through the CVR, and this will significantly strengthen the ability of authorities to obtain beneficial ownership information in a timely way.​

Denmark has a sound legal framework for all forms of international cooperation. Where there is an absence of a legal framework to provide legal assistance, authorities apply Danish legislation by analogy.

Risks and General Situation​

The Kingdom of Denmark consists of Denmark, Greenland and the Faroe Islands. The total annual ML potential in Denmark is estimated by authorities to be approximately EUR 2.8 billion, comprising of proceeds from drugs, human trafficking, car theft, robberies, arms trade, smuggling of tobacco and liquor, tax and excise duty fraud, and other economic crime. Of these crimes, Denmark considers tax and excise duty crime to be one of the most profitable crime areas. Specifically, Denmark estimates that fiscal and value-added tax (VAT) fraud generate the largest proceeds of crime in Denmark. Tax authorities estimate that the Treasury suffers a loss of about EUR 0.4 billion a year from tax fraud alone.​

Denmark’s ML NRA identifies the following areas as high risk in Denmark: currency exchangers; legal business structures; money remittance providers; and cash smuggling. Medium risks include: banks, gambling sector; purchasing of real-estate; high-value goods; trust company service providers (TCSPs); electronic payment services; and, lawyers and accountants. Low risk areas include only life assurance and pensions funds.​

In 2015, a terrorist attack occurred in Copenhagen, resulting in three deaths (including the perpetrator) and five injured. Terrorism is recognised as a significant threat to Denmark, particularly from networks, groups and individuals who adhere to a militant Islamist ideology. Terrorist financing in Denmark is primarily conducted to support terrorist groups and networks abroad, including groups in conflict zones. At the time of the onsite an estimated

US Department of State Money Laundering assessment (INCSR)​

Denmark was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -​

Denmark does not have a serious problem in the area of financial crimes. Money laundering activity is generally derived from foreign criminal activity and is primarily related to the sale of illegal narcotics, specifically cocaine, heroin, and amphetamines. Immigrant gangs as well as outlaw motorcycle gangs have been involved in a range of offenses, including narcotics-related offenses, smuggling of goods, and various financial crimes. The Danish Special Crimes unit also believes human trafficking, car theft, robberies, smuggling of alcohol and tobacco, and tax or duties fraud also generate laundered funds. Illegal money remittances and foreign exchange services and their possible link to terror finance pose risks. There are no indications of trade- based money laundering as it relates to drug trafficking in Denmark, and public corruption is virtually non-existent. Denmark is geographically vulnerable to serving as a transit country for smuggling into Sweden and Norway.

OECD Common Reporting Standard

The Faroe Islands signed up to the implementation of the OECD Common Reporting Standard in 2017.

Reference should be made to the Denmark country report for further information (see below): -

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           N/A

World Governance Indicator – Control of Corruption              N/A

​

US State Department

Denmark is perceived as the least corrupt country in the world according to the 2019 Corruption Perceptions Index by Transparency International, which has local representation in Denmark. The Ministry of Justice is responsible for combating corruption, which is covered under the Danish Penal Code. Penalties for violations range from fines to imprisonment of up to four years for a private individual’s involvement and up to six years for a public employee’s involvement. Since 1998, Danish businesses cannot claim a tax deduction for the cost of bribes paid to officials abroad.

Denmark is a signatory to the OECD Convention on Combating Bribery, the UN Anticorruption Convention, and a participating member of the OECD Working Group on Bribery. In the Working Group’s 2015 Phase 3 follow-up report on Denmark, the Working Group concluded “that Denmark has partially implemented most of its Phase 3 recommendations. However, concerns remain over Denmark’s enforcement of the foreign bribery offence.”

GAN Integrity Business Anti-Corruption Portal

Denmark is regarded as one of the world’s least corrupt countries, and bribery and other corrupt practices are not considered obstacles to business. The Danish Criminal Code (in Danish) forbids active and passive bribery and most other forms of corruption offences contained in international anti-corruption conventions. It is also forbidden to bribe foreign public officials, and companies can be held criminally liable for acts of corruption committed by individuals working on their behalf. There is no distinction made between bribes and facilitation payments, and the propriety of gifts and hospitality depends on their intent and the benefit obtained. Safeguards against corruption and abuse of power in Denmark primarily rest with a strong practice of integrity rather than with formal rules and regulations. Despite a very low level of corruption, international monitoring institutions have criticised Denmark for its non-transparent rules on financing of political parties, and for insufficient enforcement of foreign bribery laws. Nonetheless, the government enforces their anti-corruption policies and laws effectively.

The Faroe Islands have an open economy and multiple trade agreements with other countries. For more than two centuries, the Faroese economy has relied on fisheries and related industries. Fisheries (including agriculture, hunting, and forestry) account for 22 percent of the Faroe Islands’ domestic factor income. About 95 percent of goods exports are fish products. Salmon alone accounts for 38 percent of goods exports. As a non-EU member, the Faroe Islands had open access to the Russian market post-2014, despite Russia’s retaliatory trade embargo on certain food imports from the EU. This allowed the Faroese to sell increased quantities of salmon to the Russian market at a premium even while prices dropped significantly in the European market. The Faroese government announced in February 2022 that it supports Western sanctions against Russia in the wake of its invasion of Ukraine and passed legislation in May to enable it to implement sanctions against Russia and Belarus.

The islands exported $1.59 billion (DKK 10 billion) worth of goods in 2021, 95 percent of which were fish products, with the remainder being marine vessels and aircraft resales. In recent years, construction, transportation, banking, and other financial services sectors have grown, and offshore oil and gas exploration is developing, though commercially viable finds have not been made. In 2021, the top destination for goods exports was Russia (23.3 percent), followed by Denmark (12.6 percent), the United States (10.6 percent), and the United Kingdom (10.5 percent). Goods imports totaled $1.46 billion (DKK 9.2 billion) in 2021, with the vast majority from Europe. Of total Faroes’ goods imports, 23.2 percent came from Denmark, followed by Norway (12.8 percent), Germany (9.2 percent), the Netherlands (7.5 percent), and China (6.9 percent). Direct imports from the United States were 1.6 percent of total imports. Major import categories were inputs to industry (22.5 percent), household consumption (21.0 percent), fuels (14.5 percent), and machinery and capital equipment (10.7 percent).

The Faroe Islands’ small, open, but non-diversified economy makes it vulnerable to changes in international markets. The Faroe Islands have full autonomy to set tax rates and fees, and to set levels of spending on the services they provide. Denmark provides an annual block grant indexed to Danish inflation. In 2021 it was $103.4 million (DKK 650.7 million).

COVID-19 reached the Faroe Islands in March 2020. The Faroese government quickly instituted short-term measures, similar to Denmark’s, to contain the infection. The Faroes were virus-free by July 2020, and experienced brief upticks throughout 2020 and 2021, though without the need for major shutdowns. The virus returned in earnest in late 2021, culminating in January – February 2022, but without putting the hospital system under pressure. On February 28, 2022, the government lifted all remaining COVID-19 restrictions.

The global economic downturn in the wake of COVID-19 and long-term uncertainty lowered worldwide demand and fish prices, the Faroes’ main export. Some fisheries used their existing supply chains to convert a large portion of their sales from restaurant customers to retail trade customers. At the same time, corporate investment appetite has remained intact, as corporations were well consolidated before the virus outbreak. This has helped mitigate some of the negative economic impact of the pandemic. Labor market compensation schemes further supported the economy. By September 2020, the government phased out its wage cost compensation scheme and employment and unemployment levels were roughly back to their pre-pandemic levels. The pandemic acutely impacted the tourism sector, but this sector makes up only a small portion of the Faroese economy.

Official statistics list 2020 as the most recent year available for GDP figures, at $3.4 billion (DKK 21.2 billion). According to Statistics Faroe Islands, nominal GDP rose 8.7 percent in 2016 followed by growth of 3.7 percent in 2017, 2.3 percent in 2018, and 7.9 percent in 2019. GDP contracted by 2.8 percent in 2020 mainly due to COVID-19 and related price effects on fish prices. According to the Danish Central Bank, the strongest underlying drivers for recent years’ growth are substantial price increases for farmed salmon and larger catches of mackerel and herring in particular, combined with considerable productivity gains. Activity has been concentrated in fewer farms and shipping companies, both in aquaculture and in the pelagic fisheries, making these industries more profitable. These factors have boosted incomes and led to higher private and public sector demand. Employment has risen notably, and the labor market participation rate is high, which has pushed down unemployment from 7 percent in 2011 to 0.9 percent in 2021. The need for labor has increasingly been met via high net immigration, which has prolonged the economic upswing. According to the Danish Central Bank, all industries are experiencing labor shortages. The many new inhabitants, however, have put the housing market under pressure, especially in and around the capital Tórshavn.

Construction of the tunnels to the islands Eysturoy and Sandoy, with an expected cost of approximately $420 million (DKK 2.64 billion) or 16 percent of GDP, are proceeding as planned. The Eysturoy tunnel opened for traffic on December 19, 2020, and the Sandoy tunnel is set to open in December 2023.

In the longer term, the aging Faroese population will weaken the sustainability of public finances, according to the Economic Council for the Faroe Islands. The Council suggests that in order to maintain the high level of service to citizens established over many years, the Faroese government must prioritize this issue in due course. Currently, there are four people of working age (16 to 66), for every person aged 67 or older. By 2050, the Council estimates there to be 2.1 persons for every dependent retiree. The Council estimates that a permanent fiscal improvement of 5 percent of GDP will be required to stabilize government debt, which is currently at a low level. On August 6, 2021, credit agency Moody’s maintained its Aa2 long-term issuer rating of the Government of the Faroe Islands. The Aa2 rating is the third-highest rating on Moody’s 21-tier scale. The outlook remains stable and Moody’s concludes that the Faroe Islands has a healthy degree of financial independence, a low level of refinancing risk, and that, despite a state budget deficit in 2020 and 2021 caused primarily by the COVID-19 pandemic, the debt-to-income ratio will most likely return to healthy levels in the coming years. Moody’s assesses the stable and historical relationship with Denmark as an additional strength.

The Faroe Islands opened its own securities exchange in 2000; active trading of shares followed in 2005. The exchange is a collaboration with the VMF Icelandic exchange on the Nasdaq OMX Nordic Exchange Iceland.

Foreign Direct Investment into the Faroe Islands totaled $22.2 million (DKK 139.4 million) in 2019, and outward FDI was $699 million (DKK 4.4 billion). The Faroese government has indicated an interest in attracting further foreign investment. “Invest in the Faroes” is the Faroese government unit promoting Faroese trade. The website is http://www.government.fo .

The Faroe Islands have over the years engaged in several disputes with the EU over fishing quotas, so far culminating with the EU adopting measures that allowed it to impose sanctions on the Faroe Islands in 2012. In March 2013, the Faroe Islands unilaterally increased its quota for herring and mackerel. EU member states responded by voting in favor of imposing sanctions, which went into force in August 2013. The EU lifted sanctions in 2014 after reaching a political understanding with the Faroe Islands on herring catches. Subsequently, the Faroe Islands and the other coastal states in the North Atlantic signed a five-year agreement on mackerel quotas, reducing uncertainty for fisheries and improving profitability since the agreement allows for more sustainable harvesting. The Faroe Islands negotiates reciprocal exchanges of fishing opportunities with the EU, Norway, and the United Kingdom annually.

The Government of the Faroe Islands retains control over most internal affairs, including the conservation and management of living marine resources within the 200 nautical mile fisheries zone, natural resources, financial regulation and supervision, and transport. Denmark continues to exercise control over foreign affairs, security, and defense, in consultation with the Faroese government.

The labor force comprised 31,968 people in 2021, of which 664 were unemployed. In many areas, the Faroese labor market model resembles other Nordic countries, with high standards of living, well-established welfare schemes, and independent labor unions. Most people in the Faroe Islands are bilingual or multilingual, with Danish and English being the most widely spoken languages after Faroese. The Islands boast well-developed physical and telecommunications infrastructure and have well-established political, legal, and social structures. The standard of living for the population of 53,664 (which exceeded 50,000 for the first time in May 2017) is high by world standards, with Gross National Disposable Income per capita similar to that of Denmark.

Investment Climate information provided by US State Department