FATF Status

Iceland is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

FATF Statement re AML Strategic Deficiencies:   23 October 2020

The FATF welcomes Iceland’s significant progress in improving its AML/CFT regime. Iceland has strengthened the effectiveness of its AML/CFT regime and addressed related technical deficiencies to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in October 2019. Iceland is therefore no longer subject to the FATF’s increased monitoring process. Iceland will continue to work with the FATF to improve further its AML/CFT regime. 

Compliance with FATF Recommendations

The latest follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Iceland was undertaken in 2021. According to that Evaluation, Iceland was deemed Compliant for 22 and Largely Compliant for 16 of the FATF 40 Recommendations. It remains Highly effective for 0 and Substantially Effective for 1 of the Effectiveness  & Technical Compliance ratings.​

US Department of State Money Laundering assessment (INCSR)

Iceland 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: -

Iceland is not considered a regional financial center. Criminal proceeds tend to derive from domestic organizations with some linkages to foreign groups. Money laundering in Iceland is related primarily to tax evasion, narcotics trafficking, fraud and other economic crimes, and underground casinos. Over the years, very few cases have been registered as pure money laundering cases, mainly due to the unavailability of statistical data. Financial crimes concerning market manipulation have been prosecuted, but the scale of money laundering involved in such activities is not clear. The Economic Crime Unit, which transferred from the National Commissioner of the Icelandic Police (NCIP) and merged with the Office of the Special Prosecutor (OSP) in 2012, continues to investigate criminal actions in connection with the 2008 collapse of Iceland’s financial system.

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                          72

World Governance Indicator – Control of Corruption             92

The rule of law is strong in Iceland, and the tolerance for corruption is low. Although isolated cases of corruption do occur, it is not an obstacle to business. Iceland’s General Penal Code (GPC) criminalises the acts of giving and receiving a bribe, abuse of office, trading in influence and fraud. It establishes criminal liability for individuals and companies, and forbids bribery between businesses and foreign public officials. While there is no distinction made between bribes and facilitation payments, the illegality of gifts and hospitality depends on their intent and the benefit obtained. Since the financial crisis, a number of fraud scandals have been uncovered in the financial sector, revealing conflicts of interest between businesses and political figures, as well as abuse of public funds. This has exposed institutional weaknesses and raised fundamental questions about the integrity of the governing institutions. The government has initiated a large number of investigations into the collapse, as well as legal and regulatory measures to counter abuses in its financial system. For further information - GAN Integrity Business Anti-Corruption Portal

Iceland is an island country located between North America and Europe in the Atlantic Ocean, near the Arctic Circle, with an advanced economy that centers around three primary sectors: fisheries, tourism, and aluminum production. Until recently, U.S. investment in Iceland has mostly been concentrated in the aluminum sector, with Alcoa and Century Aluminum operating smelters in Iceland. U.S. portfolio investments in Iceland have been steadily increasing in recent years. Iceland’s convenient location between the United States and Europe; its high levels of education, connectivity, and English proficiency; and a general appreciation for U.S. products make Iceland a promising market for U.S. companies. Americans made up a third of the tourist population that visited Iceland in 2022.

There is broad recognition within the Icelandic government that foreign direct investment (FDI) is a key contributor to the country’s economic prosperity. As part of its investment promotion strategy, the Icelandic government operates a public-private agency called “Invest in Iceland” that facilitates foreign investment by providing information to potential investors and promoting investment incentives. Iceland identifies the following as “key sectors” in Iceland: tourism, food and natural products, data centers, energy and green solutions, innovation, fisheries, creative industries, and life sciences. Iceland offers incentives to foreign investors in certain industries.

Tourism has been a growing force behind Iceland’s economy in the past decade, with opportunities for investors in high-end tourism, including luxury resorts and hotels. The number of tourists in Iceland reached more than 2.3 million in 2018. Tourism in Iceland contracted in 2019 and 2020 due to COVID-19, and the total number of tourists went down to 2 million in 2019 and then down to 486,000 in 2020. As of 2022, the tourism sector has fully recovered, with 698,000 tourists in 2021, around 1.8 million tourists in 2022, and a projected number of 2.3 million tourists expected for 2023.

The startup and innovation communities in Iceland are flourishing, with the information technology and biotech sectors growing fast, particularly pharmaceuticals and wellness, gaming, and aquaculture. Iceland’s IT sector spans all areas of the digital economy. The Icelandic energy grid derives 99 percent of its power from renewable resources, making it uniquely attractive for energy-dependent industries.
Iceland’s 2018 Climate Action Plan was updated in 2020 and is designed to achieve Iceland’s national climate goals of making the country carbon neutral by 2040 and cutting greenhouse gas emissions by 40 percent by 2030 under the Paris Agreement.

Russia’s war of aggression against Ukraine affected Iceland less than neighboring countries. Inflation has steadily risen since the invasion, as consumer product prices and gas prices continue to increase.

Country Links

Financial Intelligence Unit - Iceland (FIU-ICE)

Financial Supervisory Authority

Central Bank of Iceland