Sweden is a prosperous Nordic country and EU member-state with a highly developed economy. While it is traditionally regarded as a safe financial destination, recent criminal scandals have damaged Sweden’s reputation. In 2019, for example, an investigation into the Swedish bank Swedbank exposed a $200 million money laundering scheme in its Eastern European and Russian branches, and led to a €360 million fine. Similarly, in 2022, investigators uncovered money laundering regulatory violations at Swedish gambling companies Kindred, ATG, and Pinbet – and subsequently issued millions of Euros in fines to each company.
To combat the threat of financial crime, and protect the integrity of its financial system, Sweden is tightening its anti-money laundering (AML) and counter-financing of terrorism (CFT) controls, and pushing for a more robust regulatory framework across the EU. Given the increased focus, firms must understand their AML/CFT obligations in Sweden, and how to achieve regulatory compliance.
Sweden’s AML Regulator: Finansinspektionen
Established in 1991 as a merger of the Bank Inspectorate and the Insurance Supervision Authority, the Financial Supervisory Authority of Sweden, or Finansinspektionen (FI), is the country’s primary financial regulator.
FI operates under the authority of the Swedish Ministry of Finance and is responsible for examining the “risks and control systems” of the country’s financial institutions and supervising “compliance with statutes, ordinances and other regulations.” Those duties mean that FI is responsible for assessing the effectiveness of Sweden’s AML/CFT legislation and, where necessary, making recommendations for amendments. In its supervisory role, the regulator also assesses the financial health of companies setting up in Sweden, and issues permits to those deemed competent to conduct business.
In addition, FI has a mandate for financial education, disclosing clear and accurate financial information to the Swedish public and issuing guidance on compliance regulations to public and private entities. As Sweden’s national financial regulator, FI works with counterparts in other countries to aid AML/CFT investigations and address global criminal threats.
Key Sweden AML Regulations
Sweden’s main article of AML/CFT legislation is the Money Laundering and Terrorist Financing (Prevention) Act, also known as the Anti-Money Laundering Act, which requires firms to implement a risk-based AML/CFT compliance programme. In practice, this means that firms must assess the risk that individual customers present, and then deploy proportionate compliance measures. The AML Act also requires firms to monitor customers and their transactions for suspicious activity, and report AML alerts to Sweden’s Financial Intelligence Unit (FIU).
EU AMLDs: As a member of the EU, Sweden implements the Anti-Money Laundering Directives (AMLD), which are released periodically by the European Parliament and transposed into domestic legal frameworks. The latest AMLD is the Sixth Anti-Money Laundering Directive (6AMLD), which came into effect on 3 June 2021. Key regulatory details of 6AMLD include a harmonised list of money laundering predicate offences, an increase in the minimum penalties for money laundering, and an expanded definition of the crime of money laundering to include aiding and abetting.
AML/CFT penalties: In 2020, the penalty for money laundering in Sweden was capped at €50 million. Individuals found guilty of money laundering may face prison sentences of between 6 months and 6 years.
How to Comply With Sweden’s AML Regulations
In order to comply with Sweden’s risk-based AML/CFT regulations, firms must implement the following measures:
- Customer due diligence: Firms must conduct customer due diligence (CDD) in order to identify their customers and build accurate risk profiles. The CDD process includes the collection of names, addresses, dates of birth, and other identifying information, and should also include the ultimate beneficial ownership (UBO) of customer-entities.
- Transaction screening: Firms must screen their customers’ transactions on an ongoing basis for signs of money laundering activity. This might include transactions involving high risk counterparties or high risk jurisdictions.
- Sanctions and watchlist screening: As part of the screening process, firms must ensure they are not doing business with sanctions targets and politically exposed persons (PEP). To identify this type of high risk customer, firms must screen against international sanctions lists, PEP lists, and other relevant financial crime watchlists.
Adverse media screening: One of the most effective ways to strengthen compliance with risk-based screening requirements is to screen customers for involvement in adverse or negative news media. News reports and other forms of online media often reveal information about customers before it is officially confirmed – enabling firms to react as quickly as possible when a customer’s risk profile changes.
The EU AMLDs require firms to implement adverse media screening as part of their AML/CFT compliance process. This means that firms must integrate software capable of screening for adverse media on a global scale, with a coverage that includes traditional print and screen outlets, websites, and other data sources such as blogs, forums, and social media platforms.
Recent AML Initiatives in Sweden
The Swedish government is pushing for the EU to implement its most recent AML/CFT proposals, and is keen to advance the introduction of a single AML/CFT Rulebook, and a centralised Anti-Money Laundering Authority (AMLA). Discussions around both initiatives have gained broad consensus from EU member states but the location of the new AMLA is yet to be decided.
Sweden will also implement the EU’s Markets in Crypto-Assets (MiCA) regulation, a landmark new framework for managing the risks posed by unbacked crypto-assets and stablecoins. MiCA will come into effect in 2024, and joins the Transfer of Funds Regulation (TFR) which extends AML/CFT reporting and record-keeping obligations to cryptocurrency service providers.
Next Generation AML Screening for Swedish Compliance
Sweden’s AML/CFT landscape is changing, and financial institutions need to be able to respond quickly to new risks and regulatory requirements, and emerging criminal threats.
In this environment, Ripjar’s Labyrinth Screening platform provides a powerful compliance advantage, enabling searches of thousands of structured and unstructured data sources, including foreign news stories, sanctions lists, and watchlists, and generating real time financial intelligence. Built with next generation machine learning technology, Labyrinth enables firms to extract the most relevant compliance data from a source in seconds, so that firms can react quickly to new threats, in Sweden and beyond, and know as soon as possible when a client’s risk profile changes.
Contact us to discuss how Ripjar can support your AML compliance in Sweden
When money launderers disguise their identities behind corporate infrastructure or foreign shell companies, it falls to compliance teams to uncover the true criminal risk by running ultimate beneficial ownership (UBO) checks. Misuse of shell companies and corporate structures is a significant global threat, costing economies hundreds of millions of dollars in lost income per year, while enabling corruption and criminal activities around the world.
Given the scale of the threat, intergovernmental money laundering watchdog, the Financial Action Task Force (FATF), includes a requirement for UBO checks as part of its 40 Recommendations – meaning that firms must consider UBO as part of their AML/CFT compliance solution. However, in a shifting risk landscape, in which criminals continuously develop new techniques to hide illegal funds, AML/CFT regulations must evolve to keep pace and, in 2023, the FATF updated its UBO guidance to reflect new challenges.
With that in mind, we’re exploring the FATF’s UBO updates, along with some of their key compliance challenges.
How has the FATF UBO guidance changed?
Following a 2022 commitment to “preventing the misuse of legal persons”, the FATF strengthened its UBO guidance during its February 2023 Plenary in Paris. The update specifically affected Recommendation 24, Guidance on Beneficial Ownership of Legal Persons, with the goal of ensuring that “competent authorities have access to adequate, accurate and up-to-date information on the true owners of companies” and that criminals, corrupt officials and sanctions targets cannot use shell companies “to hide their dirty money and illicit activities”.
The FATF made 3 key updates to its UBO guidance:
Multi-Pronged Approach
The FATF requires members to take a “multi-pronged approach” to establishing beneficial ownership that incorporates “several sources of information”. At its core, the multi-pronged approach refers to UBO information obtained by companies as part of customer due diligence (CDD), and to UBO information held by public authorities on a registry (or “alternative mechanism”) that can be accessed rapidly and efficiently.
Under the multi-pronged approach, the FATF emphasises the importance of public and private entities being able to “access and exchange information on beneficial ownership”, and using that capability to “inform the national understanding of current and emerging risks.”
UBO Verification
The FATF clarified its guidance on the verification of UBO data in order to ensure its accuracy. The updated guidance made clear that UBO information verification must be risk-based and could include the following measures:
- A review of documents such as share certificates, shareholder registers, and board meeting resolutions.
- Manual or automated cross checks with government databases, including population registers, taxpayer registers, and vehicle and land registries.
The verification process must prove that a natural person “actually exists and is who they claim to be”. In practice, this means conducting a review of government-issued documents and verifying a “combination of attributes” such as name, birth date, and nationality. In establishing that a person is a beneficial owner, firms should consider:
- Whether the person has ownership of or voting rights in the entity they control.
- Whether the person is actually exercising their control rights over the entity – or is taking instruction from a third party.
- Whether the beneficial owner is consistent with the “structure and risk profile” of the entity.
Foreign Company Ownership
The FATF also clarified that its UBO standards should extend beyond a country’s borders, to foreign-created businesses “with sufficient links with their country”. The updated guidance states that beneficial ownership information about foreign-created businesses should be “timely”, “adequate”, and “up to date”. The 2023 update also sets out stronger controls to “prevent the misuse of bearer shares and nominee arrangements”.
UBO Challenges in 2023
While FATF guidance calls for governments to establish public beneficial ownership registers, some countries have encountered legal friction in implementing that specific measure.
The European Union: In the EU, the Fifth Anti-Money Laundering Directive (5AMLD) set out requirements for public beneficial ownership registries – a regulation which came into effect in January 2020. However, upon discovering that they had been added to the beneficial ownership registry in Luxembourg, several politically exposed persons (PEP) requested that their names be removed.
After that request was denied in Luxembourg, the PEPs launched a legal bid, citing factors such as privacy and security risks. Ultimately, the EU Court of Justice upheld the legal bid – a decision which overrode 5AMLD and meant that many EU member states either restricted public access to their UBO registers, or suspended the registers entirely. AML/CFT experts have pointed out that the decision had significantly reduced AML/CFT transparency, and made it easier for criminals to use corporate infrastructure to conceal illegal activities.
South Africa: In February 2023, South Africa was added to the FATF Grey List for failing to meet AML/CFT standards set out in the Recommendations. In its action plan for South Africa, the FATF set out a requirement that the South African government implement a UBO register in domestic legislation by the end of January 2025.
Accordingly, South Africa’s Companies and Intellectual Property Commission (CIPC) is working urgently to implement amendments to current AML/CFT laws in order to bring the country into compliance with FATF standards. CIPC Commissioner Rory Voller has indicated that South Africa’s UBO register will be launched after amendments to the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 are passed.
Address UBO Challenges with Next Generation Technology
The FATF’s 2023 update has made UBO compliance a priority for regulators around the world – and particularly in jurisdictions where legal challenges are taking valuable customer data offline. Where UBO verification has become more difficult – as a result of legal challenges or a lack of available information – firms will need to work harder to establish and verify the identities of their customers by gathering as much identifying data as possible.
One of the best sources of information on beneficial ownership is negative news or adverse media, where breaking stories frequently reveal customer connections to corporate entities, including shell companies before that information is confirmed by official sources. Both the Panama Papers (2016) and the subsequent FINCEN Files (2020) featured revelations about shell company misuse, and exposed illicit financial activity in low-regulation jurisdictions around the world – triggering numerous AML/CFT investigations and leading to the recovery of over $500 million in lost revenue.
To capture adverse media data relevant to UBO verification, firms must implement a technology solution capable of sourcing data from around the world, while minimising false positives and noise by extracting only the most relevant information. Powered by next generation machine learning technology, Ripjar’s Labyrinth Screening platform delivers that capability, enabling firms to search for customer names across thousands of global media sources in real time, in over 20 foreign languages. Generating actionable financial intelligence in seconds, Labyrinth searches ensure your firm has the latest risk data at its fingertips, and can use that data to make faster, stronger decisions about UBO and other critical AML/CFT issues.
Contact us to discuss how Ripjar can help you comply with the latest FATF UBO guidance
While Belgium has a reputation as a wealthy and politically influential European power, it also faces an increasing number of financial crime threats, which include international money laundering and terrorism financing activities. In 2021, for example, Belgium’s financial intelligence unit (FIU) recorded 46,000 suspicious transactions, up 50% on the previous year. In order to protect its own economic system from that threat, and contribute to global anti-money laundering (AML) and counter-financing of terrorism (CFT) efforts, Belgium has built a robust regulatory framework for financial institutions, and established a financial regulator to oversee compliance.
If you’re setting up or doing business in Belgium, it’s important to understand how Belgium’s AML regulations will affect you, and what steps you need to take to protect your organisation from risk.
Belgium AML Regulators
The Financial Services and Markets Authority
Belgium’s primary financial regulator is the Financial Services and Markets Authority (FSMA). Established in 2011, the FSMA replaced its predecessor, the Banking Finance and Insurance Commission (CBFA), as part of an effort to consolidate supervision of Belgium’s financial system, and protect the transparency, fairness, and orderly operation of its markets. To that end, the FSMA works primarily in the following domains:
- Supervision of financial products and services, including pension schemes
- Compliance with financial conduct rules and AML/CFT regulations
- Surveillance of markets and distributed financial information
- Financial education
The FSMA works with the National Bank of Belgium (NBB) and the Federal Public Service Economy in its supervisory role, and has the authority to conduct onsite inspections or request documentation in order to verify AML/CFT compliance. Where it finds violations, the FSMA may issue warnings, impose business prohibitions, or impose sanctions including significant financial penalties against the offending firms.
As a member of the European Securities and Markets Authority (ESMA) and other international financial organisations, the FSMA also represents Belgium on the global financial stage. To that end, it is signatory to numerous international financial crime agreements and coordinates with counterpart organisations to protect global financial markets.
The CTIF
Following Financial Action Task Force (FATF) and EU directives, Belgium has also established a financial intelligence unit (FIU), known as the Financial Intelligence Processing Unit (CTIF). Like other FIUs, the CTIF is an independent, autonomous entity responsible for collecting and processing AML/CFT data, including suspicious transaction reports (STR), in order to provide actionable intelligence for subsequent law enforcement investigations. The CTIF also coordinates with counterpart FIUs in other countries to aid in the investigation and prosecution of financial crime.
Key AML Regulations in Belgium
Belgium’s main AML/CFT legislation is the Law of 18 September 2017 on the Prevention of Money Laundering and Terrorist Financing – also known as the “AML Law”. The law transposes the details of the EU’s Anti-Money Laundering Directives, establishing a set of risk-based AML/CFT requirements for firms that operate within Belgium’s jurisdiction.
As new AMLDs are released, the Belgian government updates the AML Law to include the latest regulatory detail. The Sixth Anti-Money Laundering Directive, for example, sets out a harmonised list of money laundering predicate offences, and expanded the definition of money laundering to include aiding and abetting.
Belgian authorities may impose fines for non-compliance with the AML Law, which may reach up to €1,250,000 for non-financial companies, and €5000 or 10% of annual turnover (whichever is greater) for financial companies.
How to Comply with Belgium’s AML Law
The AML Law imposes risk-based AML/CFT requirements on firms operating within Belgium. This means that firms must conduct a risk assessment of individual customers to establish the level of risk they present, and then deploy proportionate AML/CFT compliance measures.
Establishing risk accurately is a significant challenge for financial institutions, which must collect and analyse large amounts of data in order to establish accurate customer risk profiles. With that in mind, Belgian AML/CFT compliance solutions typically include the following controls:
- Customer due diligence (CDD) measures to establish and verify the identity of customers, and build accurate risk profiles. Required CDD information may include names, addresses, places of business, and other identifying materials.
- Ultimate beneficial ownership (UBO) verification of corporate structures in order to ensure that money launderers are not concealing their identity with shell companies or corporate structures.
- Customer screening against relevant watchlists, including politically exposed person (PEP) lists and global sanctions lists, and adverse media sources. PEPs and persons subject to sanctions represent a high financial crime risk, so firms must perform ongoing screening to verify any changes to customer statuses.
Adverse media screening: In an evolving financial landscape, one of the quickest ways to establish true customer risk is to conduct adverse media screening – which may reveal critical compliance information before confirmation by official government sources. Adverse media includes news stories, social media, blogs, and forum posts, and may detail involvement in criminal activity, incoming regulatory changes, or a customer’s designation on watchlists and sanctions lists – all of which will likely change a customer’s risk profile.
Sanctions screening: Customers that are subject to international sanctions pose an elevated AML/CFT risk, and should be subject to enhanced due diligence (EDD) including adverse media scrutiny. As an EU member-state, Belgium must comply with EU sanctions screening requirements: in particular, firms should pay close attention to Russia sanctions, which are updated frequently, and currently designate a range of companies and individuals that directly support or are involved with the invasion of Ukraine.
Belgium AML Initiatives: Crypto Regulation
In addition to the most recent AMLD measures, Belgium will, like other EU member states, implement the Markets in Crypto Assets (MiCA) regulation. Scheduled to be introduced in 2024, MiCA will affect the AML/CFT treatment of crypto assets, introduce specific requirements for the use of stablecoins, and establish an EU-wide crypto asset service provider register overseen by the European Banking Authority.
Belgium has focused heavily on crypto regulation recently, with an amendment to the AML Law in 2022, which brought crypto service providers under the scope of the legislation (and previous EU AMLDs). The amendment introduced the following measures:
- A definition of “exchange services between virtual currencies and fiat currencies” as they pertain to the AML Law.
- A definition of the type of crypto exchange services that fall under the scope of the AML Law.
- A prohibition on non-European Economic Area persons offering or providing crypto exchange services in Belgium.
- An FSMA registry of crypto exchange service providers.
- A number of new criminal offences and sanctions that pertain to crypto asset activities.
The amendment came into effect on 1 May 2022.
AML Compliance Solutions
EU AMLDs include strict requirements for both sanctions and adverse media screening compliance, and firms in Belgium must be prepared to search international data sources for customer involvement in risk factors set out in domestic legislation. Speed, scope, and accuracy are critical to effective customer screening, which means firms must seek a solution with a global scope, that can be tailored to their risk appetite, and that can minimise false positive alerts.
Ripjar’s Labyrinth Screening platform is built to achieve screening compliance in Belgium, the EU, and jurisdictions around the world. Built with cutting-edge machine learning technology, Labyrinth Screening is informed by thousands of global data sources in real time, including the latest adverse media, sanctions list and watchlist updates. Labyrinth is capable of searching in over 20 foreign languages to ensure firms capture data from every corner of the world, and delivers actionable intelligence in seconds so that firms can make important decisions quickly and confidently.