Legislation – Prevention of money laundering and terrorist financing
The regulations that seek to prevent money laundering and terrorist financing consist of national legislation and European and international regulations.
Finland has an Anti-Money Laundering Act in place. The Anti-Money Laundering Act is supplemented by several separate acts.
The national law is based on EU regulations issued as directives and regulations. The directives are implemented as national laws, the regulations are applied as is.
The national law and EU law are heavily influenced by the international recommendations by Financial Action Task Force on Money Laundering (FATF).
The Anti-Money Laundering Act (Act on Detecting and Preventing Money Laundering and Terrorist Financing)
The Anti-Money Laundering Act
lays down provisions on the prevention of money laundering and terrorist financing
promotes the detection and investigation of money laundering and terrorist financing
reinforces the tracing and recovery of the proceeds of crime.
The Anti-Money Laundering Act obligates businesses in certain sectors to create a risk assessment on the risks of misconduct associated with their activities and to identify and know their customers (customer due diligence). The risk assessment shall be updated regularly.
In addition, most companies and corporations must determine and register their beneficial owners, i.e. the owners and other parties that exercise control. Further provisions on the registration are laid down separately in the Trade Register Act, Associations Act, Freedom of Religion Act and the Foundations Act.
Operators must act in ways that contribute to the prevention of money laundering and terrorist financing. The operators are also obligated to report suspicious business activities to the Financial Intelligence Unit of the National Bureau of Investigation.
The Regional State Administrative Agency for Southern Finland maintains the register for detecting and preventing money laundering. The Anti-Money Laundering Act contains provisions on the monitoring of various actors and the administrative sanctions for neglect.
Anti-Money Laundering Act (Finlex, in Finnish)
(Project window of the Prime Minister’s Office)
Government decrees to be issued under the Act on Detecting and Preventing Money Laundering and Terrorist Financing (in Finnish, Project window of the Prime Minister’s Office)
Act on Virtual Currency Providers
The Act on Virtual Currency Providers lays down provisions on the
obligation to register
of a virtual currency provider. The act applies to the business operations of virtual currency providers. A virtual currency provider means the issuer of a virtual currency, virtual currency exchange, virtual currency exchange service and its marketplace and the provider of a wallet service. The Act is a part of the implementation of the EU’s 5th Anti-Money Laundering Directive.
The Act obligates virtual currency providers to report themselves to a register maintained by the Financial Supervisory Authority. The Act lays down provisions on the conditions for registration, such as the credibility of the operator and the point in time when the Financial Supervisory Authority has to remove the virtual currency provider from the register.
The Act also obligates the virtual currency provider to know its customers and their beneficial owners and manage the risks of the customer relationship. Virtual currency providers also come within the scope of the Anti-Money Laundering Act.
Compliance with this Act is monitored by the Financial Supervisory Authority. The Financial Supervisory Authority can prohibit the virtual currency provider from continuing its operations if the provider materially neglects its statutory obligations. The prohibition will be in force until the provider corrects its neglect. A conditional fine may be imposed to give more weight to the prohibition.
Act on Virtual Currency Providers (Finlex, in Finnish)
Government Decree on Politically Exposed Persons
When the risk of money laundering or terrorist financing is elevated, the parties under the reporting obligation must adopt enhanced customer due diligence measures. Risk is elevated in cases such as business relationships with politically exposed persons or their family members or persons known as their close business partners.
The Government has issued a Decree on important public positions referred to in the Anti-Money Laundering Act. A person acting in such a position now or in the past shall be considered a politically exposed person.
Government Decree on Politically Exposed Persons (Finlex, in Finnish)
Act on the Bank and Payment Accounts Control System
The Act on the Bank and Payment Accounts Control System promotes the prevention of money laundering and terrorist financing because it improves the authorities’ access to electronic information on the Bank and Payment Accounts of citizens, businesses and corporations. The Act is a part of the implementation of the EU’s 5th Anti-Money Laundering Directive.
The bank and payment accounts control system consists of two technologically different systems:
an account register maintained by Customs
a distributed information search system.
The parties obligated to report to the bank and payment account control system are credit institutions, payment institutions, electronic money institutions and virtual currency providers. These parties must join the account register or construct their own information search system from which they can disclose their customers’ bank and payment account information to the authorities.
Act on the Bank and Payment Accounts Control System (Finlex, in Finnish)
Government Proposal on the amendment of the Act on the Bank and Payment Accounts Control System (in Finnish) (Project window of the Prime Minister’s Office)
Act on the Financial Intelligence Unit
The Act on the Financial Intelligence Unit specifies the tasks of the Financial Intelligence Unit that is a part of the National Bureau of Investigation and provides the Unit with the necessary data access rights.
The tasks of the Financial Intelligence Unit are the
investigation of money laundering and terrorist financing.
The Financial Intelligence Unit receives and examines reports on suspicious business activities from the parties with a reporting obligation and also brings them to preliminary investigation. In certain necessary situations the Unit can also order a suspicious business activity to be suspended for a maximum of ten business days.
The Financial Intelligence Unit maintains a money laundering register which stores data on reports on suspicious business activities.
The Financial Intelligence Unit has the right to obtain, use and disclose information whose processing is necessary in order to prevent money laundering and terrorist financing, even though the information is otherwise required to be kept secret by law. The Financial Intelligence Unit also has to publish statistics on suspicious business activities and criminal investigations.
In addition, the Financial Intelligence Unit collaborates with the supervisory authority of the Anti-Money Laundering Act and the parties with a reporting obligation and also engages in international collaboration and information exchange with corresponding authorities in other countries.
Act on the Financial Intelligence Unit (Finlex, in Finnish)
EU Directive on Combating Money Laundering by Criminal Law (Project window of the Prime Minister’s Office, in Finnish)
The Criminal Code of Finland
The Criminal Code of Finland contains provisions on the criteria for a money laundering offence and the criminalisation of the various forms of the offence. The provisions seek to prevent the perpetrator from benefiting from the property obtained through criminal activity.
The provisions of the Criminal Code serve the overall prevention of money laundering and terrorist financing by giving the authorities the power to punish the perpetrator and seize the perpetrator’s assets that were obtained through criminal activity. This is achieved by declaring the proceeds from crime forfeit to the State.
Money laundering is often associated with organised crime. Forfeiture of the proceeds from crime prevents the financing of new crimes.
Criminal Code (Finlex, in Finnish)
EU Directive on Combating Money Laundering by Criminal Law (Official Journal of the European Communities)
Administrative freezing of terrorist funds
Finland uses an administrative system for the freezing of funds. The decision on freezing funds is made by the National Bureau of Investigation.
The purpose of the freezing of funds is to prevent the target of the decision – whether it is a person, group or corporation – from using its assets for carrying out, attempting to carry out or preparing for terrorist acts.
The transfer, conversion or assignment of assets to the target of an administrative freezing decision is criminalised in the Criminal Code.
Trade Register Act
The Trade Register Act lays down provisions on the registration of the beneficial owners of a company.
The Associations Act lays down provisions on the registration of the board members of an association.
Freedom of Religion Act
The Freedom of Religion Act lays down provisions on the registration of the board members of an association.
The Foundations Act lays down provisions on the registration of board members or supervisory organ members of a foundation.
Business Information Act
The Business Information Act specifies the parties responsible for submitting a notification to the register.
International financial sanctions
The sanctions regulations obligate the freezing of the assets and other financial resources of specific persons and corporations, It is also prohibited to assign any funds or financial resources to the specified persons directly or indirectly. An exception to the freezing of assets or the assignment prohibition might be possible if the authority grants a permit for such.
Although the sanctions obligations are based directly on the applicable EU legislation, their implementation is the responsibility of the Member States. The national general regulation is the so-called Sanctions Act (Act on the Fulfilment of Certain Obligations of Finland as a Member of the United Nations and of the European Union).
In Finland, the Ministry for Foreign Affairs coordinates the national implementation of the sanctions and acts as the national permit authority. Asset freezing in Finland is executed by the enforcement authority of Helsinki.
Sanctions by country (Ministry for Foreign Affairs, in Finnish)
International financial sanctions and national decisions on freezing assets (Financial Supervisory Authority)
EU Sanctions Map (European Commission)
Consolidated list of parties subject to freezing of assets (European Commission)
Sanctions Act (Finlex, in Finnish)
EU strives to prevent the use of the financial system for money laundering and terrorist financing.
Fourth money laundering directive
The purpose of the directive is to prevent the use of the financial system of the Union for money laundering and terrorist financing and to protect the stability and credibility of the system. Wide coordinated actions have been undertaken at the Union level to prevent money launderers and terrorist financiers from benefiting from the free movement of capital in the internal market of the Union and the freedom to offer financing services.
The aim of the fourth money laundering directive is to create a regulatory environment in which companies can grow their business without facing unreasonably high costs for complying with the regulations.
The fourth money laundering directive lays down provisions for
a comprehensive risk-based approach for combating money laundering and terrorist financing
customer due diligence
information on beneficial ownership
obligation to report
operating principles concerning countries outside the EU
harmonisation of administrative sanctions
ensuring data protection
increasing the cooperation between Financial Intelligence Units
granting competence to the European Supervisory Authorities.
The directive obligates actors to create risk assessments on money laundering and terrorist financing. The obligation applies to the European Commission, Member States, national supervisory authorities and the corporations and entrepreneurs that are under the reporting obligation.
The aim is to base the prevention of money laundering and terrorist financing on risk assessments and focus it efficiently on the most risk-prone areas. The risk factors might be associated with specific customers, countries or geographical areas, products, services, business operations or distribution channels. The actors must have in place internal policies, controls and procedures that are proportional to the actor’s operations and mitigate and manage effectively the risks identified at the level of the Union, the Member State and the obliged entity.
To implement the directive, Finland enacted a new Anti-Money Laundering Act in 2017. Finland also enacted the Act on the Financial Intelligence Unit.
Fourth money laundering directive (Official Journal of the European Communities)
Fifth money laundering directive
The Fifth money laundering directive is formulated on the basis of the terrorist attacks against Europe in particular. Investigation of the attacks revealed new methods by which terrorist groups finance and execute their operations. The intention was to extend the scope of EU law to financing services that leverage modern technology.
The Member States have an obligation to deploy automatic systems with which information on the holders of bank and payment accounts can be delivered to the authorities. Money laundering legislation extends to virtual currency providers and art merchants (when the payment is more than EUR 10,000). The directive also specifies further and partly extends the customer due diligence procedure and the enhanced customer due diligence.
Finland has implemented the directive as the Act on the Bank and Payment Accounts Control System, the Act on Virtual Currency Providers and amendments to the Anti-Money Laundering Act, among others.
Fifth money laundering directive (Official Journal of the European Communities)
Second Funds Transfer Regulation
One of the regulations that prevent money laundering and terrorist financing is the so-called Second Funds Transfer Regulation.
The regulation is based on the international recommendations by Financial Action Task Force on Money Laundering (FATF). The purpose is to ensure that the FATF recommendation on wire transfers is implemented consistently throughout the Union.
The regulation contains provisions on the information on the payer and payee that must be delivered along with the transfer of funds irrespective of currency. The regulation applies to funds transfers made with payment cards, electronic currency tools and mobile phones.
The payer’s payment service provider must deliver detailed information on the payer and payee along with the funds transfer, such as the payee’s name and the number of the payee’s payment account. In addition, the payment service provider must verify the correctness of the information submitted.
The payment service provider must have efficient procedures in place that enable it to detect any missing or incomplete information about the payer or payee. For cases of missing and incomplete payment information, the payment service provider must have efficient risk-based procedures in place for deciding whether to proceed with, deny or suspend the transfer of funds.
Second Funds Transfer Regulation (Official Journal of the European Communities)
Recommendations of the Financial Action Task Force (FATF)
The intergovernmental Financial Action Task Force known as FATF operates under the OECD. FATF cooperates internationally to prevent money laundering and the financing of terrorism and weapons of mass destruction. FATF develops and issues recommendations and follows their implementation in the member states with annual inquiries and periodic country evaluations.
Finland has been a member of FATF since 1991. FATF has issued 40 recommendations concerning the prevention of money laundering, terrorist financing and financing of proliferation of weapons of mass destruction, which the member countries of FATF are politically committed to implement. The recommendations were last revised completely in 2012 and individual specifications have been made to them even after that.