Anti-money laundering and counter-terrorist financing measures – the Swedish evaluation from FATF

The Swedish evaluation from The Financial Action Task Force (FATF) was issued on Tursday 25th of April. FATF is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognized as the global anti-money laundering (AML) and counter-terrorist financing (CTF) standard.

The design and implementation of procedures have been mapped to criteria according to technical standards and the assessment in total considering also effectiveness shows that Sweden is compliant - however a large amount of recommendations are issued. These are summarised on page 211-213 in the report. Below is the supervisory summary and recommendations from FATF.

The conclusion of the supervisory perspective

The supervisory AML/CFT system in Sweden covers all obliged entities and all elements of an  AML/CFT supervisory system are in place. There are weaknesses in applying risk-based supervision across all relevant entities. In some instances this is due to insufficient resources to ensure that all relevant entities are subject to supervisory action. Some supervisors, such as the FSA, show a more developed understanding of risk and vulnerabilities of their sectors and individual institutions, but this is in some cases quite basic and does not allow for effective supervision in line with the risks. Some of the DNFBP supervisors’ understanding of ML/TF risks is predominately based on the 2013–14 NRAs, which do not provide a comprehensive picture and analysis of Sweden’s risks. To some extent this can be attributed to insufficient knowledge and experience-sharing between supervisors and the law enforcement authorities. As such, the Swedish supervisory system only takes a basic risk-based approach. Sweden has achieved a moderate level of effectiveness.

Summary of recommendations from supervisory perspective

• Sweden needs to increase the resources of the FSA’s AML unit in order for it to undertake appropriate onsite and offsite supervisory actions commensurate with the risk and size of Sweden’s financial sector.
• Improve supervisors’ understanding of risks in their specific sector(s), supported by better inter-agency communication between law enforcement and supervisors, and use this understanding to take a more tailored risk-based approach towards supervising the reporting entities.
• More substantial, structured guidance on risks and AML/CFT requirements is necessary, including through inter-agency engagements with the private sector to collect input and respond to questions.
• CABs need to keep improving their assessments of the risks of the wide range of sectors under their charge, in particular those less known sectors (such as TSPs) and then focus their supervisory resources as appropriate.
• Supervision of the DNFBP sections (e.g. lawyers, CSPs, and real estate agents) should be increased to match the vulnerabilities identified in the NRAs.

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