National Risk Assessment of Money Laundering and Terrorist Financing 2023 Partial update Financial Markets PUBLICATIONS OF THE MINISTRY OF FINANCE – 2024:35 National Risk Assessment of Money Laundering and Terrorist Financing 2023 Partial update Ministry of Finance and Ministry of the Interior Ministry of Finance Helsinki 2024 Publications of the Ministry of Finance 2024:35 Ministry of Finance Copyright Act (404/1961) 9 § Works excluded from protection ISBN pdf: 978-952-367-644-2 ISSN pdf: 1797-9714 Layout: Government Administration Department, Publications Helsinki 2024 Finland Publication distribution Institutional Repository for the Government of Finland Valto julkaisut.valtioneuvosto.fi https://julkaisut.valtioneuvosto.fi/ Description sheet 16 May 2024 National Risk Assessment of Money Laundering and Terrorist Financing 2023, Partial update Publications of the Ministry of Finance 2024:35 Subject Financial Markets Publisher Ministry of Finance Group author Ministry of Finance and Ministry of the Interior Language English Pages 215 Abstract The Ministry of Finance and the Ministry of the Interior coordinated a partial update of the National Risk Assessment of Money Laundering and Terrorist Financing 2023. The partial update of the risk assessment describes the threats, vulnerabilities and risks related to money laundering and terrorist financing in the highest-risk sectors that have a disclosure obligation. The partial update also examines the risks of money laundering and terrorist financing in relation to selected phenomena. The partial update of the risk assessment does not replace the 2021 risk assessment but only supplements it. The partial update includes an updated action plan of the national risk assessment on money laundering and terrorist financing for 2024–2025. The action plan presents measures to mitigate the risks identified in the risk assessment. Together, the risk assessment and the action plan describe Finland's national understanding of the risks of money laundering and terrorist financing and of the methods to manage those risks. Keywords money laundering, terrorism, financial crimes, risks, risk assessment, financial markets ISBN PDF 978-952-367-644-2 ISSN PDF 1797-9714 URN address https://urn.fi/URN:ISBN:978-952-367-644-2 https://urn.fi/URN:ISBN:978-952-367-644-2 Kuvailulehti 16.5.2024 Kansallinen rahanpesun ja terrorismin rahoittamisen riskiarvio 2023 Osittaispäivitys Valtiovarainministeriön julkaisuja 2024:35 Teema Rahoitusmarkkinat Julkaisija Valtiovarainministeriö Yhteisötekijä Valtiovarainministeriö ja sisäministeriö Kieli englanti Sivumäärä 215 Tiivistelmä Kansallisen rahanpesun ja terrorismin rahoittamisen riskiarvion osittaispäivitys 2023 on laadittu valtiovarainministeriön ja sisäministeriön koordinoimana. Riskiarvion osittaispäivityksessä kuvataan rahanpesun ja terrorismin rahoittamisen uhkia, haavoittuvuuksia ja riskejä korkeimman riskin ilmoitusvelvollissektoreilla. Lisäksi riskiarvion osittaispäivityksessä tarkastellaan rahanpesun ja terrorismin rahoittamisen riskejä liittyen valittuihin ilmiöihin. Riskiarvion osittaispäivitys ei korvaa vuoden 2021 riskiarviota, vaan ainoastaan täydentää sitä. Riskiarvion osittaispäivityksen yhteydessä on päivitetty kansallinen rahanpesun ja terrorismin rahoittamisen riskiarvion toimintasuunnitelma vuosille 2024–2025. Toimintasuunnitelmassa esitellään ne toimenpiteet, joilla riskiarviossa havaittuja riskejä pyritään pienentämään. Riskiarvio ja toimintasuunnitelma muodostavat kokonaisuuden, joka kuvastaa Suomen kansallista ymmärrystä rahanpesun ja terrorismin rahoittamisen riskeistä ja niiden hallintakeinoista. Asiasanat rahanpesu, terrorismi, talousrikokset, riskit, riskinarviointi, rahoitusmarkkinat ISBN PDF 978-952-367-644-2 ISSN PDF 1797-9714 Julkaisun osoite https://urn.fi/URN:ISBN:978-952-367-644-2 https://urn.fi/URN:ISBN:978-952-367-644-2 Presentationsblad 16.5.2024 Nationell riskbedömning av penningtvätt och finansiering av terrorism 2023 Partiell uppdatering Finansministeriets publikationer 2024:35 Tema Finansmarknaden Utgivare Finansministeriet Utarbetad av Finansministeriet och inrikesministeriet Språk engelska Sidantal 215 Referat Den partiella uppdateringen av den nationella riskbedömningen av penningtvätt och finansiering av terrorism 2023 har sammanställts under samordning av finansministeriet och inrikesministeriet. I den partiella uppdateringen av riskbedömningen redogörs för hot, sårbarheter och risker som hänför sig till penningtvätt och finansiering av terrorism inom de rapporteringsskyldiga sektorer där risken är högst. Riskerna med penningtvätt och finansiering av terrorism i samband med vissa utvalda fenomen tas också upp. Den partiella uppdateringen av riskbedömningen ersätter inte riskbedömningen 2021, utan endast kompletterar den. Den nationella handlingsplanen för riskbedömningen av penningtvätt och finansiering av terrorism för 2024–2025 har uppdaterats i samband med den partiella uppdateringen av riskbedömningen. I handlingsplanen beskrivs de åtgärder som syftar till att reducera de risker som identifierats i riskbedömningen. Riskbedömningen tillsammans med handlingsplanen avspeglar Finlands nationella insikter i riskerna med penningtvätt och terrorfinansiering och hur de hanteras. Nyckelord penningtvätt, terrorism, ekonomiska brott, risker, riskbedömning, finansmarknaden ISBN PDF 978-952-367-644-2 ISSN PDF 1797-9714 URN-adress https://urn.fi/URN:ISBN:978-952-367-644-2 https://urn.fi/URN:ISBN:978-952-367-644-2 Contents Abbreviations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1 General part.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.1 Summary.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.2 Risk assessment of money laundering and terrorist financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.2.1 Structure of the risk assessment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.2.2 Action plan based on the risk assessment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.2.2.1 Implementation of the Action Plan for 2021–2023.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.3 Anti-money laundering and countering the financing of terrorism in Finland.. . . . . . 21 1.3.1 Resources allocated for anti-money laundering and countering of terrorist financing. . . . . . . . . . 23 1.3.1.1 Resources and budgeting.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 1.3.1.2 AML/CFT measures taken by supervisory authorities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1.3.2 Financial Intelligence Unit’s activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 1.3.3 National cooperation group for preventing money laundering and terrorist financing.. . . . . . . . . 31 1.3.3.1 Sub-working group on NPOs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 1.3.3.2 Sub-working group on ML/TF risk assessment (sub-working group on NRA).. . . . . . . . . . 32 1.3.4 Finnish Anti Money Laundering Intelligence Task Force (FAMLIT).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1.4 Amendments to regulation concerning anti-money laundering and countering the financing of terrorism.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1.4.1 Supranational actors and regulation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1.4.1.1 Financial Action Task Force (FATF). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1.4.1.2 Commission’s Supranational Risk Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 1.4.1.3 Supranational regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 1.4.2 National legislation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2 Money laundering.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 2.1 Self-laundering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 2.2 National operating environment of money laundering.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.3 General factors affecting money laundering risk.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2.3.1 Predicate offences to money laundering.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2.3.1.1 Confiscation of proceeds of crime.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 2.3.2 International trade and cross-border money transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 2.3.2.1 Trade in goods and services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 2.3.2.2 Impact of Russia’s invasion of Ukraine on exports and imports. . . . . . . . . . . . . . . . . . . . . . . . . . 53 2.3.2.3 Imports to Finland.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 2.3.2.4 Cross-border financial flows.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 2.4 Key observations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 2.5 Assessment of sector-specific money laundering risks.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 2.5.1 Payment service providers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 2.5.1.1 Operating environment of payment service providers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 2.5.1.2 Money laundering risks associated with payment service providers.. . . . . . . . . . . . . . . . . . . . 69 2.5.1.3 Money laundering risks associated with hawaladars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 2.5.2 Credit institutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 2.5.2.1 Operating environment of credit institutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 2.5.2.2 Money laundering risks associated with credit institutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 2.5.3 Virtual currency providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 2.5.3.1 Operating environment of virtual currency providers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 2.5.3.2 Money laundering risks associated with virtual currency providers. . . . . . . . . . . . . . . . . . . . . 83 2.5.4 Designated non-financial businesses and professions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 2.5.4.1 Professional enablers as a phenomenon.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 2.5.4.2 Real estate brokerage and letting agencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 2.5.4.3 Attorneys-at-law and other providers of legal services as well as providers of tax advisory services or tax-related support directly or indirectly.. . . . . . . . . . . . . . . . . . . . . . . . . . . 95 2.5.4.4 Trust or company service providers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 2.5.4.5 Traders in goods.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 3 Terrorist financing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 3.1 Overview of terrorism in Finland.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 3.2 Terrorist financing in the Finnish context.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 3.2.1 Financing of radical Islamism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 3.2.2 Financing of far-right terrorism.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 3.2.3 New technologies in the terrorist financing context.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 3.2.4 Amendments to legislation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 3.2.5 High-risk third countries.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 3.2.6 Freezing of funds to combat terrorism.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 3.3 Key observations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 3.3.1 Challenges in identifying terrorist financing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 3.3.2 Challenges in investigating and prosecuting terrorist financing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 3.4 Assessment of sector-specific terrorist financing risks.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 3.4.1 Payment service providers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 3.4.1.1 Terrorist financing risks associated with hawaladars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 3.4.1.2 Terrorist financing risks associated with payment service providers.. . . . . . . . . . . . . . . . . . . . 120 3.4.2 Credit institutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 3.4.2.1 Terrorist financing risks associated with credit institutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 3.4.3 Terrorist financing risks associated with virtual currency providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 3.4.3.1 Terrorist financing risks associated with virtual currency providers. . . . . . . . . . . . . . . . . . . . . 123 3.4.4 Financial institutions, other financial service providers and debt collectors. . . . . . . . . . . . . . . . . . . . . . 126 3.4.4.1 Operating environment of financial institutions, other financial service providers and debt collectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 3.4.4.2 Terrorist financing risks associated with financial institutions, other financial service providers and debt collectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 4 Phenomena.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 4.1 Russia’s invasion of Ukraine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 4.1.1 Human trafficking and exploitation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 4.1.2 Sanctions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 4.1.3 Money collection and donations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 4.1.4 Other risks that have emerged due to the invasion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 4.2 Non-face-to-face transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 4.2.1 General about non-face-to-face transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 4.2.2 Money laundering and terrorist financing risks associated with non-face-to-face transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 4.3 Corruption.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 4.3.1 Definition of corruption.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 4.3.2 Harmfulness of corruption.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 4.3.3 Corruption in Finland.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 4.3.4 Corruption offences in the Criminal Code of Finland.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 4.3.5 FATF anti-corruption requirements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 4.3.6 Association of corruption with money laundering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 4.3.7 Money laundering and terrorist financing risks associated with corruption.. . . . . . . . . . . . . . . . . . . . . . 155 Appendices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Appendix 1 – Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Appendix 2 – Numbers of participants in sectoral assessments of overall risk and individual risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Appendix 3 - List of risks identified at risk assessment workshops concerning money laundering and terrorist financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 References.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Action plan is available as a separate file at https://urn.fi/URN:ISBN:978-952-367-644-2 https://urn.fi/URN:ISBN:978-952-367-644-2 9 Publications of the Ministry of Finance 2024:35 A B B R E V I AT I O N S Abbreviations Abbreviated from AML Anti-Money Laundering CFT Countering the Financing of Terrorism DNFBP Designated Non-Financial Business or Profession FATF Financial Action Task Force FIU Financial Intelligence Unit ML Money Laundering NRA National Risk Assessment NPO Non-profit Organisation OECD Organisation for Economic Co-operation and Development SNRA Supranational Risk Assessment STR Suspicious Transaction Report TF Terrorist Financing TFR Terrorist Financing Report 10 Publications of the Ministry of Finance 2024:35 1 General part This 2023 update of Finland’s National Risk Assessment of Money Laundering and Terrorist Financing is the third national risk assessment (NRA) of its kind prepared in Finland. Coordinated by the Ministry of Finance and the Ministry of the Interior, the previous National Risk Assessment of Money Laundering and Terrorist Financing was published in 2021. This partial update examines sectors identified as high-risk ones and current phenomena related to money laundering (ML) and terrorist financing (TF). Therefore, this partial update does not replace, but only supplements, the previous NRA. The NRA update process was coordinated by the Ministry of Finance and the Ministry of the Interior. NRA work was steered by the national cooperation group for preventing money laundering and terrorist financing (hereinafter inter-authority AML/CFT cooperation group)1 and the sub-working group on risk assessment of ML/TF (hereinafter sub-working group on NRA)2. 1.1 Summary The main findings of the 2023 update of Finland’s National Risk Assessment of Money Laundering and Terrorist Financing3 are as follows: y Inadequacies relating to exchange of information between actors in the public as well as private sectors have been identified as a significant risk in different sectors. y Hawala operators (hawaladars) are still considered as involving a very significant risk in terms of money laundering (ML) and terrorist financing (TF). In addition, the risk level concerning virtual currency providers, credit institutions and payment service providers is significant. 1 See section 1.3.3. 2 See section 1.3.3.2. 3 The NRA has taken account of data available by the end of November 2023. 11 Publications of the Ministry of Finance 2024:35 y As regards ML, the greatest number of individual significant risks was identified regarding virtual currency providers. The virtual currency sector is evolving continuously, whereby the importance of the competence and understanding of the authorities and legislators regarding the various trends is emphasised. y Efforts have been made to respond to challenges involved in the identification of TF, but the risk management of obliged entities and the specialisation of authorities in investigating and prosecuting terrorist offences must still be developed further. y One of the phenomena examined in the NRA is the national impacts of Russia’s invasion of Ukraine, particularly from the perspective of anti- money laundering (AML) and countering the financing of terrorism (CFT). Various methods of circumventing sanctions emerged as a key risk, and sector-specific assessments also considered the effects of sanctions particularly from the perspectives of ML risks. y The other phenomena analysed in the NRA are corruption and non- face-to-face transactions. Cybercrime is considered the most significant risk in non-face-to-face transactions. As regards corruption, the challenges involved in identifying corruption, particularly in the context of political decision-making, is a risk highlighted in the assessment. 1.2 Risk assessment of money laundering and terrorist financing A national risk assessment of money laundering and terrorist financing is required under chapter 2, section 1 of the Act on Preventing Money Laundering and Terrorist Financing (444/2017; hereinafter the Anti-Money Laundering Act). The national risk assessment (NRA) identifies and assesses money laundering (ML) and terrorist financing (TF) risks in the various sectors in Finland. It also contributes to the strengthening of a risk-based approach, to the development of supervision and activities relating to anti-money laundering (AML) and countering the financing of terrorism (CFT) and to efficient allocation of resources. The NRA must take account of the Supranational Risk Assessment (SNRA) produced by the European Commission (hereinafter the Commission).4 Under the Anti- Money Laundering Act, one of the purposes of the NRA is to provide the competent 4 Under Article 7 of the Fourth Anti-Money Laundering Directive ((EU) 2015/849), in carrying out the national risk assessment measures, Member States must make use of the findings of the SNRA. 12 Publications of the Ministry of Finance 2024:35 supervisory authorities, the Finnish Bar Association and the obliged entities with support in the preparation of their own risk assessments. According to the Commission, the supranational, national and sectoral risk assessments are equally relevant and complement each other. The NRA must be updated regularly.5 Finland’s NRA is updated every two years, unless otherwise required by national or international obligations. The NRA is updated in four-year cycles so that the second year of the cycle sees an update of the risk assessment only concerning the key elements (sectors and current phenomena) and the fourth year sees a comprehensive update. In addition, information and statistical data are collected annually from the authorities and supervisors involved in AML/CFT work as, under chapter 2, section 1, subsection 4 of the Anti-Money Laundering Act, the Ministry of the Interior and the Ministry of Finance must publish a summary of statistics. Preparatory measures are also carried out in the years preceding the updates. The Financial Action Task Force (FATF), operating in conjunction with the Organisation for Economic Co-operation and Development (OECD), does not specify a cycle for updates of risk assessments but, for example, the Commission’s SNRA is updated every two years, which also justifies using the same cycle for NRA updates. Risk assessment work is evolutionary by nature, and this third NRA also contributes towards future risk assessments both in terms of methodology and by identifying information needs. Once the risks have been identified and the risk levels determined, AML/CFT measures must be applied in ways that are commensurate with the risks identified. The FATF and the Commission require risk mitigation measures,6 and these measures are presented in the action plan prepared on the basis of the findings of the NRA that, as a rule, is prepared for a four-year period in conjunction with the comprehensive update of Finland’s NRA. Measures adopted due to new requirements set by the FATF or the Commission or regarded as necessary for AML/CFT can also be included in the action plan. 5 Under Article 7 of the Fourth Anti-Money Laundering Directive (EU (2015/849)), each Member State must keep the NRA up to date. 6 FATF 2012–2020, p. 8. 13 Publications of the Ministry of Finance 2024:35 1.2.1 Structure of the risk assessment This national risk assessment (NRA) consists of four parts. The first, general part contains a description of the national and international framework of the NRA, the legislation and documents guiding the process and the purpose of the NRA. The second part discusses money laundering (ML) and the third part terrorist financing (TF), with both of these sections covering related risks identified on the basis of threats and vulnerabilities. The fourth part discusses current phenomena relating to ML/TF. The appendices at the end of this NRA describe the methodology followed in this NRA, provide the number of risk assessment participants, and list all the risks identified. This partial update assesses ML risks in the sectors of payment service providers, credit institutions, virtual currency service providers and designated non-financial businesses and professions (DNFBPs). TF risks are examined concerning the same sectors, except that risks relating to financial institutions are examined instead of DNFBPs. The section on phenomena assesses the ML/TF risks relating to Russia’s invasion of Ukraine, non-face-to-face transactions, and corruption. The sectors for the update were selected together by the members of the sub-working group on NRA assessing the sectors with the most significant risks. 1.2.2 Action plan based on the risk assessment The previous Action Plan for National Risk Assessment of Money Laundering and Terrorist Financing was prepared for 2021–2023 in conjunction with the previous national risk assessment (NRA). Going forward, an action plan will, as a rule, be prepared every four years in conjunction with the comprehensive update of the NRA, with a government resolution issued on the plan. However, since the next comprehensive update of the NRA is due to take place during 2025, the previous action plan is updated in conjunction with this partial update of the NRA for 2024– 2025. The action plan communicates at the national level how the risks identified in the NRA are responded to, that is, which measures are implemented to address them. 1.2.2.1 Implementation of the Action Plan for 2021–2023 This section presents how the measures of the Action Plan for 2021–2023 have been implemented. The Action Plan for 2021–2023 was divided into five strategic priorities: 1. raising public awareness of money laundering and terrorist financing, 14 Publications of the Ministry of Finance 2024:35 2. improving the exchange of information, statistics and national legislation, 3. promoting the currency and content of registers available to authorities and obliged entities, 4. implementing measures to reduce the most significant individual risks highlighted by the risk assessment, 5. developing the digitalisation of the supervision and risk management of the prevention of money laundering and terrorist financing. 1. Raising public awareness of money laundering and terrorist financing Public awareness of ML/TF has been raised in cooperation between various authorities and supervisory authorities specified in the Anti-Money Laundering Act through, for example, the moneylaundering.fi website. Supervisory authorities and authorities with a general duty to exercise care specified in the Anti-Money Laundering Act as well as other authorities also report to the Ministry of Finance on their measures to raise awareness, such as training they have provided or information bulletins for obliged entities they have produced. Information about sanctions is currently available on the website of the Ministry for Foreign Affairs, and the Financial Intelligence Unit (FIU) has provided obliged entities with training concerning funds frozen to combat terrorism. The national list of decisions to freeze funds maintained by the National Bureau of Investigation is sent to obliged entities at least twice a year via a free application and can also be ordered from the registry of the National Bureau of Investigation. The Financial Supervisory Authority (FIN-FSA) provides obliged entities with guidance on customer due diligence measures related to compliance with sanctions regulation and national freezing orders.7 In addition, training in anti-money laundering (AML) and countering the financing of terrorism (CFT) has been provided for the supervisory authorities specified in the Anti-Money Laundering Act. 2. Improving the exchange of information, statistics and national legislation Improving the exchange of information, statistics and national legislation is a section that contains several measures. Improving the efficiency of the exchange of information was first promoted by means of a preliminary 7 Financial Supervisory Authority (FIN-FSA) 2023a. 15 Publications of the Ministry of Finance 2024:35 review completed in April 2022.8 The review resulted in the appointment of a working group to prepare an action plan and a draft government proposal for improving the exchange of information. The working group memorandum was published in June 2023,9 the draft government proposal is due to be submitted to Parliament in early 2024, and the acts are due to enter into force in spring 2024. The Ministry of the Interior prepared a government decree relating to simplified and enhanced customer due diligence required under chapter 3, sections 8 and 10 of the Anti-Money Laundering Act, and the decree entered into force on 1 January 2022.10 In addition, under chapter 4, section 1 of the Anti-Money Laundering Act, a government decree is to be laid down on the form and content of suspicious transaction reports (STRs). As regards drafting the decree, it was decided that, instead of laying down a decree, an amendment to the Anti-Money Laundering Act would be proposed. Following the amendment, the FIU would be granted a more specific authorisation to issue regulations regarding the technical requirements concerning the submission of STRs and the presentation of the content of the reports. Measures establishing the relationship between data protection regulation and AML legislation and enhancing the identification of beneficial owners are awaiting the AML/CFT legislation of the EU that is undergoing reform (see section 1.4.1.3). Continuous risk assessment as part of national authorities’ activities is a matter concerning which the Ministry of Finance has, together with the Ministry of the Interior, focused strong efforts in the past two years. In late 2022, a sub-working group on NRA11 to support the preparation of the NRA was established under the inter-authority AML/CFT cooperation group12. 8 Ministry of Finance 2022. 9 Ministry of Finance 2023. 10 Government Decree on Customer Due Diligence Procedures and Risk Factors in Preventing Money Laundering and Terrorist Financing (929/2021). 11 For more details about the sub-working group on NRA and its duties, see section 1.3.3.2. 12 Ministry of Finance 2021a, p. 25. 16 Publications of the Ministry of Finance 2024:35 The Ministry of Finance has developed the NRA process through measures including the creation of a guide and annual schedule for NRA and by introducing new risk management software for NRA updates. Measures carried out each year include collecting statistical and other data from competent authorities. The Ministry of Finance has also explored the possibility of including in the Anti-Money Laundering Act an obligation for supervisory authorities and other competent authorities to provide obliged entities with AML/CFT training. Training would focus on obliged entities and would be provided by supervisory authorities and authorities with a general duty to exercise care specified in the Anti-Money Laundering Act as well as by the FIU. It was found that authorities were not in favour of including the training obligation in the Act, as obliged entities of the various sectors are already currently provided with training and guidance by the supervisory and other authorities. The Ministry of the Interior has explored the development of statistics produced to support the NRA. The focus was on the police administration, as a substantial part of statistical data relevant for the NRA is based on data held by the police. The initial stage involved an assessment of the minimum level specified by legislation in relation to the current capacity of the police to produce statistical data. The Ministry of the Interior and the police administration have identified certain development needs, with the implementation of these still partly in progress. At a later stage, the intention is to look into statistics in other administrative branches. The development of statistics will continue under the next action plan. 3. Promoting the currency and content of registers available to authorities and obliged entities This priority includes ensuring the timeliness of beneficiary information, which has been promoted in the overall reform of the Trade Register Act implemented by the Ministry of Economic Affairs and Employment.13 Going forward, companies are obliged to submit the register information as part of electronic start-up notifications and keep it up to date each calendar year. Sanctions may also be imposed on failure to keep the information up to date. 13 Government Proposal 244/2022. 17 Publications of the Ministry of Finance 2024:35 The new Trade Register Act (564/2023) entered into force on 1 June 2023, but some of the provisions will not enter into force until the beginning of 2025 or 2026. 4. Implementing measures to reduce the most significant individual risks highlighted by the risk assessment Implementing measures to reduce the most significant individual risks highlighted by the risk assessment seeks to address the significant individual risks identified in the 2021 NRA through mitigation in different sectors. As regards payment service providers, the capacity of hawaladars to report on suspicious transactions has been improved by means of training provided for actors in cooperation with the FIU and the FIN-FSA. Including fintech operators as obliged entities in the Anti-Money Laundering Act was not regarded as appropriate on the basis of the review conducted. Instead, the matter is currently awaiting the AML/CFT legislation of the EU that is undergoing reform (see section 1.4.1.3). As regards virtual currency providers, the FIN-FSA examined whether the provision of virtual currency services without registration could be criminalised and whether mixer services could be prohibited. It was found that prohibiting mixer services by legislative means is challenging partly because the sector is evolving continuously and legislation might turn out to be obsolete soon after its completion. In addition, any prohibition would be ineffective, as mixer services are anonymous and operated from outside of the EU/EEA. A decision was made to await any further specifications and amendments of the new AML/CFT legislation of the EU. The FIN-FSA has, however, provided its obliged entities with guidance whereby, if a provider of services related to virtual currency allows customers to transfer virtual currencies to or from the service with the assistance of features whose evident purpose is to obscure the origin of virtual currencies, this should be taken into account in the risk assessment on ML/TF.14 As regards gambling, the aim was to restrict gambling outside the monopoly in connection with the reform of the Lotteries Act (1047/2001). A project of the Ministry of the Interior implemented amendments to the 14 Financial Supervisory Authority (FIN-FSA) 2019. 18 Publications of the Ministry of Finance 2024:35 Lotteries Act and the Anti-Money Laundering Act that entered into force on 1 January 2022.15 The Act Amending the Lotteries Act lays down provisions including, in order to restrict gambling outside the monopoly system, imposing payment blocks on operators for marketing in violation of the Lotteries Act. A risk identified with regard to attorneys-at-law and other providers of legal services is one-time clients where part of the problem is the definition of such an actor or activity, as the Anti-Money Laundering Act does not provide definitions for ‘client/customer’ or ‘client/customer relationship’. Appointed by the Ministry of Finance, the working group preparing a partial reform of AML legislation16 proposed in its memorandum provided in the form of a government proposal17 that two new subparagraphs be added to chapter 1, section 4, subsection 1 of the Anti-Money Laundering Act where definitions would be provided for ‘client/customer’ and ‘client/customer relationship’. Based on feedback received during the round for comments, it was decided in the further preparation of the government proposal to omit these from the final government proposal. The proposed additions were regarded as requiring such extensive further preparation that could not be completed within the period of time reserved for the further preparation of the government proposal. It was further found that it would also be appropriate to conduct a careful comparison with the provisions of Chapter III on customer due diligence of the AML regulation included in the legislation proposed by the Commission. At the time of the writing of this partial update of the NRA, there is no certainty of the contents of the EU AML/CFT legislation undergoing reform, which is why a decision has been made to await the final version of the legislative proposal (see section 1.4.1.3).  With regard to non-profit organisations (NPOs), risks detected and feedback provided by the FATF resulted in the creation of several measures and, to implement these, a sub-working group on NPOs18 was established at the beginning of 2022 under the inter-authority AML/CFT cooperation group. In late 2022, a two-year project was launched by the Ministry of the 15 Act Amending the Lotteries Act (1284/2021), Act Amending Chapter 1, Section 3 of the Act Preventing Money Laundering and Terrorist Financing (1286/2021). 16 Ministry of Finance project: Group to reform AML/CFT legislation (in Finnish), accessed 19 October 2023. 17 Ministry of Finance 2021b. 18 See section 1.3.3.1. 19 Publications of the Ministry of Finance 2024:35 Interior on AML/CFT and NPOs,19 which replaced the sub-working group on NPOs. The project contributes to the NRA and the implementation of the NRA action plan. The project aims to increase awareness of and guidelines on ML/TF risks faced by NPOs and obliged entities and to increase exchange of information about the NPO sector between authorities. Additionally, the aim is to identify any need for legislative amendments to develop supervision carried out by the authorities. The project has mapped the Finnish NPO sector, resulting in the formulation of a new risk profile for the sector, and the aim is to produce an updated national ML/TF risk assessment concerning the NPO sector during 2024. Opportunities for a euro-denominated limit for cash payments have been explored by monitoring EU debate on restricting the use of cash. The use of cash has decreased significantly in Finland. The share of point-of-sale cash payments in Finland was the lowest in the euro area in 2022.20 Cash plays a relatively minor role in payments in Finland but, on the other hand, recent studies show that its role is still important in Finland, too, for some population groups in particular. Bank of Finland research shows that there are major regional differences in Finland in the availability of cash.21 On 28 June 2023, the Commission submitted a proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins (COM(2023) 364 final), which aims to safeguard the legal tender status of cash by ensuring the broad acceptability and sufficient availability of cash.22 In Finland, the Ministry of Finance review of banking services and legislation on credit institutions assesses topics including basic banking services and availability and usability of cash. The memorandum of the assessment is due for completion in late 2023. Considering the objectives of the EU Regulation to safeguard the status of cash, it is unrealistic to assume that the risk involved in the use of cash could be mitigated by reducing the use of cash in Finland. 19 Ministry of the Interior project: AML/CFT and NPOs (in Finnish), accessed 19 October 2023. 20 Bank of Finland: E-payments challenging efficient upkeep of cash network (in Finnish), accessed 10 October 2023. 21 Bank of Finland: Major regional differences in availability of cash in Finland (in Finnish), accessed 1 October 2023. 22 Union communication 58/2023 (in Finnish). 20 Publications of the Ministry of Finance 2024:35 Member organisations of the inter-authority AML/CFT cooperation group regularly shared information about phenomena and observations relating to the COVID-19 pandemic and maintained a continuous situation picture in 2020–2021. 5. Developing the digitalisation of the supervision and risk management of the prevention of money laundering and terrorist financing As a strategic priority, the development of the digitalisation of the supervision and risk management of the prevention of ML/TF consists of five separate development projects: y Aggregating application and adding account transaction information to the control system (Ministry of the Interior/Finnish Customs) y Supervisory authority’s control desk (FIN-FSA) y Improving the timeliness, completeness and accuracy of the register of beneficial owners (Finnish Patent and Registration Office) y Digitalisation of money laundering clearance process (Financial Intelligence Unit) y Digital tools for national money laundering/terrorist financing risk assessment (Ministry of Finance/Ministry of the Interior) The projects are included in the Sustainable Growth Programme for Finland, which enables their funding being fully, or mostly, from the Recovery and Resilience Facility (RRF) of the EU. The legislative amendments to the Trade Register Act and to the Act on the Bank and Payment Accounts Control System (571/2019) required by the projects must have legal force by 31 December 2025, and the national implementation of the reform must be completed and all of the digitalisation projects must be in operation by 30 June 2026. All of the digitalisation projects of the reform are underway as planned.23 23 Finnish Government 2020. 21 Publications of the Ministry of Finance 2024:35 1.3 Anti-money laundering and countering the financing of terrorism in Finland The ministries, authorities, supervisory authorities and authorities with the duty to exercise care that play key roles in anti-money laundering (AML) and countering the financing of terrorism (CFT) in Finland are shown in Figure 1 below. The Prison and Probation Service of Finland was included in the authorities with the duty to exercise care under chapter 9, section 5 of the Anti-Money Laundering Act by the Act Amending the Anti-Money Laundering Act24 that entered into force on 31 March 2023. The inclusion of the Prison and Probation Service in the authorities with the duty to exercise care was regarded in the bill drafting process as having an effect increasing the efficiency of AML/CFT, as the Service supervises the prisoners’ use of funds (cash and prepaid cards) under chapter 19, section 1 of the Imprisonment Act (767/2005).25 24 Act Amending the Act on Preventing Money Laundering and Terrorist Financing (444/2023). 25 Government Proposal 236/2021. 22 Publications of the Ministry of Finance 2024:35 Figure 1.  How we prevent money laundering and terrorist financing.26 Source: Ministry of Finance 2023. 26 The activities of Lotteriinspektionen end at the turn of 2023–2024, which is when the supervisory duties transfer to the Government of Åland. How we prevent money laundering and terrorist financing Responsible ministries: Ministry of Finance and Ministry of the Interior Collaborating ministries: Ministry of Justice, Ministry for Foreign Affairs, Ministry of Economic Affairs and Employment, Ministry of Social Affairs and Health Suspicious transaction report Legislation and coordination of international matters Financial Intelligence Unit (FIU) • Prevention • Detection • Investigation • Referral for criminal investigation Investigation National Prosecution Authority Consideration of charges Courts Sentences Financial Supervisory Authority (FIN-FSA) Gambling Administration of National Police Board Regional State Administrative Agency for Southern Finland Finnish Patent and Registration Office Finnish Bar Association Government of Åland Ålands lotteriinspektion Supervision of obliged entities Administrative sanctions Supervision by the authorities For example • Financial sector actors (banks, insurance companies…) • Gambling actor • Real estate agents, auditors and attorneys-at-law Reporting obligation Finnish Customs Finnish Border Guard Finnish Tax Administration National Enforcement Authority Finland Bankruptcy Ombudsman Prison and Probation Service of Finland Duty to exercise care Police Finnish Customs Finnish Border Guard Finnish Security and Intelligence Service Crime Prevention Finnish Customs • Bank and Payment Accounts Control System Finnish Patent and Registration Office • Beneficial owners Registration 23 Publications of the Ministry of Finance 2024:35 1.3.1 Resources allocated for anti-money laundering and countering of terrorist financing Under the Anti-Money Laundering Act (chapter 2, section 1, subsection 2), one of the purposes of the risk assessment is to describe the structures and general measures as well as resources in combating money laundering and terrorist financing. Key AML/CFT authorities27 and supervisory authorities were sent a survey concerning their AML/CFT human resources, full-time equivalents of labour input, budget and the sufficiency of these. 1.3.1.1 Resources and budgeting Article 32 of the Fourth Anti-Money Laundering Directive and Article 48 of the Fifth Anti-Money Laundering Directive require that Member States provide FIUs and competent authorities with adequate financial, human and technical resources in order to fulfil their tasks. The Commission’s 2022 Supranational Risk Assessment (SNRA) drew attention to many supervisors in the EU being critically understaffed. The Commission recommends that Member States take measures to ensure that AML/CFT supervisors can fully carry out their tasks.28 The results of the survey mentioned above show that Finnish supervisory authorities specified in the Anti-Money Laundering Act employed a total of around 30 human resources in AML/CFT roles at the beginning of 2023, while the full- time equivalents (FTE) of labour input totalled around 27.5. The figures cover persons working full time in AML/CFT. In addition to these, organisations may have individual persons whose job description includes some AML/CFT duties. As for the authorities with the duty to exercise care specified in the Anti-Money Laundering Act, it is challenging to measure their resources in FTEs, as these actors promote AML/CFT as part of their other duties. The FIU had access to 41 human resources and 40 FTEs at the beginning of 2023. At the beginning of 2023, the ministries involved in AML/CFT work had allocated 23 human resources and around 10.65 FTEs for AML/CFT. The figure also includes persons carrying out AML/CFT as part of their duties, and some of the resources were hired under external project funding. 27 In March 2023, the Ministry of Finance conducted a resource survey among the supervisory authorities and authorities with the duty to exercise care specified in the Anti-Money Laundering Act and among the ministries and other authorities involved in AML/CFT work. 28 Supranational Risk Assessment 2022, p. 21. 24 Publications of the Ministry of Finance 2024:35 Responses to the survey indicate that the amount of resources is generally regarded as inadequate. Respondents find that further resources are required in particular due to the development of AML/CFT legislation, increasing obligations, increases in suspicious transaction reports and, as regards supervisors, there being in part a broad range of supervised entities. There are actors who do not have a separate budget for AML/CFT. Instead, they carry out this work in conjunction with other supervisory work. 1.3.1.2 AML/CFT measures taken by supervisory authorities During 2022, the supervisory authorities specified in the Anti-Money Laundering Act carried out several supervisory measures in conjunction with their supervisory duties. The supervisory authorities carry out risk-based supervision and, owing to limited resources, supervision focuses on high-risk sectors in particular. This, however, may involve the risk of the supervision of lower-risk sectors not being efficient enough. Measures taken by each supervisory authority in 2022 are described below. Regional State Administrative Agency for Southern Finland In 2022, the Regional State Administrative Agency for Southern Finland carried out 14 inspections of obliged entities operating in a variety of sectors. Inspections took place at real estate agencies and accountancy firms, and at one currency exchange office and one art dealer. Six of the inspections resulted in consideration of sanctions. In addition to inspections, the Regional State Administrative Agency carried out supervision of risk assessment. Requests for risk assessment were sent to accountants, financial service providers, providers of ancillary services related to investment services, art dealers and trust or company service providers. The Regional State Administrative Agency went through the risk assessments received and in that way reviewed risk awareness concerning ML and supervised the quality of risk assessments. In addition, the Regional State Administrative Agency conducted a supervision campaign among trust or company service providers and, among traders in goods, motor vehicle dealers. The Agency also took stock of obliged entities in various sectors and sent requests for evidence to actors that were carrying out their operations without having registered in the money laundering supervision register. The Regional State Administrative Agency also developed its own risk assessment in 2022, and the Agency’s new risk assessment was completed in December 2022. 25 Publications of the Ministry of Finance 2024:35 Finnish Patent and Registration Office The Finnish Patent and Registration Office carried out risk-based AML/CFT inspections at five different audit firms in 2022. In addition, the Office has targeted a variety of financial audit as well as AML/CFT supervision measures at several audit firms and auditors whose clients have close links to the State or citizens of Russia. Work concerning these measures still continues in 2023. In autumn 2022, the Finnish Patent and Registration Office organised a Teams training event on current issues relating to the Anti-Money Laundering Act that was open to all financial auditors. The event covered topics including the impact of sanctions on auditors’ activities, the threshold for submitting suspicious transaction reports, and the identification of beneficial owners. Finnish Bar Association The Finnish Bar Association supervises compliance with the provisions of the Anti- Money Laundering Act among attorneys-at-law. The Association carries out its supervisory duty by means of measures including inspections of law firms. In 2022, ten risk-based inspections were carried out. In addition, 31 new law firms were inspected. Each of the firms inspected was requested to report on their customer due diligence procedures, including practical procedures. In addition, the inspections examined the firms’ ML/TF risk assessment. In 2022, the Finnish Bar Association also updated its own ML/TF risk assessment. The Association also prepares an annual report of the supervision carried out by it. In 2021, the Board of the Finnish Bar Association initiated with the Regional State Administrative Agency for Southern Finland a procedure to impose an administrative sanction on an attorney-at-law. By its decision of May 2023, the Regional State Administrative Agency imposed an administrative sanction on the attorney-at-law. The decision is not yet final, however. There were no new procedures initiated concerning the imposition of an administrative sanction in 2022. 26 Publications of the Ministry of Finance 2024:35 Financial Supervisory Authority (FIN-FSA) Supervisor-specific risk assessments On 11 April 2022, the Financial Supervisory Authority (FIN-FSA) published a summary of the inherent risk assessment of ML/TF concerning obliged entities referred to in the Anti-Money Laundering Act supervised by the FIN-FSA. In addition, it prepared sector-specific risk assessments of ML/TF risks relating to the activities of credit institutions and capital market participants (published on 17 October 2022 and 7 February 2023). Inspections and thematic review In 2022, three of the AML inspections of the FIN-FSA were carried out on banks and two on money remitters. The selection of the targets of risk-based inspections was informed particularly by the results of the supervisor-specific risk assessment of the FIN-FSA and by previous observations made in supervision. In 2022, the FIN- FSA examined the unwarranted restriction of banking service provision to high-risk customers and the occurrence of the de-risking29 phenomenon in Finland by means of a thematic review conducted on 10 banks. The review examined factors that could result in refusal of customer relationship, restriction of services or termination of customer relationship. Continuous supervision The continuous supervision measures carried out by the FIN-FSA in 2022 included 11 supervisory reviews of actors in the credit and insurance sectors, which for credit institutions was part of the broader Supervisory Review and Evaluation Process (SREP). These reviews included elements including meetings with supervised obliged entities. In 2022, the FIN-FSA had 32 other meetings relating to continuous supervision and also other supervisory measures. The other meetings included regular meetings with supervised entities, meetings relating to addressing disturbances and unexpected occurrences of inadequacies, meetings relating to further measures based on inspection observations, and AML/CFT college 29 ‘De-risking’ means financial institutions seeking, rather than to manage risks, to avoid risks relating to relationships with clients by either terminating or restricting business relationships with clients or even entire categories of client they regard as involving a high risk. 27 Publications of the Ministry of Finance 2024:35 meetings.30 In addition to AML themes, also discussed at meetings with supervised entities were the procedures of the supervision of compliance with sanctions, the responsibility for which was being transferred to the FIN-FSA. Supervised obliged entities were also met, where necessary, in conjunction with the consideration of applications for authorisations and registrations. In addition, the FIN-FSA examined, as part of the continuous supervision, the transaction monitoring procedures of three banks by requesting extensive reporting of evidence from them. The FIN-FSA submitted numerous requests for evidence to its supervised entities based on their customers having contacted the FIN-FSA. Whistleblowing reports In 2022, the FIN-FSA received one whistleblowing report under chapter 7, section 9 of the Anti-Money Laundering Act concerning suspected violations of the Act. Administrative sanctions In 2022, the FIN-FSA imposed administrative sanctions on two supervised entities and issued public warnings for negligence concerning compliance with regulation. Gambling Administration of the National Police Board In 2022, the Gambling Administration of the National Police Board carried out two inspections under the Anti-Money Laundering Act concerning compliance with the obligations of the Act in gambling. In addition, AML/CFT supervision included regular supervision meetings with the supervised obliged entity and, where necessary, measures such as requests for evidence. Slot machines outside casinos, that is, in gambling locations and specific game rooms, were included in the scope of application of the Anti-Money Laundering Act from the beginning of 2022. The National Police Board published a risk assessment of the ML/TF risks relating to slot machine gambling, which supplements the summary of the supervisor-specific risk assessment under the Act and covers 30 European Banking Authority 2021: AML/CFT colleges bring together AML/CFT and prudential supervisors of credit and financial institutions which operate on a cross- border basis in at least three EU Member States. The legal basis of the colleges is found in Directive (EU) 2015/849, which requires that supervisory authorities cooperate. By participating in colleges, supervisors that supervise the same cross-border institution can efficiently exchange information with each other, improving the risk assessment concerning the institution and the targeting of supervision. 28 Publications of the Ministry of Finance 2024:35 the most significant money laundering risks generally involved in slot machine gambling based on the risk assessment carried out by the Gambling Administration of the National Police Board. Government of Åland The Government of Åland drew up a supervision plan at the beginning of 2022. It also requested supervision-related information from all real estate agencies in Åland in early 2022. Since 2021, the Government of Åland has requested that agencies in Åland submit their risk assessment at least every other year. The Government of Åland therefore requested in 2022 risk assessments from all those agencies that had not submitted their risk assessment in 2021. The information requested from and the risk assessments submitted by the agencies were examined and analysed. In this context, it was also established whether the information provided results in the need to update the supervisor- specific risk assessment and guidance of the Government of Åland. The Government of Åland developed its on-site supervision systems (on-site inspections of workplaces) in 2022. The Government of Åland also met with the Regional State Administrative Agency and discussed supervisory practices and, in particular, practices concerning on-site supervision. The Government of Åland did not have any matters resulting in sanction measures in 2022. Lotteriinspektionen At the beginning of 2022, Lotteriinspektionen, the supervisor of gambling operations in Åland, prepared a proposal for the supervision plan for the year. The plan was adopted on 21 February 2022 following discussions with the gaming company Paf. During the first quarter of the year, Paf provided Lotteriinspektionen with information on the AML processes and changes that have taken place since the previous inspection and of the number of cases reported to the FIU. Paf strengthened its AML organisation, and there are currently seven employees working on AML. The general AML operating principles are adopted annually in December, but updates can also be made over the year, if necessary. 29 Publications of the Ministry of Finance 2024:35 Paf’s risk assessment and origin of funds were also inspected during the second quarter. The risk assessment process has been updated to better identify the risks in the different sectors. New reports have been developed in accordance with the updated risk assessment. Quality management documents, effects of new legislation, and management of politically exposed persons were examined during the third quarter of the year. Lotteriinspektionen investigated how Paf deals with storage of information in cloud services to ensure security. In addition, Lotteriinspektionen inspected and accepted Paf’s training plan. 1.3.2 Financial Intelligence Unit’s activities Obliged entities specified in the Anti-Money Laundering Act are obliged to ensure customer due diligence, detect and investigate suspicious transactions and, without delay, report any suspicious transactions to the Financial Intelligence Unit (FIU) of the National Bureau of Investigation. The duties of the FIU are described in more detail in section 1.4.4 of Finland’s 2021 National Risk Assessment (NRA). Since the preparation of the previous NRA, the FIU has been assigned with a new duty of producing operational and strategic analyses concerning methods, phenomena, trends and mechanisms of ML/TF and the offences by means of which the assets or proceeds of crime have been or would be obtained. The duties of the FIU have also been affected by the rights, added to the Act on Transfers of Real Estate Requiring Special Permission (470/2019) and the Act on the State’s Right of Pre-Emption in Certain Areas (469/2019) from 1 January 2023, to access from the money laundering register the information necessary for the permission and pre-emption processes laid down in the Acts where necessary to safeguard national security. Likewise, the purpose of use and disclosure of information in the money laundering register have been expanded to cover the prevention, detection, investigation and prosecution of forms of crime listed in Annex I to the Europol Regulation31. Europol32 has been included in the parties to which the FIU may disclose information. 31 Regulation (EU) 2016/794 of the European Parliament and of the Council replacing and repealing Council Decisions 2009/371/JHA, 2009/934/JHA, 2009/935/JHA, 2009/936/ JHA and 2009/968/JHA. 32 European Union Agency for Law Enforcement Cooperation. 30 Publications of the Ministry of Finance 2024:35 The FIU had 41 employees at the beginning of 2023.33 In 2022, the number of suspicious transaction reports (STRs) totalled 230,171, the second-highest annual number of reports ever submitted. By way of comparison, in Sweden the number of STRs submitted in 2022 totalled 45,113.34 Statistics for 2023 are yet to be released, but it can already be seen that the number of STRs has continued to increase.35 The largest annual number of STRs so far – 3,692,641 reports – was submitted in 2021 but, according to the FIU, the number was exceptional due to the STRs submitted by virtual currency service providers.36 The majority of the STRs in 2022 were submitted in the credit and financial sector (other than banking), where 107,629 STRs were submitted. The second-largest group consisted of reports submitted by virtual currency service providers, totalling 84,055.37 In 2022, a total of 55 terrorist financing reports (TFRs) separate from ML-related STRs were submitted. In addition to the above, the FIU detected a certain number of other reports with indications of TF.38 In 2022, the FIU launched 1,430 ML-related investigations. Of these, 54 potentially involved TF.39 Under section 6 of the Act on the Financial Intelligence Unit (445/2017), the FIU has the right to issue an order to suspend a transaction for a maximum of ten working days. In 2022, the number of such freezing orders totalled 94, whereas the corresponding figure in 2021 was 114.40 In 2022, the freezing orders covered EUR 5.3 million in funds, whereas the corresponding figure in 2021 was EUR 11.3 million.41 33 Survey of authorities’ resources for AML/CFT in 2023. 34 Swedish Police Authority 2022, p. 6. 35 Financial Intelligence Unit 2023. 36 Financial Intelligence Unit 2022, p. 12. 37 Financial Intelligence Unit 2022, p. 12. 38 Financial Intelligence Unit 2022, p. 17. 39 Financial Intelligence Unit 2022, p. 15. 40 Financial Intelligence Unit 2021, p. 21. 41 Financial Intelligence Unit 2022, p. 16. 31 Publications of the Ministry of Finance 2024:35 1.3.3 National cooperation group for preventing money laundering and terrorist financing The inter-authority AML/CFT cooperation group was appointed by the Ministry of Finance and Ministry of the Interior on 18 December 2019 for an indefinite period.42 Three amending decisions have been made on the appointment decision, including on changes to the composition and duties of the group. The inter-authority AML/ CFT cooperation group is tasked with contributing towards the development and increased efficiency of national AML/CFT efforts. Following an amending decision made on 1 November 2022, the group’s duties also include monitoring the updates of the NRA and adopting an appropriate procedure for the implementation of the NRA and the methodology followed in NRA work. In addition, the group is tasked with monitoring the implementation of the NRA action plans. The inter-authority AML/CFT cooperation group has three sub-working groups: on NRA, on supervisors and on NPOs. The sub-working group on supervisors has been operational since February 2020. Since the sub-working groups on NRA and NPOs are new, their duties and purpose are described below. 1.3.3.1 Sub-working group on NPOs The sub-working group on NPOs was established in February 2022. The Ministry of Finance, the Ministry of the Interior, the Ministry of Economic Affairs and Employment, the Gambling Administration of the National Police Board, the Ministry of Justice, the Finnish Patent and Registration Office, the Finnish Security and Intelligence Service, the Financial Intelligence Unit and the Ministry for Foreign Affairs were invited as members of the sub-working group. The group was tasked with promoting the measures of the NRA Action Plan for 2021–2023 concerning the NPO sector. The sub-working group met four times during 2022. 42 The member organisations of the inter-authority AML/CFT cooperation group are: the Ministry of Finance, the Ministry of the Interior, the Ministry for Foreign Affairs, the Ministry of Justice, the Ministry of Economic Affairs and Employment, the Ministry of Social Affairs and Health, the National Police Board, the Gambling Administration of the National Police Board, the Financial Intelligence Unit of the National Bureau of Investigation, the Finnish Security and Intelligence Service, the Finnish Border Guard, the Finnish Patent and Registration Office, Finnish Customs, the Finnish Tax Administration, the Grey Economy Information Unit of the Finnish Tax Administration, the Regional State Administrative Agency for Southern Finland, the Financial Supervisory Authority (FIN-FSA), the National Prosecution Authority and the Finnish Bar Association. 32 Publications of the Ministry of Finance 2024:35 In December 2022, the Ministry of the Interior launched a project on AML/CFT and NPOs, which replaced the sub-working group on NPOs for the project period (until the end of 2024). The Ministry of Finance, the Ministry of Justice, the Ministry for Foreign Affairs, the Finnish Patent and Registration Office, the Gambling Administration of the National Police Board, the Financial Intelligence Unit, the Finnish Security and Intelligence Service and the Finnish Tax Administration were invited as members of the project group. The project has been adopted as part of the Strategy and Action Plan for Tackling the Grey Economy and Economic Crime and continues the performance of the duties assigned to the sub-working group. One of the objectives of the project is to publish a separate ML/TF NRA concerning the NPO sector during 2024. 1.3.3.2 Sub-working group on ML/TF risk assessment (sub-working group on NRA) A sub-working group on NRA of the inter-authority AML/CFT cooperation group was established in November 2022 and tasked with y proposing for approval by the inter-authority AML/CFT cooperation group an appropriate manner of implementing the NRA and the methodology followed in NRA work, y ensuring that progress is made in NRA work in accordance with a schedule agreed separately, y guiding the parties preparing the NRA, y ensuring that the views of the competent authorities participating in the NRA are taken into account in NRA work, y ensuring the regular disclosure of the necessary information and statistical data for NRA work. The member organisations of the inter-authority AML/CFT cooperation group were invited to the sub-working group on NRA. The Ministry of Social Affairs and Health, the National Prosecution Authority and the Finnish Border Guard appointed liaison persons, who attend the meetings where necessary. The purpose of the activities of the working group on NRA is to commit the key national actors to the NRA process. The sub-working group met four times during 2023. In spring 2023, the members of the sub-working group participated in workshops concerning AML/CFT and identification of risks relating to associated phenomena. Members of the sub- working group have also assessed identified risks in writing and participated in the preparation of the NRA. 33 Publications of the Ministry of Finance 2024:35 1.3.4 Finnish Anti Money Laundering Intelligence Task Force (FAMLIT) The Finnish Anti Money Laundering Intelligence Task Force (FAMLIT) was established in 2020 to increase the efficiency of AML/CFT and to improve the exchange of information. At the end of 2022, a separate operational sub-working group was established to develop operational cooperation, in addition to which a designated centralised and information-secure platform was established for FAMLIT, enabling smoother exchange of material relating to ML risks and methods. FAMLIT was extended during 2022 with several new representatives, with stakeholders including virtual currency service providers joining the task force for the first time. In addition to exchange of information, training cooperation is also developed continuously. FAMLIT met eight times during 2022.43 FAMLIT was chaired by the Financial Intelligence Unit of the National Bureau of Investigation until the end of October 2023, after which leadership role has been transferred to obliged entities. 1.4 Amendments to regulation concerning anti-money laundering and countering the financing of terrorism This section discusses the key amendments to regulation and supranational recommendations concerning anti-money laundering and countering the financing of terrorism (AML/CFT). The 2021 NRA provides a broader description of AML/CFT regulation and supranational actors issuing recommendations to Finland.44 1.4.1 Supranational actors and regulation A broader description of supranational actors and regulation is provided in the 2021 NRA. This section covers the key changes that have occurred since the previous NRA. 1.4.1.1 Financial Action Task Force (FATF) In June 2021, the Financial Action Task Force (FATF) issued its Guidance on Proliferation Financing Risk Assessment and Mitigation.45 Under the new obligations set out by the FATF, a specific risk assessment should be prepared concerning the prevention of financing of the proliferation of weapons of mass 43 Financial Intelligence Unit 2022, p. 20. 44 Ministry of Finance 2021a, p. 27. 45 FATF 2021b. 34 Publications of the Ministry of Finance 2024:35 destruction, containing the measures to mitigate the risks detected. Finland’s 2021 NRA examined the prevention of proliferation and financing of weapons of mass destruction in the theoretical overview as one of the phenomena. The FATF has prepared several amendments to its recommendations. The reviews of Recommendation 8 clarify measures concerning NPO actors, whereas the amendments to Recommendations 4 and 38 provide countries with a stronger set of tools to recover proceeds of crime. The FATF has also amended Recommendations 24 and 25 concerning beneficial ownership. At the time of the writing of this NRA, the FATF is still preparing potential targeted amendments to Recommendations 1 (Assessing risks & applying a risk-based approach) and 16 (Wire transfers). 1.4.1.2 Commission’s Supranational Risk Assessment The Commission published its most recent, third Supranational Risk Assessment (SNRA) in October 2022. The SNRA provides Member States with a full picture of the risks in all relevant sectors and contains recommendations for mitigating measures concerning ML/TF risks. 1.4.1.3 Supranational regulation At the EU level, provisions on the prevention of ML/TF are laid down by the Fourth Anti-Money Laundering Directive, which has in part been amended and supplemented by the Fifth Anti-Money Laundering Directive.46 On 20 July 2021, the Commission presented a package of four legislative proposals to strengthen AML/ CFT. This package consists of the following proposals: y Proposal for a Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, COM(2021) 420 final (hereinafter AML/CFT Regulation proposal). y Proposal for a Directive on the mechanisms to be put in place by the Member States for the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and repealing Directive (EU) 2015/849, COM(2021) 423 final (hereinafter the Sixth Anti- Money Laundering Directive). 46 Directive (EU) 2018/843 of the European Parliament and of the Council amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU. 35 Publications of the Ministry of Finance 2024:35 y Regulation (EU) 2023/1113 of the European Parliament and of the Council on information accompanying transfers of funds and certain crypto-assets and amending Directive (EU) 2015/849 (hereinafter the Transfer of Funds Regulation). The Regulation entered into force in June and applies from 30 December 2024. y Proposal for a Regulation establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism, COM(2021) 421 final (hereinafter the AMLA Regulation proposal). On 20 July 2021, the Commission also issued a proposal for a Directive of the European Parliament and of the Council amending the Financial Information Directive (EU) 2019/1153, as regards access of competent authorities to centralised bank account registries through the single access point (COM(2021) 429 final). The recast Transfer of Funds Regulation entered into force in June 2023 and applies from 30 December 2024 onwards. Political trilogue negotiations between the Commission, the Council and the European Parliament are underway concerning the AML/CFT Regulation proposal, the Sixth Anti-Money Laundering Directive and the AMLA Regulation proposal. Negotiations are expected to be completed during spring 2024, and the application of the new regulation is due to commence in 2027. As regards the SNRA, the package of AML/CFT legislative proposals is going to involve changes to the Commission’s publication frequency of the SNRA. According to the Commission proposal for the Sixth Anti-Money Laundering Directive and the opinion of the Council, the SNRA would be published in four years from the entry into force of the new Directive and, after that, every four years. The European Parliament in turn has proposed that the SNRA should be published every three years. Where necessary, the Commission could update parts of the risk assessment more frequently. As regards NRAs, the Commission and the Council have proposed that these should also be published every four years under the Sixth Anti-Money Laundering Directive. The European Parliament in turn has proposed that the NRA should be published every three years. Member States could, where so required by the risk environment, also update their NRA more frequently. There has been no previous EU-level regulation on the specific NRA updating cycle. The European Parliament has proposed the inclusion of sanctions in the scope of application of AML regulation, and the risks relating to the circumvention of sanctions should in its opinion be taken into account in the NRA as well as the SNRA. 36 Publications of the Ministry of Finance 2024:35 The Regulation of the European Parliament and of the Council on Markets in Crypto-Assets (MiCA Regulation) entered into force in June 2023.47 Most of the MiCA Regulation will apply from December 2024 and some parts already from June 2024. The Regulation aims to create the first common regulatory framework at the EU level applied to crypto-assets, crypto-asset issuers and crypto-asset service providers. The MiCA Regulation will apply to natural and legal persons and certain other undertakings that are engaged in the issuance, offer to the public and admission to trading of crypto-assets or that provide services related to crypto-assets in the Union. The Regulation will result in more stringent regulation of providers of crypto-assets and, in the future, requirements set for actors will include improved investor information, the establishment of a complaint handling procedure, and disclosure of conflicts of interests to clients. The MiCA Regulation also covers the prevention of market abuse. 1.4.2 National legislation Finnish national provisions on AML/CFT are laid down in the following acts: y Act on Preventing Money Laundering and Terrorist Financing (444/2017) y Act on the Financial Intelligence Unit (445/2017) y Act on the Bank and Payment Accounts Control System (571/2019, in Finnish) y Act on Virtual Currency Providers (572/2019, in Finnish) y Act on the Freezing of Funds with a View to Combating Terrorism (325/2013) y Criminal Code (39/1889). A few key legislative amendment projects implemented since the 2021 NRA are presented below. The project for the partial reform of AML/CFT legislation amended the legislation on the basis of national needs for legislative amendments and at the same time improved the implementation of the Fourth Anti-Money Laundering Directive and responded to recommendations made by the FATF. The amendments were prepared in a broad-based working group appointed by the Ministry of Finance, 47 Regulation (EU) 2023/1114 of the European Parliament and of the Council on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937. https://finlex.fi/en/laki/kaannokset/2017/en20170444.pdf https://www.finlex.fi/en/laki/kaannokset/2017/en20170445.pdf https://www.finlex.fi/fi/laki/ajantasa/2019/20190571 https://www.finlex.fi/fi/laki/ajantasa/2019/20190572 https://finlex.fi/en/laki/kaannokset/2013/en20130325_20170456.pdf https://www.finlex.fi/en/laki/kaannokset/1889/en18890039.pdf 37 Publications of the Ministry of Finance 2024:35 and further drafting took place at the Ministry as part of official duties.48 A supplementary government proposal relating to this package was also submitted in early 2023.49 Most of the amendments entered into force on 31 March 2023. The Ministry of Finance conducted a review of the needs to amend the national AML/CFT legislation during 2020. In this context, the need also emerged to examine whether it would be possible to lay down provisions in the Anti-Money Laundering Act on a national information system processing the personal data of politically exposed persons (PEP) with regard to the enhanced customer due diligence obligation specified in chapter 3, section 13 of the Act. The topic was considered by the working group preparing the partial reform of the Act in 2021, and this resulted in the decision of the Ministry, in autumn 2022, to launch a project to prepare a memorandum assessing the topic. The project was funded under the Action Plan for Tackling the Grey Economy and Economic Crime 2020– 2023. The assessment memorandum describes and assesses the current state of such data processing, on the basis of which obliged entities specified in the Anti-Money Laundering Act could identify a customer or a customer’s beneficial owner as a PEP or a family member or business partner of a PEP. In addition, the assessment memorandum assesses the prerequisites for the processing of such personal data from the perspectives of data protection legislation and the national regulatory leeway available. The memorandum also assesses the key impacts and implementation options of the collection and storage of personal data. The assessment memorandum will be published and sent for a round for comments in January 2024.50 Finnish legislation on the bank and payment accounts control system was reformed in September 2022. The legislative amendments implemented the Financial Information Directive of the EU and supplemented the implementation and national regulation of the Fifth Anti-Money Laundering Directive. Following the reform, more authorities with competence in the prevention, detection and investigation of various offences or with the right of access to financial information from actors in the financial sector are able to make use of the register data. The legislative amendments also enable the better targeting of data requests and reduce the need for overlapping information systems. The reform resulted in the 48 Government Proposal 236/2021. 49 Government Proposal 323/2022. 50 Ministry of Finance project: Memorandum assessing the processing of personal data of politically exposed persons using a centralised national information system (in Finnish), accessed 29 September 2023. 38 Publications of the Ministry of Finance 2024:35 introduction of an aggregating application to the Bank and Payment Accounts Control System, which facilitates the work of the authorities and financial sector actors alike. Using the aggregating application, the competent authority can make a single request to gain electronic and information-secure access to data in the Bank and Payment Accounts Register maintained by Finnish Customs as well as data in individual information search systems. These reforms increase the efficiency of AML/CFT efforts. 39 Publications of the Ministry of Finance 2024:35 2 Money laundering Money laundering (ML) refers to activity specified in chapter 32, section 6 of the Criminal Code where property obtained through an offence, proceeds of crime or property replacing these is received, used, converted, conveyed, transferred, transmitted or possessed in order to obtain benefit for oneself or another person or to conceal or disguise the illegal origin of such proceeds or property or in order to assist the perpetrator to evade the legal consequences of the offence. Also regarded as ML is any activity in which someone conceals or disguises the true nature, source, location or disposition of, or rights with respect to, property obtained through an offence, proceeds of crime or property replacing these, or assists another person in such concealment or disguising. ML has three stages: placement, layering and integration. In the first stage, the criminal proceeds are introduced into the financial system. In the second stage, measures are taken to conceal or disguise the origin of the funds and in the third stage the aim is to return the proceeds of crime that have been moved around to the legitimate market. These stages may also occur simultaneously.51 Figure 2.  Structure of money laundering. 51 FATF: What is Money Laundering?, accessed 27 July 2023. Unlawfully obtained • property, • proceeds of crime, or • property replacing these is • received, • used, • converted, • conveyed, • transferred, • transmitted, or • possessed. • concealed or disguised (in terms of true nature, source, location or disposition of or rights to), or • another person is assisted in such concealment or disguise. The activity aims to • obtain benefit for oneself or another person, • conceal or disguise the illegal origin of the proceeds or property, or • assist the perpetrator to evade the legal consequences of the offence. 40 Publications of the Ministry of Finance 2024:35 According to Statistics Finland, in 2022 a total of 926 cases under the headings of money laundering, attempted money laundering, aggravated money laundering, attempted aggravated money laundering, conspiracy for the commission of aggravated money laundering, negligent money laundering, or money laundering violation were recorded by the authorities (Table 1). Of these, 648 cases involved money laundering and 232 aggravated money laundering. The preparatory work of the Criminal Code and case law have set EUR 13,00052 as the minimum for the proceeds of aggravated money laundering, but this is not an absolute limit. For comparison, a year earlier in 2021 a total of 700 cases were recorded by the authorities. Table 1.  Money laundering offences recorded by the authorities and solved offences in 2018–2022.53 Number of offences per year 2018 2019 2020 2021 2022 Money laundering offences recorded by the authorities 426 452 594 700 926 Solved offences 406 353 492 680 623 It appears on the basis of the statistics that the number of all ML offences has increased steadily by around 43% from 2017 to 2021 (Table 2). The biggest increase is seen in negligent ML offences, the occurrence of which has more than doubled, whereas the increase in regular ML offences is around 37%. 52 Government Proposal 53/2002, p. 36. 53 Statistics Finland: Solved offence: Definition 1, accessed 1 September 2023. Offence headings included in the statistics: money laundering, aggravated money laundering, attempted money laundering, attempted aggravated money laundering, negligent money laundering and money laundering violation. 41 Publications of the Ministry of Finance 2024:35 Table 2.  Imputable money laundering offences in court in 2018–2022.54 Offence heading 2018 2019 2020 2021 2022 Money laundering 286 290 256 382 556 Attempted money laundering 1 2 5 5 2 Aggravated money laundering 75 63 70 67 77 Attempted aggravated money laundering 2 1 0 0 2 Conspiracy for the commission of aggravated money laundering - - - - - Negligent money laundering 71 71 68 89 73 Money laundering violation 31 46 47 41 59 Total 466 473 446 584 769 As expected, steady growth has also been seen in sentences for money laundering offences, with the growth rate exceeding 60% (Table 3). The biggest increase is seen in the number of regular money laundering offences in particular, up by as much as 37% between 2017 and 2021. Sentences for negligent money laundering offences have also tripled. Table 3.  Sentences for money laundering offences in 2018–2022.55 Persons sentenced in court (number) 2018 2019 2020 2021 2022 Money laundering 156 180 145 206 240 Attempted money laundering 0 0 2 3 1 Aggravated money laundering 66 54 55 60 62 54 Statistics Finland: Sentences by district court and offence (district courts and courts of appeal as courts of first instance), accessed 1 September 2023. Sentence, information, principal offence and year as variables. 55 Statistics Finland: Sentences by district court and offence (district courts and courts of appeal as courts of first instance), accessed 1 September 2023. Sentence, information, principal offence and year as variables. 42 Publications of the Ministry of Finance 2024:35 Persons sentenced in court (number) 2018 2019 2020 2021 2022 Attempted aggravated money laundering 1 1 0 0 0 Conspiracy for the commission of aggravated money laundering - - - - - Negligent money laundering 50 56 44 60 54 Money laundering violation 11 18 10 14 22 Total 284 309 256 343 379 According to the FATF, it is impossible to estimate precisely how much money is laundered each year.56 For example the United Nations Office on Drugs and Crime (UNODC) has, however, estimated that 2–5% of global GDP is laundered each year.57 Assuming the scale of the phenomenon is as large nationally as it is globally, the amount money laundered in Finland each year is around EUR 5.3 to EUR 13.4 billion.58 2.1 Self-laundering In self-laundering, the person who commits the offence also launders the proceeds of their crime. In December 2020, the amendments required by the EU Directive on combating money laundering by criminal law59 were made to the Criminal Code. This made the concealing of criminal proceeds more widely punishable. If a person who has committed a predicate offence takes specific arrangements to conceal the proceeds of their crime, they may be sentenced for not only the predicate offence but also for money laundering.60 In the 2021 NRA, a preliminary estimate was made that extending the scope of punishment for self-laundering could increase the 56 FATF: What is Money Laundering?, accessed 27 July 2023. 57 UNODC: Money-laundering. Overview, accessed 8 August 2023. 58 According to Statistics Finland, Finland’s GDP at market prices was EUR 268.6 billion in 2022. 59 Directive (EU) 2018/1673 of the European Parliament and of the Council on combating money laundering by criminal law. 60 Moneylaundering.fi 2020: Money laundering provisions to be added to Criminal Code (in Finnish), accessed 18 August 2023. 43 Publications of the Ministry of Finance 2024:35 number of ML sentences by around 100–200 each year.61 However, the statistics for 2021 show 343 sentences for ML, whereas the corresponding figures for 2020 and 2019 were 256 and 309, respectively (see Table 3). The expected increase does not appear to have materialised in the light of the statistics. 2.2 National operating environment of money laundering This partial update of the NRA covers only the highest-risk sectors. From the ML perspective, the highest-risk sectors are payment service providers, credit institutions, virtual currency service providers and designated non-financial businesses and professions (DNFBPs). Actors in the sectors of the obliged entities are broken down into two main groups, with the majority of the actors being limited liability companies (70%) and the second-largest group comprising natural persons (22%). Other significant legal forms are partnerships, associations, corporations and death estates. According to the Standard Industrial Classification (TOL 2008), the largest group of obliged entities is professional, scientific and technical activities, accounting for 38% of all selected actors. The second-largest group is financial and investment activities at 25%, and other significant sectors include real estate activities, and the wholesale and retail trade. As regards geographical distribution, Uusimaa is the region where the largest percentage of the actors at 37% of the total are based, with other regions each accounting for less than 10%. Activities in the sectors of obliged entities are diverse. The customer classification of the Grey Economy Information Unit shows that the enterprises in these sectors have operated for a long time. Enterprises that have operated for more than 10 years account for 54%, for 5–10 years for 20% and for 3–5 years for 10% of the total. The enterprises are significant in terms of the size of their turnover, with their total combined turnover amounting to EUR 38.3 billion. 61 Government Proposal 183/2020, p. 33. 44 Publications of the Ministry of Finance 2024:35 Table 4.  Scope of operations: Turnover of obliged entities registered by supervisory authorities in 2019–2021.62 Turnover per year 2019 2019 2020 2020 2021 2021 Turnover category Number Share of total number Number Share of total number Number Share of total number No data 2,398 26% 2,021 22% 1,649 18% Less than EUR 40,000 1,175 13% 1,289 14% 1,378 15% EUR 40,000–100,000 1,517 16% 1,578 17% 1,645 18% EUR 100,000–400,000 2,171 23% 2,273 24% 2,376 25% EUR 400,000–EUR 1 million 884 9% 964 10% 1,002 11% EUR 1–2 million 433 5% 417 4% 442 5% EUR 2–10 million 440 5% 459 5% 490 5% More than EUR 10 million 303 3% 320 3% 339 4% Total 9,321 - 9,321 - 9,321 - EUR 42,410,136,140 - 38,012,340,356 - 40,624,681,172 - 62 Finnish Tax Administration 2023e, p. 11. This does not include branches of foreign payment institutions or mortgage credit intermediaries. 45 Publications of the Ministry of Finance 2024:35 The sectors of obliged entities had a significant number of employees. According to the customer classification, the sectors selected in 2022 had a total of 269,919 wage and salary earners. These sectors are significant from the perspective of the tax authorities, as their (gross) tax payments totalled EUR 12.7 billion in 2022. The sectors are stable also from the perspective of outstanding taxes and payment defect figures. Of the total, 92% had no outstanding taxes at all in earl