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Cablegate: Money Laundering and Financial Crimes in Finland:

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 HELSINKI 001592

SIPDIS

E.O. 12958: N/A
TAGS: KCRM PTER KSEP SNAR KTFN EFIN FI
SUBJECT: MONEY LAUNDERING AND FINANCIAL CRIMES IN FINLAND:
SUBMISSION TO PART II OF 2004-2005 INCSR


1. Summary: The following is Embassy Helsinki's submission
to the money laundering and financial crimes section of the
2004-2005 International Narcotics Control Strategy Report
(INCSR). End summary.

--------
Overview
--------
2. Finland is not a regional center for money laundering,
financial crime or illegal commerce. A "Corruption
Perceptions Index" survey taken by Transparency
International, which evaluates countries based on experts'
perceptions of corruption, ranked Finland in first place as
the country perceived around the world to be the least
corrupt. Nonetheless, Finnish authorities are concerned
about links to organized crime, as well as money laundering
arising from fraud or other economic crime. To date, no
Finnish (or Finland-based) individuals or organizations have
been suspected of financing terrorism.

3. The Money Laundering Clearing House (MLCH), established
under the National Bureau of Investigation in March 1998,
receives and investigates reports of suspicious transactions
from obligated reporting institutions. The Clearing House
has authority to initiate investigations before the basis of
a pre-trial investigation has been established. The Clearing
House also has the ability to freeze a transaction for up to
five business days in order to determine the legitimacy of
the funds. The responsibilities of the Clearing House were
expanded in 2003 to include the prevention of terrorist
financing.

4. The Clearing House received 4,132 suspicious transaction
reports (STRs) in 2004, 2,716 in 2003, 2,718 in 2002, and
2,796 in 2001. A majority of the reports-roughly four-
fifths-concerned money laundering; the remainder consisted
mostly of U.S., EU and/or UN designations of entities
suspected of terrorist financing. Of the cases forwarded to
pre-trial criminal investigation, the most common offenses
were tax fraud (25 percent), narcotics offenses (13
percent), fraud (12 percent) and receiving offense (11
percent).

5. Money laundering represents about 10 percent of all
financial crime in Finland. Financial crime--not limited to
money laundering--has remained steady over the past three
years (approximately 1600 cases per year). As of the
preparation of this report, no information is available on
the number of arrests and/or prosecutions for money
laundering in 2004. However, the scale of the problem is
relatively minor. Between 1994-2002, 93 people were arrested
for money laundering. Of those, 83 people were convicted.

6. A majority of STRs involve at least one foreign party.
Nationals from 84 countries were mentioned in the reports.
To some extent, this internationalization is due to the
receipt of terrorist financing related STRs. Of the money
laundering STRs, the most-represented suspect nationalities
were Finnish (48%), Russian (16.5%), Estonian (4.8%) and
Swedish (1.6%). Criminal proceeds laundered in Finland
derive mainly from domestic criminal activity. Local
narcotics trafficking organizations as well as a small
number of local organized crime groups control some of the
money-laundering proceeds.

7. Of all the reporting agencies, currency exchange
companies are the most active in reporting suspicious
transactions, accounting for 70% of all money laundering
STR's. Other reporting entities include banks (19%), non-
Police national authorities such as Customs and the Frontier
Guard (7%) and insurance companies (1%). Reports from the
National Police account for approximately 0.6% of all STR's.
The Act on Preventing and Clearing Money Laundering protects
individuals that cooperate with law enforcement entities.

8. Money laundering occasionally occurs within offshore
financial centers. Finland has not enacted secrecy laws that
prevent disclosure of client and ownership information by
domestic and offshore financial services companies to bank
supervisors and law enforcement authorities. Finland does
not have any cross-border transaction reporting
requirements. However, Finnish authorities have addressed
the problem of the international transportation of illegal
source currency and monetary instruments in the Customs Act
(sections 13-20).

9. No Finnish entities or officials are known to encourage,
facilitate or engage in laundering the proceeds from illegal
drug transactions, from other serious crimes, or from
terrorist financing. Neither have there been any reports of
Finland's financial institutions engaging in currency
transactions involving international narcotics trafficking
proceeds that include significant amounts of United States
currency or currency derived from illegal drug sales in the
United States.

--------------------------------------------- --
Money Laundering & Financial Crimes Legislation
--------------------------------------------- --
10. In 1994, Finland enacted legislation criminalizing money
laundering related to all serious crimes. The Act of
Preventing and Clearing Money Laundering (Money Laundering
Act), which passed in 1998, compels credit and financial
institutions, investment and fund management companies,
insurance brokers and insurance companies, real estate
agents, pawn shops, betting services, casinos, and most non-
bank financial institutions to report suspicious
transactions. Management companies and custodians of mutual
funds were added as covered entities in the Money Laundering
Act in 1999.

11. Apartment rental agencies, auditors, auctioneers,
lawyers, accountants, and dealers in high value goods were
added when amendments to the Act came into force in 2003.
Also included are the businesses and professions that
practice other payment transfers in the field of financing
that are not referred to in the Credit Institutions Act,
such as "hawala." According to the Money Laundering Act, an
obliged party must identify customers, exercise due
diligence and report suspicious activity.

12. In December 2002 the Parliament accepted amendments to
the Penal Code, which came into force on April 1, 2003. The
amendments included the differentiation of penalty
provisions concerning money laundering and traditional
receiving offense in order to clarify the law where some
actions could be punishable on the basis of both the
receiving offense and money laundering penalty provisions,
and to emphasize in legislation the criminality of money
laundering and its relevance to serious organized crime.
Prior to the amendments, the definition of money laundering
was limited only to property gained through crime.

13. The new amendments expand the definition to include
negligence and the usage or transmission of property gained
through an offense and its proceeds or property replacing
such property, as well as bringing under the law those who
assist in activities of concealment or laundering. With the
differentiation of money laundering from the traditional
receiving offense, the receiving offense penal scale now
corresponds to the basic penal scale of other economic
offenses, and the money laundering penal scale is set to
meet international standards, with sanctions of up to six
years of imprisonment.

-------------------------
INTERNATIONAL COOPERATION
-------------------------
14. Finland is a member of the Financial Action Task Force
(FATF) and the Council of Europe. The MLCH is a member of
the Egmont Group. Finland also cooperates with the European
Union, Europol, the United Nations, Interpol, the Baltic Sea
Task Force, the Organization for Economic Co-operation and
Development and other international agencies designed to
combat organized crime. Finland is a party to the 1988 UN
Drug Convention and has signed the UN Convention against
Transnational Organized Crime. Finland is also a party to
the Council of Europe Convention on Laundering, Search,
Seizure, and Confiscation of Proceeds from Crime.

15. Finland has enacted laws for the sharing with other
governments of seized narcotics assets, as well as the
assets from other serious crimes. Finland is party to the
Vienna and Strasbourg Conventions, and has signed the
European Convention on Mutual Assistance in Criminal
Matters, under which other countries may be afforded a
considerable amount of legal assistance. Finland has also
concluded numerous bilateral law enforcement cooperation
agreements. In September 1989, Finland signed a tax treaty
with the United States, replacing a previous treaty signed
in 1970. The current treaty has provisions to exchange
information for investigative purposes.

16. The MLCH may exchange information with other Financial
Intelligence Units (FIUs) and with bodies engaged in
criminal investigations, such as police services and public
prosecutors. Although no Memorandum of Understanding (MOU)
is required for this purpose under Finnish law, MOUs have
been concluded with Belgium, Bulgaria, France, Latvia,
Lithuania, Luxembourg, Poland, Spain, Switzerland, Thailand,
Korea, Canada, Russia and Albania. The information exchanged
may only be used for the prevention and clearing of money-
laundering transactions. Consequently, the information
obtained may only be used as evidence with the approval of
the MLCH.

17. The MLCH's action in response to a request for
information on a given person or organization differs from
case to case. In most cases, the MLCH simply hands over the
requested information and no other measures are taken. If
the MLCH has already received a STR related to the person or
entity, the Anti-Money-Laundering Act allows it to start a
police investigation. Under the Pre-trial Investigation Act,
the police must institute an investigation if an offence is
reported or suspected in Finland.

--------------
ASSET FREEZING
--------------
18. From January-November 2004 the Money Laundering Clearing
House gave 24 orders to freeze assets/suspend transactions.
The total value of these transactions was $1.7 million (EUR
1,398,398). With these orders, the Money Laundering Clearing
House recovered $630,000 of criminal proceeds. Most cases
involved money laundering and financial crime. In 2003, the
Clearing House gave 16 orders to freeze assets/suspend
transactions. The total value of these transactions was
approximately $1.8 million, a significant increase from 2002
($900,000) and 2001 ($720,000). With these orders,
authorities recovered criminal proceeds totaling over $1.5
million (compared to approximately $5,000 in 2002 and
$650,000 in 2001).

19. According to the Penal Code Chapter 10 Section 2, the
proceeds of crime shall be given to the injured party. If a
claim for compensation or restitution has not been filed,
Finnish authorities can order forfeiture. With some
exceptions, only the proceeds of a crime can be forfeited.
Legitimate businesses can be seized if used to launder drug
money or support terrorist activity.

20. Finnish authorities do not have national authority to
permanently suspend transactions or forfeit assets
independent of a judicial process. Although the authority to
freeze assets rests with the National Bureau of
Investigation, officials at the MLCH consult and coordinate
with other branches of government, including the Ministry of
Foreign Affairs, the Ministry of Interior and the Ministry
of Finance.

-------------------------------
Terrorist Financing Legislation
-------------------------------
21. Finland became a party to the UN International
Convention for the Suppression of the Financing of Terrorism
on June 28, 2002. The penal code of Finland was amended at
the end of 2002 with the addition of a new chapter on
terrorism (Chapter 34 a). According to Section 5 of the
amendment, a person who directly or indirectly provides or
collects funds in order to finance a terrorist act or who is
aware that these funds shall finance a terrorist act,
commits a punishable offence.

22. In January 2003 the Parliament accepted amendments to
the Money Laundering Act bringing it in line with the FATF
Eight Special Recommendations on Terrorist Financing, the UN
International Convention for the Suppression of the
Financing of Terrorism and the amendments to the EU
Directive on Money Laundering.

23. Finland has national authority to freeze terrorist
assets. The Money Laundering Clearing House performs
investigations on all individuals suspected of financing
terrorist acts, including all individuals and entities on
the UN 1267 sanctions committee's consolidated list. To date
no Finns have been suspected of financing terrorism and no
funds of foreign nationals suspected of terrorist financing
have been located in Finland. In the event that funds are
found, the assets could be frozen without undue delay for
five business days. For the funds to remain frozen, a
criminal investigation must be launched (either in Finland
or abroad). The funds would remain frozen for the period of
the investigation.

----------------
Free Trade Zones
----------------
24. Finland has four Free Zones and seven Free Warehouse
areas. The four designated Free Zones are located in Hanko
(southern Customs District), Hamina and Lappeenranta
(Eastern customs district), and Turku (Western Customs
District). The seven Free Warehouses are located in Helsinki
(southern customs district), Naantali, Pori, Rauma, Vaasa
(Western Customs District), Kemi and Oulu (Northern customs
district).

25. In Finland, the duty-free free zone and warehouse
licenses have in most cases been granted to municipalities
or cities, but one or several commercial operators, approved
by the customs districts, are usually in charge of
warehousing operations within the area. The duty-free
storage areas are available to both domestic and foreign-
owned companies. The free zone area regulations have been
harmonized in the EU by the Community Customs Code.

26. Finnish Free Trade Zones often serve as a transit points
for shipments of good to and from Russia. Many goods
originating in East Asia and destined for St. Petersburg or
Moscow, are transported on the trans-Siberian railway to the
Lappeenranta Free Trade Zone, where they are temporarily
stored. These are mostly high-valued goods, whose passage
offers safety and tax incentives to Russian consumers. There
are no indications that these zones are being used in trade-
based money launderings schemes or by the financiers of
terrorism. There are no supervisory programs and/or due
diligence procedures in place to monitor activities in the
free trade zones.

WEISBERG#

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