Consumer lenders have various shortcomings in AML/CFT risk management; registered information on supervised entities assessed and updated
Companies granting consumer credit were transferred under FIN-FSA supervision on 1 July 2023, when the Act on the Registration of Certain Credit Providers and Credit Intermediaries entered into force. At the time of the shift of supervision, there were 44 entities in the register.
In autumn 2023, the FIN-FSA commenced a review, looking into:
- the fulfilment of registration requirements by these entities
- customer protection procedures
- compliance with obligations under the AML Act
In addition, the FIN-FSA carried out a thematic review of the management of default risks by entities granting consumer credit in Finland.
This supervision release presents the results of the reviews about the prevention of money laundering/terrorist financing and the fulfilment of registration requirements by companies granting consumer credit in Finland.
Review of the prevention of money laundering and terrorist financing
The review examined the level of compliance of the new supervised entities’ procedures and risk management measures with the obligations under the AML Act. The entities were informed of the shortcomings identified during the review and given instructions on how and which areas of their practices they need to develop further, and they were requested to submit to the FIN-FSA their updated documentation related to anti-money laundering (AML) processes.
Key findings on the prevention of money laundering and terrorist financing
Significant differences were detected across the entities granting consumer credit in Finland in terms of the scale of their efforts to identify and manage the risks of money laundering and terrorist financing (ML/TF). Some of the entities were also found to have significant shortcomings in their AML/CFT risk assessments.
In addition, entities granting consumer credit in Finland were found to have significant differences and various shortcomings in terms of their policies and code of conduct established for the management of ML/TF risks. The most significant shortcomings were related to customer-specific risk rating, internal assignment of responsibilities pertaining to AML/CFT obligations, customer due diligence and enhanced due diligence.
According to the review, the FIN-FSA's active measures have had a positive impact on enhancing the entities’ awareness of ML/TF risks and thereby also on their risk management. Most of the entities have reacted swiftly to the FIN-FSA's requests for further clarifications. They have embraced the feedback given by the FIN-FSA by developing their internal risk management processes to combat money laundering more effectively.
Subsequent measures by the FIN-FSA
The findings of the review will be used as a basis in targeting ongoing risk-based supervision. As regards two entities, the documentation includes many and/or significant shortcomings. These entities submitted their responses to the FIN-FSA’s requests for clarification late, and therefore the supervisory measures are still ongoing. By the end of year 2024, all registered entities in the sector are expected to fulfil their obligations under the AML Act based on the updated documents.
The entities’ responses to the data collection on AML/CFT risks, controls, and sanctions (RA, Risk Assessment survey) will be reviewed and analysed. The FIN-FSA will also assess risks of money laundering and terrorist financing associated with the sector.
The FIN-FSA may conduct inspections and on-site supervision visits at the entities. If shortcomings are identified, the FIN-FSA may impose administrative sanctions. The administrative sanctions are a penalty payment, public warning and administrative fine. The FIN-FSA may also oblige an entity to fulfil its obligations under penalty of a conditional fine if the non-compliance is not minor.
Review of the fulfilment of registration requirements
The review examined the up-to-datedness of the information in the register and whether registered entities meet the requirements for registration. In particular, the requirements concern the reliability and expertise of senior management and the reliability of large shareholders. Another objective was to explore the ownership structure of the entities to determine an appropriate scope for the assessment of the reliability requirement.
Key findings of the review of the fulfilment of registration requirements
The entities are obliged under law to report any changes in the registered information. Failures to report this information were identified. The FIN-FSA has updated its register based on the information obtained. In the same context, the ownership structures of the entities were explored.
During the review, 14 affirming decisions and one negative decision were made on the termination of registration. Each decision on removal from the register was made at the request of the company concerned. The termination of registration was contingent on the company no longer granting new consumer credits or having outstanding credit portfolio based on previous activity.
As regards the entities remaining in the register, the findings of the review did not affect the assessment of the fulfilment of the requirements.
Subsequent measures by the FIN-FSA
In ongoing supervision, the FIN-FSA will pay attention to ensuring that the entities notify any changes to information entered in the register. As an administrative sanction, the FIN-FSA may impose a penalty payment on the entity for non-compliance with the obligation.
Appendix
For further information, please contact
- Anti-money laundering
Emilia Isolauri, Supervisor, telephone +358 9 183 5017 or emilia.isolauri(at)fiva.fi - Fulfilment of registration requirements
Roosa Heinonen, Specialist, telephone +358 9 183 5575 or roosa.heinonen(at)fiva.fi