Prevention of money laundering and terrorist financing
When suspecting terrorist financing, the supervised entity is under the same obligations as when detecting a suspicious transaction which may be related to money laundering. However, there is the difference that money laundering is concerned with a suspicion of the legality of the origin of the assets, whereas terrorist financing may also be based on legally obtained assets, for example in connection with fund raising or money remittance. In this case, the suspicion is concerned with the purpose of use of the assets.
International financial sanctions
International financial sanctions refer to the freezing of funds and other financial resources of those subject to the sanctions. They are a response to various circumstances posing a threat to international peace and security, including terrorism. This entails, among other things, the imposition of sanctions often directly on individuals, entities or groups. The Security Council of the United Nations imposes globally binding sanctions, but the EU or individual countries may also impose their own sanctions. International financial sanctions applicable in Finland are published in the Official Journal of the European Union.
In addition to financial sanctions, there are also other international sanctions, including export and import embargoes as well as prohibitions of flight and travel. In Finland, main responsibility for coordination of compliance with UN and EU financial sanctions belongs to the Ministry for Foreign Affairs.
National decisions on freezing assets
The purpose of freezing decisions under the Act on the Freezing of Funds with a View to Combating Terrorism is to prevent a person, group or entity subject to the decision from channelling assets under its management to the purposes of terrorism. In addition to receiving reports of suspicious transactions, the Financial Intelligence Unit of the National Bureau of Investigation assesses the grounds of freezing decisions, makes freezing decisions on individuals, groups or entities to be added to the public list, and makes decisions on withdrawing parties from the public list. The freezing decisions are published in the Official Gazette, and a current list of the freezing decisions is available from the Financial Intelligence Unit.
Obligations of supervised entities due to financial sanctions and freezing decisions
Decisions made by the UN Security Council under chapter VII of the Charter of the United Nations are binding on the member states of the UN, and they are implemented in the EU by Council Regulations. The list of parties subject to sanctions may be revised by Council Implementing Regulations and Commission Implementing Regulations. The Regulations are directly applicable legislation in all EU member states after publication in the EU Official Journal.
Freezing decisions based on national law are made in Finland by the Financial Intelligence Unit within the National Bureau of Investigation, and the decisions are enforced by the enforcement officer. Reporting entities are considered to have been informed of freezing decision on the date when they are published in the Official Journal.
All assets of individuals, entities and groups subject to EU Regulations and freezing decisions by the Financial Intelligence Unit must be frozen. In addition, it is forbidden to surrender assets or other financial resources directly or indirectly to parties stated in the Regulations and asset-freezing decisions. The supervised entity must take measures required by the Regulations and freezing decisions directly without a separate related announcement or order issued by an authority. Failure to comply with the obligations is punishable as a regulation offence under chapter 46 of the Penal Code.
As a rule, the freezing covers the entire wealth of the person. The freezing of assets is valid until the UN Security Council, the EU institutions or the Financial Intelligence Unit revise or repeal their decisions. However, assets may be relieved for example on humanitarian grounds. In Finland, authority for making such decisions concerning international sanctions belongs to the Ministry for Foreign Affairs. As regards domestic freezing decisions, any exceptions to the freezing of assets are detailed in the freezing decisions.
Supervised entities must monitor the EU's sanction regulations and national asset-freezing decisions as well as changes therein, and review its registers and monitor payment traffic in order to ensure that the assets of parties subject to sanctions are frozen. It is forbidden to surrender assets and other financial resources directly or indirectly to the parties concerned, unless the surrender is arranged so that the assets surrendered will be frozen.
If supervised entity identifies a person in its registers or payment transactions whose identification details match those of parties subject to international financial sanctions or freezing orders, the person under the reporting obligation must freeze the assets or abort the transaction and notify the Helsinki Enforcement Authority.
The supervised entity should note that the basis of an asset freeze may indicate a suspicious transaction or financing of terrorism as referred to in the AML Act.
If a supervised entity identifies a person in its registers or payment transactions whose identification details is not a full match with those of parties subject to international financial sanctions or freezing orders, but are almost identical (for example, the identifying information on the sanction list may be so defective that it is impossible for the supervised entity to verify itself whether the same party is concerned), the supervised entity should abort the transaction, notify the Helsinki Enforcement Authority and act according to its instructions.