Insurance and Pension Denmark criticises FSA over money laundering rules

Insurance and Pension Denmark has criticised the country’s Financial Supervisory Authority (FSA) on the tightening of money laundering rules that impact pension funds.

It argues that the industry is low risk for money laundering, as previously stated by the State Prosecutor for Serious Economic and International Crime (SØIK). However, the industry is now faced with more control and stricter reporting requirements, which it says are meaningless and costly. It believes that the FSA should ensure it is more proportionate in its control efforts.

Insurance and Pension Denmark deputy director, Torben Weiss Garne, said: “We take an active part in the efforts against money laundering, and our companies spend a lot of resources on it. But the Danish FSA's money laundering control has simply gone out of proportion.

“The risk of money laundering is severely limited - and yet pension companies are facing an increasing number of requirements that seem completely out of proportion to the risk. It is very difficult to see how the new austerity measures will contribute to our fight against money laundering. But the burdens on them are obvious.”

He emphasizes that the pension system is structured in a way where the risk of money laundering is minimal.

“It is difficult to imagine which employer or employee will have the idea of money laundering by paying 15-16 per cent of their salary each year into a pension scheme that is only paid out when you retire. In addition, the money is taxed at the time of payment, declared for tax due to the right to deduct and paid in via a bank, which must also report suspicious transactions,” he stated.

This is supported by SØIK's risk assessment from 2018 in the money laundering area. This states that: “In addition, it should be noted that the insurance and pension area was highlighted as being vulnerable to abuse for money laundering. However, the subsequent risk assessment of the area has shown that with the current control measures and laws regarding the payment of pension and insurance funds, it seems very unlikely that money laundering could occur. This area is therefore omitted from the risk assessment analysis.”

“Against this background, it is honestly difficult to understand that the Danish Financial Supervisory Authority has now tightened the requirements for the pension companies' reports further to the obvious detriment of both the companies and their customers. The new requirements are neither proportional nor risk-based, as the Authority's own strategy otherwise dictates,” Weiss Garne added.

In response, FSA head of anti money laundering and counter financing of terroism, Stig Nielsen, said: ”The Danish Financial Supervisory Authority also believes that the risk of money laundering in pension funds and life insurance companies is low, but it is not zero. And every year we do receive notifications related to suspicion of money laundering in these companies.

“Proportionality should not be measured in terms of what the costs of control of money laundering are, but in terms of what the risk is, and the companies are only obliged to do what is necessary.”

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