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

UNCLAS SECTION 01 OF 05 HELSINKI 000077 
 
SIPDIS 
 
DEPARTMENT FOR INL, EUR/ERA, EUR/NB and EB/ESC/TFS 
JUSTICE FOR OIA and AFMLS 
TREASURY FOR FINCENT 
 
¶E. O.  12958: N/A 
TAGS: PTER SNAR KTFN EFIN KCRM FI
SUBJECT: MONEY LAUNDERING AND FINANCIAL CRIMES IN FINLAND: 
SUBMISSION TO PART II OF 2005-2006 INCSR 
 
REF: 05 SECSTATE 210324 
 
¶1.  Summary:  The following is Embassy Helsinki's submission 
to the money laundering and financial crimes section of the 
2005-2006 International Narcotics Control Strategy Report 
(INCSR).  End summary. 
 
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OVERVIEW 
-------- 
 
¶2.  Finland is not a regional center for money laundering, 
financial crime or illegal commerce.  Over the past decade, 
Finland repeatedly has placed first or second on 
Transparency International's Corruption Perceptions Index, 
indicating extraordinarily low perceived levels of 
corruption, as determined by expert assessments and opinion 
surveys.  Nonetheless, Finnish authorities are concerned 
about links to organized crime, as well as money laundering 
arising from fraud or other economic crime.  Terrorism 
related fund-raising, to the extent that it exists, appears 
to be less of a problem than in other European countries. 
 
¶3.  No government 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.  Cooperation between government 
authorities and financial institutions is good. 
 
¶4.  Officials do not point to an increase in any particular 
area of financial crimes in recent years.  Criminal proceeds 
laundered in Finland are predominantly in the local currency 
(Euros) and continue to derive mainly from domestic criminal 
activity.  These funds are normally laundered through the 
banking system and currency exchangers.  Local narcotics- 
trafficking organizations as well as a small number of local 
organized crime groups control some of the money laundering 
proceeds. 
 
¶5. Money laundering represents about 10 percent of all 
financial crimes in Finland.  A majority of the cases (80%) 
were related to economic crimes.  Financial crimes offenses 
have remained steady over the past three years 
(approximately 1,600 cases per year).  Between 1994 and 
2002, 93 people were arrested, of which 83 were convicted 
for money laundering. 
 
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FREE TRADE ZONES 
---------------- 
 
¶6.  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, 
and Vaasa (Western Customs District); and Kemi and Oulu 
(Northern Customs District). 
 
¶7.  In Finland, the duty-free free zone and warehouse 
licenses have, in most cases, been granted to municipalities 
or cities; however, 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 Community Customs Code has harmonized 
the free zone area regulations in the EU. 
 
¶8.  Finnish free trade zones often serve as 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 Zone, where they are temporarily stored. 
These are mostly high-value goods.  There are no supervisory 
programs and/or due diligence procedures in place to monitor 
activities in the free trade zones.  Nevertheless, there are 
no indications that the free trade zones are being used in 
trade-based money launderings schemes or by the financiers 
of terrorism. 
 
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TRANSBOUNDARY ISSUES 
-------------------- 
 
¶9.  Finland's ability to identify suspicious transactions 
may be impaired by the absence of cross-border transaction 
reporting requirements.  Finnish authorities have addressed 
the problem of the international transportation of illegal 
source currency and monetary instruments in the Customs Act. 
Beginning in June, 2007, Finland will implement a new EU 
regulation, which requires border crossers to declare cash 
in excess of $12,000. 
 
¶10.  Money laundering occasionally occurs within offshore 
financial centers.  Finnish legislation does not require 
that non-resident companies maintain a physical presence in 
Finland.  It does prohibit, however, nominee (or anonymous) 
directors and/or trustees.  There are no off-shore casinos 
or Internet gaming sites. 
 
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LEGISLATION 
----------- 
 
¶11.  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. 
 
¶12.  Management companies and custodians of mutual funds 
were added as covered entities in the Money Laundering Act 
in 1999.  Apartment rental agencies, auditors, auctioneers, 
lawyers, accountants, and dealers in high value goods were 
added when amendments to the Money Laundering Act came into 
force in 2003.  Also included are the businesses and 
professions that perform other payment transfers that are 
not referred to in the Credit Institutions Act, such as 
"hawala." According to the Money Laundering Act, a covered 
party must identify customers, exercise due diligence, and 
report suspicious activity to the Money Laundering Clearing 
House (MLCH), Finland's financial intelligence unit or FIU. 
 
¶13.  Amendments to the Penal Code came into force on April 
1, 2003.  The amendments include the differentiation of 
penalty provisions concerning money laundering and the 
traditional receiving offense in order to clarify the law 
where some actions could be punishable under 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.  The new 
amendments expand the definition to include negligence and 
the use or transmission of property gained through an 
offense, and its proceeds or property replacing such 
property. 
 
¶14.  The amendments also bring 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. 
 
¶15.  Money laundering legislation does not list specific 
crimes.  Rather, it takes an "all serious crimes" approach. 
Banks/financial institutions are required to maintain 
records that could be used in a financial investigation for 
five years.  In practice (and according to accounting 
regulations), these records are kept for at least seven 
years. 
 
¶16.  There have been no new laws pertaining to money 
laundering, terrorism or banking passed recently.  In 2006, 
Finland will begin implementing measures concerning the 
third EU Money Laundering directive. 
 
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FINANCIAL SECTOR 
---------------- 
¶17.  There are 12 local banks in Finland, 320 local savings 
and cooperative banks, 48 insurance companies, 27 mutual 
fund companies, 29 remittance offices, 47 securities firms 
(broker dealers, portfolio managers, etc), and 10 other 
financial service companies, including mortgage brokerages 
and credit card companies. 
 
¶18.  The financial sector is supervised by the Financial 
Supervision Authority (except for money remittances), the 
insurance sector by the Insurance Supervisory Authority, and 
the gambling sector by the Ministry of Interior.  The rest 
of the parties under obligation to report are not 
supervised, but there is some self-regulatory supervision in 
place.  Bearer shares are permitted in Finland.  To use the 
rights related to those shares, however, the bearer must 
register with the shareholders' register. 
 
¶19. The Act on Preventing and Clearing Money Laundering 
protects individuals that cooperate with law enforcement 
entities.  Finland has not enacted secrecy laws that prevent 
disclosure of client and ownership information by financial 
services companies to bank supervisors and law enforcement 
authorities. 
 
¶20. According to the Money Collection Act, charities and non- 
profit organizations require a license to raise money in 
Finland.  Money collection is supervised by the Ministry of 
the Interior.  The new act defines license conditions more 
efficiently, allows for greater supervision of money 
collection and permits the licensing authority to freeze an 
account and impose fines.  It requires license holders to 
render accounts on money collection and the licensing 
authority to inspect and approve the accounts. 
 
¶21. Unless otherwise provided in the Lotteries Act, a 
lottery may be run only with a license granted by the 
licensing authority.   The holder of a (non-money) lottery 
license must render accounts for non-money lottery. The 
Ministry of the Interior is responsible for supervision of 
the running of lotteries and keeping statistical records on 
lotteries. 
 
------------------------------- 
MONEY LAUNDERING CLEARING HOUSE 
------------------------------- 
 
¶22.  The MLCH, established under the National Bureau of 
Investigation in March 1998, operates as Finland's FIU, with 
analytical duties and law enforcement authority (but without 
any regulatory authority).  It has direct access to the 
databases of other government entities, including the 
National Police, the Frontier Guard, the Ministry of 
Justice, as well as tax and a number of other databases.  It 
does not have access to the databases of financial 
institutions. 
 
¶23.  The MLCH receives and investigates suspicious 
transaction reports (STRs) from covered reporting 
institutions.  In 2003 the responsibilities of the MLCH were 
expanded to include the prevention of terrorist financing. 
There is no threshold amount, below which a STR is not 
required.  In 2005, the MLCH received 3,661 STRs.  Almost 
all (3,495) concerned money laundering.  The remaining 166 
STRs consisted of entities suspected of terrorist financing, 
designated by the United States, European Union, and/or 
United Nations. 
 
¶24.  Between 1994-2005 the MLCH forwarded 1,719 reports on 
suspicious transactions for pre-trial investigation.  In 
2005, 385 STRs resulted in criminal investigations, compared 
to 552 in 2004.  A majority of STRs involved at least one 
foreign party.  Nationals from 100 countries (in 2005) 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 (47.4 
percent), Russian (8.5 percent) and Estonian (6.5 percent). 
 
¶25.  Of all the reporting agencies, currency exchange 
companies are the most active in reporting suspicious 
transactions, accounting for a majority of all money 
laundering STRs.  Other active reporting entities include 
banks, gambling establishments and non-police national 
authorities such as Customs and the Frontier Guard.  Reports 
from the National Police account for approximately 0.1 
percent of all STRs. 
 
¶26.  As a law enforcement branch, the MLCH has authority to 
initiate investigations before the basis for a pre-trial 
investigation has been established.  Of the cases forwarded 
to pre-trial criminal investigation, the most common 
offenses were tax fraud (28 percent), narcotics offenses (25 
percent) and pandering (19 percent). 
 
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ASSET FREEZING 
-------------- 
 
¶27.  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. 
 
¶28. The MLCH has the ability to freeze a transaction for up 
to five business days in order to determine the legitimacy 
of the funds.  Funds can remain frozen for an extended 
period when linked to a criminal investigation. According to 
the Coercive Measures Act, all restraining and freezing 
orders must be presented to the court every four months.  A 
new order can be given for a "reasonable time," but it is 
yet unclear how long that time can ultimately be. 
 
¶29.  In 2005 the MLCH issued 11 orders to freeze 
assets/suspend transactions.  The total value of these 
transactions was $3. 6 million.  With these orders, the MLCH 
recovered $670,800 of criminal proceeds.  Most cases 
involved money laundering and financial crime.  In 1998-2005 
the Clearing House gave a total of 89 decisions to suspend 
of transactions with a total value of $18. 3 million, 
including an estimated $11. 1 million in property assets. 
 
¶30.  According to the Penal Code, 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.  Finland has enacted laws for 
the sharing of seized narcotics assets, as well as the 
assets from other serious crimes, with other governments. 
 
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TERRORIST FINANCING 
------------------- 
 
¶31.  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 offense.  Amendments to the Money Laundering Act 
came into force in the spring of 2003, bringing it in line 
with the Financial Action Task Force's (FATF) 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.  The amendments extend the system of money 
laundering prevention to include suspected terrorist 
financing. 
 
¶32.  Finland has national authority to freeze terrorist 
assets.  The MLCH performs investigations on all individuals 
suspected of financing terrorist acts, including all 
individuals and entities on the UNSCR 1267 Sanctions 
Committee's consolidated list.  To date, no Finns have been 
found guilty or complicit of terrorist financing.  In the 
event that funds are found to be located in Finland, 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. 
 
------------------------ 
INTERNATIONAL AGREEMENTS 
------------------------ 
¶33.  Finland has concluded numerous bilateral law 
enforcement cooperation agreements.  Finland signed a tax 
treaty with the United States in September 1989, replacing a 
previous treaty signed in 1970.  The current treaty has 
provisions to exchange information for investigative 
purposes.  The MLCH may exchange information with other 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 
Albania, Belgium, Bulgaria, Canada, France, Latvia, 
Lithuania, Luxembourg, Poland, Russia, South Korea, Spain, 
Switzerland and Thailand.  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. 
 
¶34.  Finland is party to the 1988 UN Drug Convention; the UN 
Convention against Transnational Organized Crime; the UN 
International Convention for the Suppression of the 
Financing of Terrorism; the Council of Europe Convention on 
Laundering, Search, Seizure and Confiscation of the Proceeds 
from Crime; and the European Convention on Mutual Assistance 
in Criminal Matters.  Finland has signed, but not yet 
ratified, the UN Convention against Corruption. 
 
¶35.  Finland is a member of the FATF and the Council of 
Europe.  The MLCH is a member of the Egmont Group.  Finland 
also co-operates with the EU, Europol, the UN, Interpol, the 
Baltic Sea Task Force, the Organization for Economic Co- 
operation and Development, and other international agencies 
designed to combat organized crime. 
 
HYATT#