Financial Supervisory Authority (FSA)

Financial Supervisory Authority (FSA) or FIN-FSA is Finland’s financial and institutional market regulator. It was created in 2009 (Act on the Financial Supervisory Authority 878/2008) by the merging of the former Financial Supervision Authority and Insurance Supervisory Authority. It operates independently but is subject to administrative control by the Ministry of Social Affairs and Health and Bank of Finland.

What Are the Regulatory Requirements of FIN-FSA?

Finnish Financial Supervisory Authority (FIN-FSA) has specific regulatory requirements for banks, insurance companies, investment companies, and supervised companies. The regulatory requirements provide stability, transparency, and compliance with Finnish as well as EU legislations.

• Licensing & Authorization: Authorization by FIN-FSA is a requirement before financial institutions can establish operations.
• Capital & Solvency: Companies must ensure they have adequate capital in terms of CRR/CRD IV for banks and Solvency II for insurance companies.
• Governance & Risk Management: Managers and Boards must be fit-and-proper, with appropriate internal controls and risk management procedures.
• AML/CTF Compliance: Customer due diligence, monitoring, and suspicious transaction reporting are required under Finnish and EU law.
• Consumer Protection: Services and products must be fair, transparent, and clearly disclosed.
• Market Conduct: Companies must comply with MiFID II and not indulge in insider dealing, market abuse, and manipulation.
• Reporting & Supervision: Risk and financial condition are required to be reported on a regular basis. FIN-FSA conducts visits and also fines or revokes licenses if a financial institution does not comply.

The above requirements, set out under FSA regulations, ensure that financial institutions operate safely, have public trust, and meet national and European regulatory requirements.

How Does the Authority Supervise AML/CTF Compliance?

FIN-FSA monitors AML/CTF compliance through a risk-based method by which institutions with greater exposure are monitored more strictly. Customer due diligence, with strengthened checks on high-risk clients, is conducted by financial institutions, and records are properly maintained. They are also obligated to track transactions, identify unusual activity, and report suspicious activities to Finland’s Financial Intelligence Unit (FIU).

Compliance with the EU and national lists of sanctions is mandatory. To ensure these are effective in practice, FIN-FSA conducts on-site and off-site visits. In case of non-compliance, it is entitled to issue warnings, penalty payments, or even withdraw licenses. This forms a core part of FSA AML supervision.

What Enforcement Actions Has FIN-FSA Taken?

The FIN-FSA ensures compliance by employing a variety of measures including public warnings, administrative penalties, and penalty payments for regulatory requirement breaches. It can restrict business operations or limit them, require remedial measures, or revoke operating licenses in serious breaches.

The regulator also makes on-site inspections, issues binding orders, and reports serious cases to law enforcement. These enforcement tools, combined with ongoing FSA supervisory activities, help ensure financial institutions with governance, capital adequacy, AML/CTF, consumer protection, and market conduct obligations.

How Does FSA Cooperate Internationally?

FIN-FSA works with other countries to enhance financial supervision, AML/CTF measures, and market integrity. It has close ties with EU institutions like the ECB and the EBA in order to ensure Finnish regulation is at the same level as in the EU.

The authority collaborates together with foreign regulators, international organizations, and financial intelligence agencies to exchange information, coordinate cross-border audits, and implement AML/CFT and sanctions legislation globally. This cross-border cooperation also helps in aligning Financial Supervisory Authority rules with international best practices.

What Challenges Does FIN-FSA Face in Oversight?

FIN-FSA has strong systems but faces many challenges. Emerging financial digitalization including mobile banking and fintech creates new risks. Crypto-assets are difficult to track since they are pseudonymous and cross-border. VASPs and high-risk remittance businesses need to be strictly monitored to prevent money laundering and terrorist financing.

There are insufficient resources in place to limit strict regulation with the evolution of markets. Adherence to EU law, international AML/CFT standards, and cyber risks requires ongoing adaptation.

Finland’s economic linkages with Nordic-Baltic neighboring countries present cross-border risks. Beneficial ownership registers are not always comprehensive or up-to-date. Information exchanges between the private sector and authorities can be slow, which can slow responses to emerging threats.

What Recent Developments Have Shaped FIN-FSA’s Work?

FIN-FSA has also updated its supervisory tools and guidelines in the last few years. Finland’s 2023 National Risk Assessment identified rising threats from virtual assets, unregistered remittance services, cybercrime, and sanction evasion. These observations are indicative of the rising advanced financial crime threats in the country.

Finland is also enhancing the collection of data, raising the level of risk assessments, and intensifying inter-agency coordination.

What are the Implications for Financial Institutions in Finland?

Finnish financial institutions must ensure that they are FIN-FSA compliant. That involves sound risk assessments, strong KYC and due diligence mechanisms, effective sanctions screening, and proper governance arrangements.

Compliance with proper reporting to FIU Finland and readiness for inspections are also important. Failure to comply with FSA AML regulations can be sanctioned as a fine, reputational damage, or cancellation of authorization. For Finnish companies, prior compliance is also a regulatory requirement and means of ushering in stability in the long term.