Professional content

Alarming evolvement of the currency restrictions

6.6.2012 Andri Gunnarsson og Páll Jóhannesson

It appears that the government's access to investigation mechanisms, which fall under the principle of privacy, such as phone tapping and house search warrants, have no limitations and indeed not compatible with what is happening in other countries that Iceland compares itself with.

When capital controls were introduced in Iceland in the wake of the financial crises in 2008, in form of rules of the CBI, many specialists warned of their long-term effects on the economy and the nature of such restrictions would only narrow business opportunities. 

Originally, the capital controls should only apply until 1 March 2009. Since the initial of the controls, they have been tightened and extended, in some cases even under the pretext that they were being expanded. It is fair, that the rules have had to undergo some necessary changes afterwards, as the experience of their implementation has increased. However, it does not change the fact that the last tightening of the rules, conducted in haste on 12 March, were significantly harsh and implies that Iceland's regulatory environment is unpredictable and the government's attitude towards investors is generally hostile. 

Currently, a new bill is being discussed at the Parliament, which includes changes to various extended permission regarding small capital transactions, fines for violations have increased substantially as well as the CBI has been provided with almost unlimited permission to gather information. Accordingly, extended supervision permission is controversial.  

These changes of CBI's supervision sources includes permission to gather almost any kind of information about individuals and corporations, from any person, whether the information is related to foreign exchange or not, and completely independent of whether they are confidential. The party in question does not have to had breach rules on capital controls. The authority of the CBI is so broad that the Privacy Agency pointed out that the proposed changes to the act were not in compliance with Art. 71 of the Constitution, which provides for privacy. 

the importance of CBI's mandatory supervision is not questioned, but whether there is any indication of that breach of capital controls is of such magnitude that it is appropriate to assign the government with such unlimited powers to monitor its citizens, which goes against the objectives of the Constitution and the European Convention on Human Rights and Fundamental Freedoms.