The macroeconomic adjustment and rebalancing was unavoidable and was facilitated over time by the real depreciation of the currency. The shocks disproportionally affected overblown sectors (banking and construction), whereas most of the export base remained intact. Much of the impact of the banking collapse hit countries other than Iceland. Another important reason was the policy responses that mitigated the recession and promoted recovery. Let me now turn to those. The policy responses took two main forms: crisis management during the collapse of the banks and the economic programme developed by the Icelandic authorities in co-operation with the IMF. From at least early 2008, the Icelandic authorities were aware of potential foreign currency liquidity problems at the banks and took action by trying to negotiate swap lines and tap foreign capital markets – in both cases, with limited success. Given the lack of international cooperation, the Icelandic authorities were forced to consider radical solutions when the banks failed. Although they were not necessarily articulated in full at the time, these solutions entailed several goals: to preserve a functioning domestic payment system, ring-fence the state in the case of bank failures, limit the socialisation of private sector losses, and create the conditions for rebuilding a domestic banking system. The adopted solution was embedded in the so-called Emergency Act, which was passed by Parliament on 6 October 2008. The Emergency Act saved the domestic operations of the banking system by creating new banks, which involved carving domestic assets and liabilities out of the old, failing banks.

We should envisage that terrorist financiers will attempt to benefit from anonymous transactions made possible by innovations of new payment products and services such as internet-based payment systems, prepaid cards and virtual currencies. Likewise, fundraising through social media and other online platforms such as “crowdfunding” have increased in prominence, in addition to other more traditional sources of funds such as proceeds of criminal activities, conventional donations, and funding from legitimate purposes. As change is a constant, collation of data points that this environment will continue to persist. Global internet users have increased from 397 million in the year 2000 to nearly 3.9 billion as of June 2017, an impressive growth of almost 1000%. Similarly, global investment activities in the FinTech industry have increased from USD9 billion in 2010 to USD25 billion in 2016. If this trend is anything to go by, the financial industry will be hard pressed to mitigate, identify and prevent cases of abuse in the system. There is no doubt that rapid technological developments have offered immense potential for economic growth. Unfortunately, they have also spawned new ways for terrorist organisations to acquire, move and manage their funds. There are other risks not anticipated before, such as remote radicalisation via the internet that has resulted in an increase in the number of small terrorist cells and “lone wolf actors” that makes detecting and halting terrorism financing even more challenging. In light of this development, the role of financial sector as a bulwark against terrorists financing becomes even more critical.