New Iceland law allows jailed bankers to walk free amid Panama Papers scandal

The Iceland flag flies next to the headquarters of Kaupthing Bank in Reykjavik © Bob Strong
Three top figures from Iceland’s failed Kaupthing Bank have been released from jail after barely serving a quarter of their sentences due to a new law. It comes as Iceland deals with a fresh scandal linking the ex-PM to both the Panama offshore revelations and the bank.

Former chairman of Kaupthing, Sigurdur Einarsson, its biggest shareholder, Olafur Olafsson, and the finance director of the Luxembourg branch, Magnus Gudmundsson, were released from the low-security Kviabryggju prison on Thursday.

The bankers have served just one year of their four-to-five year sentences. All were convicted of financial fraud ahead of the collapse of the country's biggest bank in October 2008.

The bankers were accused of concealing an investor from Qatar who bought a 5.1 percent equity stake in Kaupthing, with the money illegally provided as a loan from the bank itself.

The release was made possible due to a new law which was rushed through a parliamentary vote in March.

The law enables prisoners to spend double the amount of time under electronic surveillance in the comfort of their own homes than previously had been allowed, while being released earlier from jail.

The Icelandic Review explained the new law further:

“The parliamentary bill was changed in committee to allow five days of electronic monitoring for every month of a prisoner’s sentence, instead of 2.5 days as it has been. This means that a prisoner sentenced to one year in prison can now spend the last 60 days electronically tagged and in the community, instead of 30 days. The rule change means criminals can now be released earlier from prison.”

READ MORE: Panama Papers leak leads to ‘largest protest’ in Iceland’s history (PHOTOS, VIDEOS)

Icelandic media reports question why the new bill was passed so quickly. Some claimed that the chair of the Alþingi General Committee and MP for the Independence Party, Unnur Brá Konráðsdóttir, was responsible for the bill.

Left Green MP Bjarkey Olsen Gunnarsdóttir alleged to Iceland’s Stundin newspaper that the change in the law seemed to be made specifically for the three bankers, adding that rushing it through seemed inappropriate during this time.

Iceland has been dealing with a new financial scandal, after the Panama Papers leak revealed information that former Prime Minister Sigmundur David Gunnlaugsson allegedly failed to declare his stake in an offshore company based in the British Virgin Islands to avoid paying taxes in Iceland. Local media also linked the offshore allegations to the Icelandic banking crisis, for which Kaupthing Bank managers were jailed, and in connection to which Gunnlaugsson had already been accused of taking a softer stance towards the bankers.

The Panama Papers were published on Sunday and are said to be “the largest leak in offshore history.” They claim to reveal the offshore holdings of over 100 international politicians and public officials, including 12 current and former world leaders.

The scandal escalated quickly in Iceland, with massive protests forcing Gunnlaugsson to resign on Tuesday, even though he denied violating the law. According to a Gallup poll conducted ahead of Gunnlaugsson’s resignation, a whopping 81 percent of Icelanders wanted the PM to resign.

The Icelandic center-right coalition appointed Sigurdur Ingi Johannsson, the deputy chairman of the disgraced former PM, as the country’s new prime minister and scheduled early elections for the fall.