The Financial Supervision Office [Bureau Financieel Toezicht, “BFT”] published its Annual Report on 13 March 2020. In the Annual Report the BFT reports on its work, including its main activities and its findings for the past year. The BFT conducts independent supervision of the Civil-Law Notaries Act [Wet op het notarisambt], the Court Bailiffs Act [Gerechtsdeurwaarderswet], and the Act to Prevent Money Laundering and Financing of Terrorism [Wet voorkoming van witwassen en financieren van terrorisme, the “Wwft”]. In this blog, we will discuss the relevant passages from the Annual Report with regard to the latter area of supervision: the organisations – some 50,000 of them – that are subject to Wwft supervision.
Developments in the sector
The report sets out the general developments and trends observed by the BFT. Rapidly developing and changing legislation and regulations mean that the BFT is identifying more and more new tasks for Wwft organisations in order for them to comply with the requirements of the Wwft. This includes the risk-based approach that Wwft organisations nowadays have to lay down in a risk policy/management system, the obligation for Wwft organisations with 50 or more employees to have a compliance and audit function, and appointment of a member of the day-to-day management to take responsibility for ensuring compliance with the Wwft rules. All this means that the responsibility of Wwft organisations to properly assess the risk for a client has increased. In order to carry out a thorough risk assessment, it is important to know a great deal about the client. The BFT notes that that knowledge is often still lacking at administration offices (mainly small and one person operations). One possible reason for this is that many of these offices are not affiliated with a sector organisation. It is becoming increasingly difficult for these (small) administration offices to comply with all the investigation requirements attached to the role of “gatekeeper”, and the obligations ensuing from the Wwft in that regard. The BFT believes that increasing cooperation offers opportunities for continuing to fulfil that role. One of the ways to bring about that cooperation is by informing and questioning administration offices that are not affiliated to a sector organisation via the automated “Digin Wwft” system. In 2019 the BFT also carried out a survey of all the organisations that it supervises. The survey will be updated periodically and from 2020 on new administration offices will be written to and informed of the obligations ensuing from the Wwft.
As far as its supervision is concerned, the BFT notes a very wide variety of Wwft-related matters among the organisations that it supervises, ranging from fraud with the person-related budget [PGB] to failure by car dealers to submit a notification of unusual transactions.
This year the BFT carried out supervision by means, for example, of investigations focusing on risk policy/management for correct compliance with the Wwft. The BFT considers risk policy/management system to be of major importance for correct compliance. In 2019 it therefore requested and assessed the risk policy/management system of 26 large and medium-sized accountancy firms. The Annual Report sets out the requirements that a risk policy/management system must in any case meet. For example, the system must be based of the most recent text of the Wwft, it must be updated regularly, and it must be sufficiently specific and practicable. The risk policy must provide insight into high-risk clients and transactions, both when the client relationship is first entered into and as it continues. If there is an increased risk of money laundering and/or financing of terrorism, the supervised organisation must put measures in place to mitigate those risks. Finally, the risk management system must provide guidelines for employees of the supervised organisation for mitigating an increased risk. In 2020, the BFT will require some twenty large and medium-sized tax consultancy firms to submit their risk policy/management system.
Notifications to, and registrations with, the FIU
The BFT notes that awareness of the obligations ensuing from the Wwft seems to have increased in 2019, especially among accountancy and civil-law notary firms. That is apparent from the number of notifications made by the organisations that it supervises. In 2019, a total of 5045 notifications of unusual transactions were submitted to the Financial Intelligence Unit Netherlands (the “FIU-NL”). In 2018 the total was 3085. Of the 5045 notifications in 2019, 3869 (76.6% of the total) were based on the subjective indicator (2018: 2745 notifications, i.e. 89.0% of the total). Although the number of notifications submitted by tax consultancies and administration offices remained the same, there was a significant increase in the number of notifications from both accountancy and civil-law notary firms. The BFT attributes this increase to greater awareness of the obligations ensuing from the Wwft among these supervised organisations.
It also follows from the BFT’s own analysis that over the past five years, an additional 89 supervised organisations registered as notifiers with FIU-NL, after the BFT had carried out an investigation or after they had received a letter within the framework of the Digin Wwft project (the above-mentioned computerised system that the BFT uses to inform and question administration offices that are not affiliated to a sector organisation).
Enforcement of the Wwft
The BFT can enforce the Wwft if a violation of the standards is discovered during an investigation of an organisation that is obliged to submit notifications pursuant to the Wwft. Enforcement takes place according to the BFT’s Enforcement Policy and the Internal policy for determining the amount of the administrative fine pursuant to the Wwft. Enforcement by the BFT is aimed at ensuring behaviour that complies with the set standards and ending violations of those standards (or having them ended). The means of enforcement and how it is deployed depends on the circumstances of the particular case, with the most effective and efficient means being determined on a case-by-case basis. Various aspects are then weighed up, including the seriousness of the violation of the standards, but also remedial measures.
In 2019 the BFT imposed a total of 228 enforcement measures (2018: 224). The number of enforcement measures imposed on organisations subject to the Wwft has therefore remained almost the same, although there has been a shift in the professions in respect of which enforcement measures have been taken: fewer measures were imposed on civil-law notaries and more on court bailiffs than in 2018.
As regards further development of the BFT, greater attention was paid in 2019 to alternative settlement of violations of standards (such as positive influence on the behaviour of civil-law notaries) and regional information sessions for the various professional groups.
Enforcement issues where the Wwft is concerned are aimed at organisations subject to the Wwft that have failed to comply with the obligation to notify, that have not carried out a client investigation (or not done so sufficiently), and/or organisations that do not have proper procedures or training in place. As in previous years, enforcement capacity in 2019 was distributed more evenly across the various different violations of standards that were identified.
Looking to the future, it is important that companies comply with their obligations pursuant to the Wwft. The issues referred to in the BFT’s Annual Report merit (additional) attention, as does the need to arrange and apply a sound internal risk policy/management system. Please don’t hesitate to contact us if you have any questions about compliance with the Wwft or its consequences for your company.