After roundtable discussions of banks and the Dutch Central Bank (DNB) on more risk-based customer due diligence to prevent money laundering, the Dutch Banking Association (NVB) published five baselines that set out clear principles for banks to carry out their role as gatekeepers proportionately whilst focusing on the real risks. According to the Financieele Dagblad (FD), DNB agrees with the standards and will later this year bring the DNB Guideline Wwft and Sw in line with the NVB Baselines. This would mean that the new procedure would then also apply to institutions other than banks that are under DNB supervision.
A more focused approach to prevent money laundering
The procedures as described in the NVB Baselines fit within DNB's more focused approach to keep the financial sector free from financial crime and to reduce the undesirable side effects of the gatekeeper role of banks and other financial institutions. In the report ‘From recovery to balance’ that was published in September 2022, DNB already looked ahead to a more risk-based approach to preventing and combating money laundering and terrorist financing. DNB emphasised in this regard that banks must improve their customer risk classification processes to achieve a more risk-based approach.
According to DNB, more limited scrutiny in the case of low-risk customers will allow for greater capacity and attention to be focused on higher-risk customers. We do not exclude the possibility that the changed approach was partly driven by the (then still expected) ruling of the Trade and Industry Appeals Tribunal (CBb) of October 2022, stating that DNB could not make clear why bunq's anti-money laundering approach was in breach with the Wwft. On 17 May 2023, the Minister of Finance also stated that most of the effort and attention (going forward) should be focused on addressing the highest money laundering risks, and that fewer or no measures would be required in the case of low money laundering risks.
De new baselines
On 31 May 2023 the NVB published the following baselines to which twelve more baselines will follow:
- NVB Baseline - UBO identification and verification
- NVB Baseline - Pseudo UBO
- NVB Baseline - EDD measures for EC high risk third countries
- NVB Baseline - Expected Transaction Profile (ETP)
- NVB Baseline - Client data actualisation
Important (new) principles that follow from the baselines are:
- The identification and verification of the ultimate beneficial owner (UBO) is risk-based and the Wwft does not require, for example, that the verification of the UBO always involves a copy of an identification document. Institutions are often in doubt whether such a copy should be requested and often choose to do so in any scenario, just to be on the safe side. The new standard on UBOs states that if the customer has a low or neutral risk, the institution can use the data from the UBO register, which the customer must confirm. Requesting an UBO declaration and copies of identification documents of the UBOs - now frequently requested by banks in case of all, including low and neutral risks - is no longer required.
- The Wwft states that an institution must perform enhanced due diligence in relation to transactions related to 'high-risk third countries'. The new standards make clear that if a client pays for (regular) holiday expenses in such a country, the transaction is not related to that country (within the meaning of the Wwft). Enhanced due diligence is not required in that situation.
Towards a balanced anti-money laundering approach
We strongly welcome this development and hope that other regulators will also move towards a more efficient and less burdensome approach to Wwft supervision on financial institutions. Banks, and in the future hopefully other Wwft institutions, will thus be able to implement a more effective and efficient anti-money laundering approach. In that situation, the anti-money laundering approach in the Netherlands will be more balanced, where the focus is on the real risks. This will lead to a reduction of the burden for both the institution and the client, whilst focusing on the real risks. In other words, those from the Minister of Finance on 17 May 2023: ''If necessary, gatekeepers should strictly apply the [anti-money laundering] frameworks. At the same time, it is important to provide flexibility in order to limit burdens and disproportionate effects on gatekeepers and their clients. This should result in a more efficient and effective approach to prevent money laundering.''
Any questions about these new standards and the consequences for your Wwft institution? Do not hesitate to contact us.