We wrote a previous blog about the proposed measures in the joint plan of action to combat money laundering (only available in Dutch) that was submitted to the Dutch House of Representatives by the Minister of Finance and the Minister of Justice and Security on 30 June 2019. There have since been a number of developments; we will discuss them below in chronological order.
Overview of legislative proposals
On 7 November, the Minister of Finance submitted an overview of legislative proposals, including the Prevention of Money Laundering Act (Wet aanpak witwassen), which will comprise the measures in the aforementioned joint plan of action to combat money laundering. The proposal was submitted for consultation (only available in Dutch) on 2 December 2019 and comprises – briefly – three measures:
- The first measure involves a prohibition on cash payments of EUR 3000 and up for traders (professional or commercial purchasers or sellers of goods). This limit of EUR 3000 may not be circumvented by making several separate cash payments.
- The second measure enables institutions such as banks, which have a legal duty to monitor transactions, to exchange data with one another more easily. This will make joint transaction monitoring possible.
- The third measure ensures that institutions that are required to comply with the (Dutch) Money Laundering and Terrorist Financing (Prevention) Act (Wwft) can share information with one another when there are signs of integrity risks as regards their clients. The intention is that henceforth, institutions should investigate – at the point when they are required to carry out an enhanced client due diligence – whether their client is making use (or has made use) of services with another institution of the same category. If this is the case, then the institution must request more information about integrity risks that have been identified, and the other institution will be required to provide that information.
Pilot Serious Crime Task Force (STCF)
From a Letter to the House of Representatives of 6 December 2019 (only available in Dutch) in which - in brief - questions were asked about money laundering constructions, it follows that one of the measures in the joint plan of action to intensify cooperation between public and private parties, led to the launching of the Serious Crime Task Force (SCTF) pilot project. In that context – subject to strict conditions – information from an investigation about money laundering parties could be shared with major banks and vice versa, thus allowing those banks to identify relevant transactions more effectively. The SCTF will seek to detect “brokers” (i.e. people who make organised, subversive crime possible by connecting the legitimate society to the "underworld" through their services and contacts) and to take on phenomenon-oriented projects on certain money laundering themes in public-private partnerships. This collaboration will be intensified in the coming period, as will the collaboration between “gatekeepers” and the Financial Intelligence Unit Netherlands (FIU-NL) and that with the Anti-Money Laundering Centre. In the context of these collaboration arrangements, money laundering phenomena, typologies, and methods will be identified and shared.
The Letter to the House of Representatives points out that funds have been made available as part of the joint plan of action, increasing to a structural sum of EUR 29 million from 2021 onwards. That amount will be used to intensify the detection of money laundering, fraud prevention and undermining, and to increase capacity. This is because more and better cooperation – whether private-private, public-private, or public-public – is expected to lead to more information and action prospects for the authorities.
Letter to the House of Representatives on progress on measures in the joint plan of action
Recently, on Tuesday 14 January, the Minister of Finance and the Minister of Justice and Security sent a Letter to the House of Representatives (only available in Dutch) to inform them on the progress with regard to the (proposed) measures in the Action Plan to Combat Money Laundering. The two minsters emphasise that the importance of preventing and combating money laundering and implementing the measures set out in the joint plan of action remains as urgent as ever.
One important matter addressed in the Letter is the supervision of trust offices, and tighter legislation regarding them. The Dutch Central Bank (DNB) already issued an interim supervision overview (only available in Dutch) on the effects of the stricter legislation for trust offices until November 2019. The overview shows that the DNB’s supervision reveals that the trust sector has not yet completed incorporation of the stricter requirements, which makes rectification and enforcement procedures necessary. Up to November 2019, for example, the DNB imposed ten formal enforcement measures in this context (including fines, instructions, and penalties for non-compliance (lasten onder dwangsom). Among other things, the overview shows that the required client investigation has not always been carried out, so that in some cases integrity risks have not become apparent, or are estimated to be lower than they in fact are, or so that the effectiveness of mitigating measures is estimated to be greater than it in fact is. It is also noticeable that the client investigation is not always complete. The Letter to the House of Representatives states that these integrity risks are unacceptable because of the priority given to combating them. It has therefore been decided that three further measures should be put in place:
- a prohibition on the use of trust offices as conduit companies1, given that, according to the Ministers, this service has solely tax objectives and leads to a lack of transparency, and is undesirable with a view on combating tax evasion and tax avoidance;
- a prohibition of the provision of services by trust offices involving countries that are (a) on the European Commission’s list of high-risk countries (see our blog about the high-risk countries) or (b) on the European Commission’s list of non-cooperative jurisdictions for tax purposes; and
- initiating an investigation into illegal trust services in order to determine whether the stricter requirements of the 2018 Trust Offices (Supervision) Act (Wet toezicht trustkantoren) and the measures referred to above are leading to relocation into illegality.
In addition to the new measures regarding the trust sector, the Letter to the House of Representatives is accompanied by an appendix with a table showing the progress of each measure, classified according to the main categories. This shows, among other things, that a ban on cash payments of more than EUR 3000 for traders has been included in the legislative proposal of 2 December 2019 as discussed above. Action regarding withdrawal of the EUR 500 banknote still need to be discussed at a meeting of the Working Party on Efficiency and European Affairs. Progress has also been made on the actual launch of a pilot for a joint transaction monitoring system (the “TMNL”), an initiative by five Dutch banks. A feasibility study of this initiative is underway and will probably be completed in the first half of 2020.
Don’t hesitate to contact us if you have any questions about the joint plan of action to combat money laundering and the proposed measures.
1 A conduit company (also referred to as an “in-house company”) is a company that belongs to the same group as the trust office and that is used by the trust office on behalf of one or more clients to channel funds. Conduit companies are used, inter alia, for managing intellectual property, such as image rights, royalties, and licences.