Transparency International: Dutch anti-money laundering policy consistently substandard
In the Netherlands, it is still child’s play to conceal the origin and ultimate beneficial owner (UBO) of assets via structures such as foreign trusts.
That was the finding of the report on the "Under the Shell" study of the national anti-money laundering policies of six European countries (including the Netherlands) published by Transparency International (TI) on 25 April 2017. TI – an international NGO whose mission is to combat corruption around the world – prepared the report after conducting the study together with TI Nederland (in Dutch). According to the report, the Netherlands’ score on UBO transparency is poor in comparison with the other countries, despite all the vigorous rhetoric heard after the revelations in the Panama Papers.
TI therefore advocates that farther-reaching measures should be taken to prevent money laundering and tax evasion through the use of complex structures.
Although TI indicated that the UBO register that the Netherlands is currently setting up may be a step in the right direction, it still does not meet the standards TI would like to see in place. For example, foreign trusts set up by Dutch nationals or trusts that do business in the Netherlands – these being the owners of assets or holders of bank accounts – will not be included in the register.
Since it is precisely these types of trusts, usually held secretly offshore, that are used for the constructions exposed by the Panama Papers, TI has concluded that: "The Netherlands…remain blind to the issue of trusts".
According to TI, Dutch professional service providers such as accountants, civil-law notaries, and lawyers do not investigate their clients sufficiently and also do relatively little to report unusual transactions pursuant to the Dutch Money Laundering and Terrorist Financing (Prevention) Act [Wet ter voorkoming van witwassen en terrorisme financieren] (Wwft). For comparison purposes: in 2015, lawyers in the Netherlands made 9 such reports, while 1,203 were made in Italy. TI cited Vimpelcom (in Dutch) as an example of an unreported case. According to TI, service providers also do not refuse to perform transactions when they have doubts about their clients’ identity. On the other side of that coin, the authorities provide insufficient feedback on the reports that are made and do not do enough to ensure that service providers comply with the law. Despite this, TI acknowledged the steps that are being made with respect to enforcement.
One of these is the ‘non-reporters project’ set up by the Fiscal Intelligence and Reporting Service [FIOD], the police, the Financial Intelligence Unit, the Financial Supervision Office [Bureau Financieel Toezicht], the Dutch Tax and Customs Administration [Belastingdienst], the Dutch Central Bank, the Financial Market Authority, and the Public Prosecutor’s Office [Openbaar Ministerie] (OM). Recently, as part of that project, a hearing was held regarding the first lawyer presumed to be a non-reporter. This is consistent with the OM’s current trend towards first conducting a criminal investigation of professional service providers (as gatekeepers) when it comes to Wwft violations.
However, one indirect consequence of being convicted of such a crime could be that the professional is permanently precluded from continuing to practice his/her profession, while under disciplinary law, the failure to properly investigate a client (or to do so in a timely fashion) always leads to a warning, reprimand, or temporary suspension. Now that being disbarred, precluded from practicing a profession, or stricken from the roll is a real possibility, it is little wonder that, in practice, we are seeing both professional service providers and their clients struggle with this new reality and the options for complying with their duties under the Wwft.
If this situation applies to you, if you have questions about your obligations as a Wwft institution, or if you are in the position of having to respond to the inquiries of a professional service provider – perhaps in the context of a client investigation, due diligence investigation, or audit – please contact us. For more information on this topic, see our earlier posts on the UBO blog and in the UBO newsletter.