Money laundering legislation in the Netherlands – KYC/AML procedures
Category: Financial law
To whom does the Money Laundering and Terrorist Financing (Prevention) Act apply?
The Money Laundering and Terrorist Financing (Prevention) Act (“Wwft”) imposes a number of obligations on institutions that fall within the scope of the Wwft. For example, the Wwft applies to banks, lawyers, investment institutions, accountants, investment firms, trust offices, civil-law notaries, traders and sellers of goods, and a number of other institutions. The institutions listed in the Wwft must, under certain circumstances, report unusual transactions to the Financial Intelligence Unit – Netherlands (“FIU”). The reported unusual transactions are analysed at the FIU to prevent crimes from being committed, and (or) to detect them.
Client investigation in the Netherlands
The Wwft has a risk-based approach. This approach means that institutions must make their own estimates of the risks associated with certain customers or products. The institutions must endeavour to take adequate measures to prevent these risks. This starts with customer due diligence. Customer due diligence means that institutions need to know who their customer is and where the money is coming from. This is a continuing obligation. Customer due diligence must be carried out before accepting a client, and also during the term of the service. This involves questions such as which transactions are carried out? Who is the ultimate beneficial owner? Where does the money come from? Have sufficient explanations been given? Et cetera.
Report unusual transaction?
As a bank, ING, for example, is an institution that must carry out customer due diligence and report unusual transactions where necessary. A recent case revealed that ING acted as the house bank for a Caute trust office on Keizersgracht in Amsterdam. What happened? Approximately € 100,000,000 was laundered through Caute to companies through a loop. These gigantic sums were all deposited in bank accounts at ING. What did ING do wrong? ING’s obligation – as described above – is to carry out a customer investigation for each customer: who is the customer, what does the customer want, what is the origin of the money, why a bank account, et cetera. For every transaction above a certain amount, an investigation must be carried out into the origin of the money. ING allowed the Caute trust office to so, and failing to ask critical questions or questions about the origin of the money. As a result, Caute was able to launder millions of euros via ING’s bank accounts for years.
This occurred despite the obligation on every bank to carry out an investigation in relation to every customer, and to check where the money comes from. If that investigation cannot be carried out, adequate answers are not provided and (or) the customer does not wish to answer, the bank is obliged to terminate the relationship with the customer and (or) to report the unusual transaction to the FIU.
Need KYC/AML advice for yoyr transaction in the Netherlands?
Because banks are bound to conduct customer due diligence and require answers relating to the origin of funds in certain transactions, your organisation may need to have certain KYC/AML procedures in place. For example, we know that it is useful for bitcoin-related companies to have adequate KYC/AML procedures in place. After all, crypto transactions involve an increased risk of money laundering. Banks – as a Wwft institution – are obliged to trace the origin of the funds in their customers’ bank accounts. As a bitcoin company, you are therefore also bound to carry out certain customer inquiries with your customers in order to be able to provide sufficient answers to your bank.
For more information, please feel free to contact us.