Trust offices beware: Dutch regulator with Dutch sanction list is watching you?
Trust law and regulatory specialist Jasper Hagers gives a short overview. A trust office helps companies with the formation of legal entities. There are often employees of the trust office in the board of the newly created company. A trust office can help with the formation of special legal entities, for instance a ‘Special Purpose Vehicle’. A trust office is registered in a specially created register, and has to act according the Dutch Law ‘Wet toezicht trustkantoren’ (hereafter: ‘Wtt’). The Dutch central bank (de Nederlandsche Bank, DNB) is the relevant Dutch regulator.
Ultimate beneficial owner, strict regulation
A trust office has, in the case of the formation of a new legal entity or a new transaction, a close eye on the person who is the ‘Ultimate Beneficial Owner’ (hereafter: ‘UBO’ ). A lot of UBO’s are nowadays located in Turkey, while in the past locations as Russia, Mexico or the Ukraine where more common. The UBO cannot be listed on a nations sanction list. A sanction list is a list of persons who are, accordingly to the UN and the EU, suspected of terrorist activities. This means that their bank accounts are frozen in those countries. They can no longer make use of their bank accounts or credit cards for that matter. The goal of putting people on a sanction list is making it harder to finance terrorism.
Sanction list: sometimes forgotton by trust offices
In the Netherlands there is also a sanction list. After a recent survey of ‘De Nederlandsche Bank’ (DNB), figures shows that a lot of trust offices are unfamiliar with the sanction lists. Also, it is a possibility that some trust offices have not incorporated the sanction list in their screening process, with the result that some of the wrong people ‘pass the test’. The trust office is in that case assuming it is practising within the boundaries of the law, and that the person on the sanction list can be an UBO.
In the case a trust office doesn’t comply with the screening in accordance with the Dutch sanction list, the Dutch supervisory authority, DNB, has enforcement powers. If DNB reasonably suspect that a trust office or a person who is connected to a trust office via a group, acts in wrongdoing of the Wtt, it can get information from that trust office to check if the trust office does comply with the law. Another option is for DNB to revoke the licence of the trust office. Furthermore, DNB can give the trust office an instruction if the requirements of the Wtt are not met.
For example, if a trust office doesn’t use the sanction list it is in violation of article 10(1)(a) Wtt. In that case, DNB can give an instruction to the trust office to implement the sanction list in the screening process. If not, the trust office risks paying a penalty payment or an administrative fine, which can accumulate to EUR 4.000.000, – per offence.
If a trust office does not comply with the screening of persons with the help of the sanction list, they can soon expect a notice from DNB. If you have questions, please contact us.