Financial Crime World

Dutch Regulators Emphasize AML Compliance for Crypto Service Providers

Strengthening Anti-Money Laundering (AML) and Combating Terrorism Financing (CTF)

In May 2020, the Netherlands introduced new regulations aimed at strengthening anti-money laundering (AML) and combating terrorism financing (CTF) in the country’s financial sector. The Dutch Anti-Money Laundering and Terrorism Financing (Prevention) Act (Wwft) requires all crypto service providers offering exchange services between virtual and fiat currencies or custodian wallets to register with the Dutch Central Bank (DNB).

Registration Process

The registration process for these providers involves a thorough review of their business plan, governance structure, operational management, and ethical business operations. The DNB also assesses the suitability of board members and shareholders who own a qualifying holding in the company.

Compliance Requirements

Furthermore, crypto service providers must comply with the requirements set out in the Dutch Sanction Act (Sanctiewet 1977), which enables the Netherlands to impose sanctions on natural persons or legal entities designated by the UN Security Council, the EU, or national governments. This includes:

  • Monitoring all transactions for any potential hits based on the Dutch Sanction Act and its underlying regulations
  • Complying with AML requirements set out in MiCAR (Markets in Crypto-Assets Regulation)

Fintech-Friendly Environment

The Netherlands is known for its welcoming attitude towards fintech innovation, with the DNB and the Financial Markets Authority (AFM) actively contributing to stimulating innovation through various initiatives. The country has established:

  • An innovation hub: DNB’s InnovationHub offers businesses direct access to regulatory guidance
  • A regulatory sandbox: AFM’s regulatory sandbox allows for constructive dialogue with regulators
  • iForum: a forum to facilitate joint initiatives between supervised institutions and the regulator

Accessing the Dutch Market

For fintech businesses established outside the Netherlands, accessing the local market requires:

  • Prior authorization by the relevant regulator or notification procedures under EU- wide regulations
  • Payment service providers must obtain a payment institution license from the AFM before offering their services in the Netherlands
  • Fintech companies can leverage their authorization in another EU Member State to access the Dutch market through a branch or cross-border provision of services

Conclusion

The Netherlands has implemented stringent AML regulations for crypto service providers, emphasizing the importance of compliance in the country’s financial sector. Fintech businesses seeking to operate in the Netherlands must navigate these regulatory hurdles while also taking advantage of the country’s innovative environment. With its regulatory sandbox, innovation hub, and fintech-friendly policies, the Netherlands offers a unique opportunity for fintech companies to grow and thrive.