Financial Crime World

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Dutch Financial Institutions Required to Register for Cryptocurrency Exchange Services

In a move to combat money laundering and terrorist financing, the Dutch government has introduced new regulations requiring natural persons and legal entities that professionally exchange between virtual currencies and fiat currencies to register with the De Nederlandsche Bank (DNB).

New Regulations Under the AML CTF Act

The Anti-Money Laundering and Combating Terrorism Financing Act (AML CTF Act) considers such institutions as a distinct entity under Section 1a, and mandates them to:

  • Establish risks related to money laundering
  • Take necessary measures to mitigate those risks
  • Perform customer due diligence
  • Train employees

Non-Fungible Tokens (NFTs) Under Scrutiny

While the AML CTF Act does not explicitly cover NFTs, experts believe that the act may still be applicable to those who trade in NFTs, particularly if the token in question is a work of art. Natural persons and legal entities that professionally buy or sell art objects for an amount exceeding €10,000 are subject to the obligations under the AML CTF Act.

Financial Institutions Required to Maintain Compliance Programs

Under Section 2d of the AML CTF Act, institutions with two or more policy makers must:

  • Appoint a day-to-day AML CTF Act policy maker responsible for compliance
  • Establish programs that include:
    • Risk assessment
    • Customer due diligence
    • Employee training

Recordkeeping and Reporting Requirements

Financial institutions are required to:

  • Maintain records of all transactions
  • Report unusual transactions to the Financial Intelligence Unit (FIU)
  • Objective indicators of an unusual transaction include:
    • Cash exchanges above €10,000
    • Money transfers above €2,000
  • Subjective indicators can be anything that suggests a transaction is related to money laundering

Cross-Border Transactions

The AML CTF Act applies to cross-border transactions involving the Netherlands and requires institutions to report these transactions if they are deemed unusual.

Customer Identification and Due Diligence Requirements

The act provides for three procedures of customer identification and due diligence:

  • Simplified
  • Standard
  • Enhanced
  • The level of due diligence required depends on the risk profile of the client or transaction

Shell Banks Prohibited

Section 5 of the AML CTF Act prohibits banks from entering into correspondent relationships with shell banks or allowing them to use their accounts.

Reporting Suspicious Activity

Institutions are required to report transactions that are deemed unusual. The threshold for reporting is lower than “suspicious,” and the FIU will determine whether a reported transaction is actually suspicious.

Information Sharing Mechanisms

The Dutch government has introduced mechanisms to facilitate information sharing between:

  • Financial institutions
  • Businesses subject to anti-money laundering controls
  • Government authorities to assist in identifying and reporting suspicious activity.