Due Diligence Requirements for Dutch Financial Institutions
In the Netherlands, financial service providers are required by law to conduct thorough due diligence checks on their clients to prevent money laundering and terrorism financing. This article explains the requirements and procedures that financial institutions must follow.
Understanding the Money Laundering and Terrorist Financing (Prevention) Act (Wwft)
The Wwft stipulates that financial institutions, including banks, insurance companies, civil-law notaries, and tax consultants, must verify the identities of their clients and record this information for at least five years. This includes verifying the identity of individuals and establishing who the actual directors or shareholders of legal entities are.
Conducting Due Diligence Checks
Financial service providers must conduct due diligence checks before:
- Conducting a sales transaction or mediation project
- Providing services to clients
These checks involve assessing the risk of money laundering and financing terrorism for each client based on their background, the type of service they request, and the risk of money laundering and financing terrorism.
Types of Due Diligence Checks
There are different types of due diligence checks that financial service providers must conduct:
- Normal checks: Establish a client’s identity
- Simple checks: May only be required for transactions with a low risk of money laundering or financing terrorism
- Comprehensive checks: May be necessary if a client is based in a high-risk country or is related to prominent political figures
Additional Requirements
Appraisers and estate agents must conduct due diligence checks on their clients and report any unusual transactions to the authorities. Intermediaries, such as accountants and tax consultants, must report cross-border constructions that they believe are set up to avoid taxes to the Dutch Tax and Customs Administration.
Consequences of Non-Compliance
Financial service providers who fail to conduct thorough due diligence checks may face penalties and fines for non-compliance with the Money Laundering and Terrorist Financing (Prevention) Act.