Financial Crime World

Dutch Regulators Crack Down on Money Laundering: What Financial Institutions Need to Know

The Netherlands, with its tech-forward business environment and competitive climate, continues to attract financial companies looking to establish a presence in Europe. However, prospective businesses should be aware of the strict anti-money laundering (AML) regulations in the country. In this article, we dive into the AML landscape in the Netherlands and provide insider knowledge on how financial institutions can navigate the regulations and avoid costly fines.

Whom does it affect?

The following financial institutions must adhere to AML regulations in the Netherlands:

  • Banks
  • Crypto service providers
  • Investment firms
  • Clearing institutions
  • Insurers
  • Trust services
  • Electronic money institutions
  • Pension funds
  • Real estate agencies

For a comprehensive list of regulated organizations, refer to the Netherlands Financial Intelligence Unit (FIU) website.

Who’s the Regulator?

The key financial regulators in the Netherlands are the:

  • Authority for the Financial Markets (AFM)
  • Dutch Central Bank (DNB)

The AFM is responsible for supervising the conduct of financial market sectors, while the DNB monitors the financial health of financial institutions and checks the fitness of their board members. Both institutions collaborate closely, sharing information to ensure the effective enforcement of AML regulations.

What Are the Main Regulations?

The Netherlands is a member of the Financial Action Task Force (FATF) and bases its AML legislation on the FATF Recommendations. The primary legislation in the Netherlands is the Anti-Money Laundering and Anti-Terrorist Financing Act (Wwft). In 2020, the Wwft was amended to comply with the EU’s Fifth Anti-Money Laundering Directive (5AMLD).

How to Stay Compliant

Financial institutions in the Netherlands must adhere to several requirements for AML compliance:

  1. Customer Due Diligence (CDD) Companies providing financial services must verify the identities of their clients during the CDD process. This involves collecting specific information, such as names, addresses, dates of birth, and official documents. Proof of identity can include identity cards, driving licenses, passports, residence permits, and electronic sources or eIDs.
  2. Know Your Business (KYB) Companies must conduct KYB due diligence on their business clients, collecting basic information such as company names, registration numbers, and addresses. Verification of ownership structure and UBOs (Ultimate Beneficial Owners) is required.
  3. Transaction Monitoring Firms must monitor customer transactions for suspicious activity to enable prompt detection.
  4. Reporting Financial institutions must report cash transactions exceeding €15,000 and all suspicious transactions to the Netherlands FIU.
  5. Sanctions and PEP Screening Companies must carry out sanctions screening of customers as part of the verification process.
  6. Adverse Media Screening Companies should screen news sources for adverse media related to their clients, including instances of terrorist financing, tax crimes, financial crimes, organized crimes, kidnapping, corruption, and more.
  7. Record-keeping Financial institutions must maintain accurate client records for a minimum of five years.

Penalties

Violations of AML regulations in the Netherlands can result in serious consequences:

  • Money laundering with intent: Punishable by up to six years in prison or a maximum fine of €87,000 for individuals and €870,000 for legal entities.
  • Culpable money laundering (without intent): Punishable by a maximum fine of €87,000 for individuals and €870,000 for legal entities.
  • Simple money laundering: Acquiring or possessing an object derived from an offense committed by oneself.

The heaviest fine imposed in the Netherlands to date was €775 million slapped on ING Groep NV in 2018 for long-standing and systematic AML violations.

FAQ

Q: Is the Netherlands a high-risk country for money laundering?

A: Despite the Netherlands’ highly digitized and open economy making it vulnerable to money laundering, it is not currently listed by the FATF as a country with strategic deficiencies.

Q: Who regulates AML in the Netherlands?

A: The main financial regulators in the Netherlands include the Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB).

Q: What is the Netherlands’ Anti-Money Laundering Act?

A: The primary legislation in the Netherlands is the Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme – Wwft).

Q: What does KYC mean in the Netherlands?

A: KYC stands for “Know Your Customer,” and it refers to the client identity verification process during onboarding.