Risk-Based Approach to Financial Crime Prevention Gains Traction in Netherlands
The Dutch National Bank (DNB) has recently announced its agreement with NVB Baselines, a new set of standards aimed at preventing financial crime and money laundering. The DNB will align its guidelines with these baselines later this year, effectively expanding their scope to cover all institutions under its supervision - not just banks.
A More Focused Approach
The NVB Baselines are designed to promote a more focused approach to combating financial crime, prioritizing high-risk customers over low-risk ones. This risk-based approach is expected to free up resources for financial institutions to devote greater attention to higher-risk clients, while reducing the burden on those with lower risks.
Driving Factors
According to DNB, this shift in strategy was driven by its report “From Recovery to Balance” published last year, which emphasized the need for a more risk-based approach to prevent money laundering and terrorist financing. The report called for banks to improve their customer risk classification processes to achieve this goal.
Key Principles
The new NVB Baselines include several key principles aimed at streamlining financial crime prevention:
- Risk-Based UBO Identification: The identification and verification of ultimate beneficial owners (UBOs) will now be risk-based, rather than relying on a one-size-fits-all approach. Institutions can use data from UBO registers for low- or neutral-risk customers, rather than requesting declarations and identification documents.
- Enhanced Due Diligence Measures: Enhanced due diligence measures are only required for transactions related to high-risk third countries. This means that financial institutions will no longer need to apply these measures to routine holiday expenses paid in such countries.
Expert Response
Experts welcome this development, hoping it will inspire other regulators to adopt a more efficient and less burdensome approach to Wwft supervision. By implementing a risk-based approach, banks and other financial institutions can reduce the burden on both themselves and their clients, while focusing on real risks.
Minister’s Remarks
As the Minister of Finance noted in May, “If necessary, gatekeepers should strictly apply the anti-money laundering frameworks… At the same time, it is important to provide flexibility in order to limit burdens and disproportionate effects on gatekeepers and their clients.” With these new standards in place, the Netherlands is one step closer to achieving a more balanced and effective approach to preventing financial crime.
Conclusion
The adoption of NVB Baselines by DNB marks an important milestone in the country’s efforts to prevent financial crime. By embracing a risk-based approach, the Netherlands can reduce the burden on its financial institutions and clients while focusing on real risks. This development is expected to inspire other regulators to follow suit, ultimately leading to a more effective and efficient approach to combating financial crime.