Financial Crime World

Dutch Banks Adopt Risk-Based Approach to Combat Financial Crime

In an effort to reduce the burden on legitimate clients while increasing the effectiveness of anti-money laundering and combating the financing of terrorism (AML-CTF) measures, the Dutch Banking Association has published five risk-based industry baselines. These guidelines provide banks with a more targeted and proportionate approach to designing their AML-CTF procedures.

Background

The Dutch Central Bank (DNB) has intensified its supervision of compliance with AML-CTF laws in recent years, resulting in some banks facing severe enforcement measures. In response, the DNB and the banking sector have agreed that AML-CTF procedures should be more focused on real risks to avoid harm to bona fide clients.

Five Industry Baselines

The five industry baselines published by the NVB cover various topics, including:

Industry Baseline 1: UBO Identification and Verification

  • Best practices for identifying and verifying ultimate beneficial owners (UBOs) in low-, neutral-, and high-risk scenarios
  • Examples and use cases for each scenario, including the basis for identification and verification of UBOs

Industry Baseline 2: Pseudo-UBO

  • Guidelines for identifying and verifying pseudo-UBOs in low-, neutral-, and high-risk scenarios
  • Definition of pseudo-UBOs as executive board members or partners with ultimate responsibility

Industry Baseline 3: High-Risk Third Parties Enhanced Due Diligence

  • Description of how to perform enhanced due diligence measures for transactions, business relationships, and correspondent relationships related to European Commission high-risk third countries
  • Additional information that must be obtained regarding clients, UBOs, purposes of business relationships, source of funds, and source of wealth

Industry Baseline 4: Expected Transaction Profiles

  • Guidelines for establishing expected transaction profiles (ETPs) in order to identify unusual transactions
  • Criteria for demonstrating effective implementation of ETPs, including substantiation of the group establishment and methodology documentation

Industry Baseline 5: Client Data Actualisation

  • Best practices for identifying client data that must be obtained and clarifying the method and timing for actualising such data
  • Guidelines for periodic or event-driven data actualisation, methods and sources for data collection, and risk relevancy considerations

Future Developments

The NVB intends to publish around 12 more industry baselines in the future, which will focus on specific sectors and subjects such as:

  • Non-profit organisations
  • Crypto businesses
  • Automotive companies
  • Politically exposed persons
  • Others

These baselines are not statutory law but rather provide principles and guidelines for banks to design their AML-CTF measures in a proportionate manner that takes into account their risk framework and risk appetite.