On 25 July 2018, the fourth European anti-money laundering directive was implemented in the Netherlands with the Money Laundering and Terrorist Financing Prevention Act (WWFT). This entails a radical change for companies’ administrative organisation. To offer the companies involved an opportunity to adapt their business procedures, the WWFT supervisors have announced that they are exercising a flexible enforcement policy until 1 January 2019 with regard to the following WWFT provisions:
- extension of the PEP (politically exposed person) definition to include domestic PEPs (Article 1, paragraph 1, WWFT);
- extension of the UBO (ultimate beneficial owner) definition (Article 1, paragraph 1, WWFT);
- tightening of the WWFT risk policy (Article 2b, WWFT) ;
- risk management (Article 2c, WWFT), consisting of courses of action, procedures and measures in order to make identified risks controllable;
- and if applicable, the compliance function and the audit function (Article 2d WWFT).
The deadline of 1 January 2019 is fast approaching. Furthermore, the BFT, Bureau Financieel Toezicht (Financial Supervision Office), has published new guidelines for the WWFT, and the appendices to these guidelines have also been updated. These appendices contain WWFT examples for the subjective indicator and a ten-step plan to show how to comply with the WWFT duties. Therefore, it is time to take stock. Is your organisation ready for the 2019 WWFT?
Points to consider
Since in our practice we are often dealing with cases that are connected to the WWFT, we would like to share the following points for you to consider.
In a BFT audit, it is important to make sure that a representative sample is taken. After all, in the unlikely event that the client investigations turn up an omission, the fine depends on the number of files in which these omissions were found. This can be inferred from the BFT’s fining policy (for more information, see our Dutch website). It is important to bear in mind that the scope of the compulsory identification is still evolving. In our opinion, an arguable difference of views on this scope should therefore not immediately lead to a fine.
It is striking that in its guidelines the BFT mostly refers to examples from case law that show a duty to report. The fact that no unusual transaction was established in some cases is not taken into consideration. For example, the BFT guidelines refer to a decision by the College van Beroep voor het bedrijfsleven, CBB (Trade and Industry Appeals Tribunal) in which it was decided that a report should have been made due to a suspicion of tax fraud. However, in that case the CBB also decided that with regard to two loans there was no duty to report (CBB 29 May 2018, ECLI:NL:CBB:2018:233). The mere fact that a risk factor in the guidelines applies does not always mean that the transaction qualifies as an unusual transaction.
In this context, we would also like to point to a decision by the criminal division of the Court of Appeal in Den Bosch with regard to the criminal prosecution of the supplementation duty. In that decision the Court ruled that the supplementation duty was in violation of the principle of nemo tenetur (Court of Appeal Den Bosch 10 July 2018, ECLI:NL:GHSHE:2018:2879). However, the question arises whether a parallel can be drawn between the duty to report in the WWFT and the principle of nemo tenetur. This issue came up indirectly when the WWFT bill was passing through Parliament. Then the Public Prosecutor Service stated that in practice it is hardly ever an impediment to prosecute an organisation for money laundering if the reporting organisation itself has been involved in money laundering practices. In those cases, the duty to report is redundant because the proof of money laundering can be delivered by other means. As far as we are concerned, this argument is putting things on their heads.
Finally, it is important to check how the FIU (Financial Intelligence Unit) Netherlands follows up any report made to it. Article 34 of the WWFT states that an institution should store all the data necessary to reconstruct the transaction, a copy of the report and the acknowledgment of receipt for a period of five years after the report was made. It regularly occurs that FIU Netherlands passes the report through to the Tax Authorities, the FIOD or another investigative service or a supervisory authority. Experience shows that the authority in question does not always determine beforehand on what legal basis it is requesting further information from the reporting institution. It is therefore important to obtain clarity about this matter before providing further cooperation.
In conclusion, the obligations arising from the WWFT weigh heavily on organisations that provide tax services and financial services. Also, supervision will be more and more focused and intensive. That is why we are advising service providers to pay attention to current discussions so that they can take due care when dealing with an audit or a report and its possible consequences.