by Jonathan J. Rusch

On June 30, two Ministers in the Dutch Cabinet — Minister of Finance Wopke Hoekstra and Minister of Justice and Security Ferdinand Grapperhaus – sent a joint letter to the President of the House of Representatives in the Dutch States-General (Parliament), outlining a series of new measures as an action plan to combat money laundering.[1]   The letter characterized money laundering as “an immense and complex problem” that made it very important that money laundering be combated “in a joint and effective manner.” [Note: All translations herein are unofficial.]

The Ministers first cited “a number of examples in the Netherlands and in Europe where the approach to money laundering clearly fell short.”  Those examples included ING, with which the Dutch Public Prosecution Service reached a $900 million criminal resolution,[2] as well as scandals relating to Danske Bank, Pilatus Bank, Versobank AS, and ABLV.  These examples, according to the letter,

show weaknesses in the system and show that it is necessary for banks to fulfill their gatekeeper function better.  Research also shows that around €16 billion is laundered annually in the Netherlands.  This mainly concerns proceeds from drug crime and fraud, about half of which comes from abroad.

While acknowledging that “[t]here is already an extensive legal framework for preventing and combating money laundering and underlying crime,” the letter included a detailed table that outlines the action plan, under three “pillars” or principal headings:

1. Increasing Barriers to Money Laundering: This section addresses increasing barriers “so that it is more difficult for criminals to bring illegally obtained income into the financial system.”  Proposed measures in this section are listed under five subheadings:
   1. Measures to prevent abuse of legal entities and structures. These include:
      1. A public registry of ultimate stakeholders of companies and other legal entities;
      2. A public registry of ultimate stakeholders of trusts and similar legal arrangements; and
      3. Countering “letterbox companies,” to address tax evasion and avoidance.
   2. Preventing the use of large amounts of cash. These include:
      1. Expansion of supervision and enforcement of customs on the transport of cash and other liquid assets within the European Union.
      2. A ban on cash from €3,000 for merchants, and periodic investigation into this limit.
      3. Committing to the abolition of the €500 euro banknote in the European context.
   3. Limiting the risks of cryptocurrencies. These include:
      1. Regulating providers of cryptowallets and cryptocurrency exchange platforms.
      2. Tightening regulation at the European level of crypto services and Initial Coin Offerings to implement Financial Action Task Force (FATF) standards.
      3. Investing in projects aimed at criminal money flows and cryptocurrencies.
   4. Countering money laundering on the “BES islands” (i.e., the Caribbean Netherlands islands of Bonaire, Sint Eustatius, and Saba). These include:
      1. Tightening the Dutch money laundering law (Wwft)[3] for the BES to limit identified risks; and
      2. Increasing the information situation, knowledge, and capacity for supervision and investigation.
   5. Continuing to sharpen anti-money laundering policy. These include:
      1. Periodic implementation of National Risk Assessments and policy monitors on money laundering and terrorism financing for the European Netherlands and the BES, so that policy can be adjusted on a risk-oriented basis; and
      2. Analysis of the Dutch money laundering policy in anticipation of the FATF evaluation of the Netherlands scheduled for 2021.
2. Increasing the Effectiveness of the “Gatekeeper Function” and Supervision Thereof.  Proposals in this section are listed under five subheadings:
   1. Strengthening prioritization in the banking sector. These included:
      1. Sufficient investment and the right “tone at the top” in the banking sector; and
      2. Dialogue between the Dutch Cabinet and the banking sector about the gatekeeper role.
   2. Increasing cooperation and information exchange between private institutions. These included:
      1. Removing existing legal obstacles to interbank data sharing for cooperation in transaction monitoring and blacklisting of “unusual” (ongebruikelijke) customers;
      2. Requesting formal advice from the Dutch Data Protection Authority[4] for:
         1. Use of the Dutch citizen service number and access to the Dutch Government’s Personal Records Database[5];
         2. Access to the closed section of the Dutch Ultimate Beneficial Ownership Register to be deployed in 2020[6];
      3. Determining the applicability of research results for other financial institutions, such as life insurers and notaries.
      4. Promote good examples of data sharing within Europe and beyond.
   3. Intensifying public-private partnerships (PPP) and collaboration between public institutions. This sets forth ten measures, including:
      1. Cooperation in the Financial Expertise Centre (FEC)[7] – a partnership between various authorities with supervisory, control, prosecution, or investigative duties within the financial sector — by means of projects aimed at specific risks, such as preventing abuse by or through foundations, cash (i.e., illegal payment), the trust sector, and investment fraud;
      2. Gaining knowledge and expertise through projects of the Dutch Anti-Money Laundering Centre[8];
      3. Promoting data processing in partnerships;
      4. Establishing a Serious Crime Taskforce (SCTF), in which money laundering subjects from criminal investigations could be shared with large banks, and vice versa, as a pilot program;
      5. Establishing priorities and sharing trends and cases within the FEC PPP and beyond;
      6. Conducting a national offensive against money laundering within the FEC PPS;
      7. Exchanging expertise between banks and authorities, such as the Dutch FIU and the Dutch Fiscal Information and Investigation Service (FIOD)[9], the Dutch anti-fraud agency;
      8. Where possible, intensifying information flow between the FIU and regulators;
      9. Research into coordination and prioritization; and
      10. Keeping a “finger on the pulse” (“vinger aan de pols”) of whether the capacity of supervisors is sufficiently guaranteed.
   4. Monitoring the approach of the trust sector. These include:
      1. Carefully following developments in and compliance with the trust sector and taking further measures if necessary.
      2. Mid-term monitoring by the Dutch central bank, De Nederlandsche Bank (DNB),[10] of initial supervisory experiences and the picture of compliance by the trust sector, in the fall of 2019;
      3. Dealing with indications, provided by the DNB, of illegal trust services; and
      4. Investigating options for an integrated approach (i.e., both administrative law and criminal law) for the trust sector.
   5. Improving compliance by accountants. These include:
      1. Focusing on better detection of fraud and corruption by accountants (with reference to the FIOD process with the Royal Dutch Professional Association of Accountants (NBA)[11]; and
      2. Expansion of the capacity of the Dutch Financial Supervision Office,[12] which oversees compliance by various professional groups with the Dutch Wwft.
   6. Increasing effectiveness at the European level. These include:
      1. Commitment to European-wide anti-money laundering supervision by a new central supervisor to be established; and
      2. Focusing on effective follow-up of post-mortem European Commission examination.
3. Strengthening Investigation and Prosecution. Proposed measures in this section are listed under four subheadings:
   1. Improving the information capacity of investigative authorities and the FIU. This includes:
      1. More opportunities for Wwft supervisors to share supervisory information with FEC partners;
      2. Establishing a banking data reference portal that gives investigators better access to banking data; and
      3. Expansion of that bank data reference portal with balance and transaction data.
   2. Intensification of investigation and prosecution. This includes:
      1. Extra capacity for the FIOD, the FIU, and the Dutch Public Prosecution Service[13] ; and
      2. A national anti-money laundering program.
   3. Strengthening the government’s approach to “undermining” activities by money launderers. This includes:
      1. Extra money from the Coalition Agreement of the four parties in the Dutch Parliament[14];
      2. Joint projects on the undermining approach;
      3. Extra police capacity (171 full-time equivalent positions) for the detection of undermining; and
      4. Tightening of various legislation in the area of Justice and Security to tackle undermining.
   4. Improving the taking away of criminally acquired assets. This includes:
      1. Extra funds (€ 30 million) from the Justice and Security Ministry; and
      2. Joint projects as part of the approach, including tightening legislation.

The Ministers emphasized that these measures, while divided into three pillars, “are explicitly linked” and “cannot exist separately.” in part because “[m]oney laundering has many forms that cannot be tackled with a single measure.”  They added that while the proposals “address the main risks that have been identified for the Netherlands . . . money laundering does not stop at the border.”  In their view, combating money laundering requires not only a national approach, but also commitment at European and global levels based on internationally established standards.

The Ministers declared that their goal “is to guarantee an honest and safe financial system,” in partnership with regulators, investigative authorities, the FIU, the Public Prosecution Service, and the parties involved in the financial sector.  They also cited the upcoming FATF evaluation as an important opportunity to measure the extent to which the Netherlands “is taking the approach to money laundering to a higher level.”

In conclusion, the Ministers stated that because “[p]reventing and combating money laundering is constantly evolving and requires constant attention and cooperation from all involved,” at the end of 2019, they would again “discuss the progress and effectiveness of the measures in the action plan with the parties involved.”  They also promised to inform the House of Representatives at the end of 2019 “about the results and state of affairs of the measures in this plan.”

This action plan by Ministers Hoekstra and Grapperhaus indicates a substantial commitment by the Dutch Government to achieve comprehensive improvements in its capacity to combat money laundering.  It is likely more than coincidence that the Ministers’ call to increase cryptocurrency regulation and track criminal use of crypto channels comes only weeks after the FATF released its own guidance on regulating cryptocurrencies.[15] But the Ministers’ letter makes clear that they intend the action plan overall not only to make immediate improvements in the Government’s approach to combating money laundering, but to make a strong showing to the FATF that that approach is thorough, well integrated, and effectively implemented.

Footnotes

[1] See Letter from Wopke Hoekstra and Ferdinand Grapperhaus to President, Dutch House of Representatives (June 30, 2019), available at Rijksoverheid, Press Release (July 1, 2019).

[2] See Openbaar Ministerie (Public Prosecution Service), ING pays 775 million due to serious shortcomings in money laundering prevention (September 4, 2018).

[3] See Netherlands Financial Intelligence Unit (FIU), Wwft (Prevention) Act.

[4] See Autoriteit Persoonsgegevens.

[5] See Government of the Netherlands, Personal Records Database.

[6] See January 2020 target for Dutch UBO register, despite criticism, DutchNews.nl, April 5, 2019.

[7] See Financieel Expertise Centrum, About the FEC.

[8] See Anti Money Laundering Centre.

[9] See Fiscale Inlichtingen en OpsporingsDienst, FIOD.

[10] See De Nederlandsche Bank.

[11] See Koninklijke Nederlandse Beroepsorganisatie van Accountants, About the NBA.

[12] See Bureau Financieel Toezicht.

[13] See Openbaar Ministerie, Dutch Public Prosecution Service.

[14] See Government of the Netherlands, Coalition Agreement ‘Confidence in the Future’.

[15] See Yessi Bello Perez, Dutch ministers push for cryptocurrency regulation to fight money laundering, The Next Web, July 1, 2019.

Jonathan J. Rusch is Principal of DTG Risk & Compliance, a consulting firm specializing in corporate-compliance issues, and Senior Fellow in the Program on Corporate Compliance and Enforcement at New York University Law School.

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