The Dutch Money Laundering and Terrorist Financing (Prevention) Act (Wet ter voorkoming van witwassen en financieren van terrorisme, Wwft) is still under development and a new draft amendment has been tabled in the Lower House. The aim of the amendment is to bring the Wwft into line with the European legislation and to address shortcomings identified by the Financial Action Task Force (FATF). The government takes the view that the Wwft should be periodically expanded and amended in order to guarantee the effectiveness of its measures. At the same time, international pressure to tighten the legislation is heavy as ever.

The Wwft imposes an obligation on banks, insurers, brokers, lawyers, civil-law notaries, investment companies, accountants, trusts and – under the new amendment – real-estate valuers to report irregular transactions. So, what kind of additional regulations can these institutions expect in the future?

General

  • Staff must receive periodic training in the identification of irregular transactions.

Identification

  • As part of a client investigation procedure, constant monitoring will be required of business relationships with clients and all transactions within these relationships;
  • The client and the Ultimate Beneficial Owner (UBO) must be identified at all times or the absence of an UBO must be ascertained;
  • It is mandatory, when acting for natural persons, to determine whether the natural person is acting for him/herself or on behalf of a third party, and whether he/she possesses the necessary authorisation;
  • Checks must be performed on representatives acting for a legal person to ensure that they have the correct authorisation;
  • Under the Wwft, client investigation requires the acquisition of insight into the ownership structure and the chain of authority and, in the case of a trust, confirmation of the identity of the founders and the trustees;
  • Any (intended) irregular transaction must be reported if the client investigation fails to deliver results and there are indications of involvement in money laundering or the financing of terrorism;
  • The requirements with regard to Politically Exposed Persons (PEP) apply to all foreign PEPs, regardless of domicile, and to UBOs who are also PEPs.

Reporting

  • A revised definition of transaction means that any ascertained irregular transaction by a client or third party for the purposes of or in connection with a service must be reported. This also applies to transactions that do not arise directly from the business relationship with the client and to transactions that take place before the business relationship is initiated; Preliminary interviews with a lawyer, civil-law notary or tax consultant still qualify as exceptions;
  • The obligation to report irregular transactions will be extended to all goods that are eligible for registration. As a result, services for the purchase or takeover of a part of a company and the establishment of mortgage rights without additional servicing also fall under the reporting obligation.

Despite criticism (from professional groups in particular), the amendment passed the Council of State relatively intact. The inconsistencies between the FATF recommendations and the current European legislation on money laundering are expected to lead to a new EU directive on money laundering in the near future. This will probably result in further amendments to the Wwft.

We would be happy to discuss any questions you may have in relation to the reporting and identification obligations under the current Wwft and any future amendments there of and to the periodic internal staff training.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.