Money laundering is a growing problem in the Netherlands, with estimates suggesting that around €16 billion in illegal funds is laundered there every year — money derived from a range of criminal activities, including drug trafficking, sexual exploitation and extortion. In 2018, Dutch bank ING was fined $900 million for failing to spot instances of money laundering in its international banking services, and in 2019, ABN Amro, part-owned by the Dutch government, was found to have been funnelling billions of dollars of illegal money from foreign countries.
Given the urgent focus on money laundering, the Netherlands’ government imposes strict reporting regulations on banks and other financial institutions, which must report all suspected criminal activities to the Financial Intelligence Unit (FIU), the country’s principal governmental organization in charge of anti-money laundering regulation. The FIU does not just serve the Netherlands’ interests in preventing domestic financial crime; it also plays a significant role in the global fight against money laundering by working with counterpart FIUs across the European Union and with other international financial authorities and agencies.
As a bank or financial services provider doing business in the Netherlands, it is important to understand the FIU’s role and the AML/CFT compliance requirements that it imposes.
What is the FIU?
The FIU is the entity to which all obliged entities in the Netherlands, including banks and financial institutions, must report when they detect suspicious transactions. The FIU was established in 2006 as a replacement for its predecessor, the Reporting Point for Unusual Transactions (MOT), which was a department of the Dutch Ministry of Justice. As an independent governmental organization, the FIU is managed by the National Police.
The FIU analyzes reported transactions in order to uncover and confirm suspected money laundering and terrorism financing activity. When an FIU investigation concludes that criminal activity is taking place, it works with the Netherlands’ law enforcement agencies and other authorities to ensure that suitable enforcement action is taken.
Part of the FIU’s mandate is to contribute to the international fight against money laundering and terrorism financing. As such, it works to uphold the Netherlands’ commitments to the anti-money laundering standards set out by the EU in its Anti-Money Laundering Directives and by the Financial Action Task Force (FATF) in its 40 Recommendations. Similarly, FIU-Netherlands works with FIUs in other EU member states, sharing information and cooperating in cross-border investigations.
The FIU operates pursuant to the Netherlands’ primary AML legislation: the Money Laundering and Terrorism Financing (Prevention) Act — known as the Wet ter voorkoming van witwassen en financieren van terrorisme (Wwft). The act sets out the legal standards for AML in the Netherlands and is intended to protect the integrity of the financial system and public confidence in the economy. In accordance with FATF recommendations, the Wwft requires financial institutions to take a risk-based approach to AML: this means they must perform risk assessments of their customers and adjust their AML response to reflect the level of risk that they present.
As a member of the EU, the Netherlands is also subject to the AML regulations introduced by the Anti-Money Laundering Directives. In July 2019, the government of the Netherlands introduced the 5AMLD Implementation Act, which functioned to transpose the various measures introduced in the directive into Dutch law, under the scope of the Wwft.
The Wwft defines the entities that must report suspicious activities to the FIU. These include banks, investment firms, payment service providers, money exchange institutions and cryptocurrency services. In order to comply with AML regulations in the Netherlands, in accordance with the Wwft, firms must put the following measures in place:
Customer due diligence: Firms must conduct adequate customer due diligence (CDD) to ensure that their customers are being truthful about their identities and the nature of their business. Practically, this means that firms must collect identifying information, including names, addresses and dates of birth, and establish beneficial ownership when dealing with a customer-entity. Higher risk customers must be subject to enhanced due diligence measures (EDD).
Transaction monitoring: In order to detect potential money laundering, prior to reporting to the FIU, firms in the Netherlands must monitor their customers’ transactions and account activity. Firms should be vigilant for unusual transaction volumes or frequencies, transactions with high-risk countries or transactions with any characteristics that don’t match the customer’s established risk profile.
Sanctions and PEP screening: Firms should screen their customers and their transactions against relevant international sanctions lists. This includes the EU’s consolidated sanctions list, and any sanctions that the Netherlands imposes independently. Similarly, firms must screen their customers to find out if they are politically exposed persons (PEPs) and therefore at a higher risk of being involved in money laundering.
Adverse media monitoring: Adverse media or negative news stories often indicate that a customer’s AML risk profile has changed. In order to remain aware of the money laundering risk that they face, firms in the Netherlands should actively monitor for adverse media stories involving their customers. An adverse media program should take in global television and print media along with online news sources.
The Wwft also entails a range of peripheral obligations in support of its core AML objectives. Those obligations include a requirement to maintain accurate customer records in order to inform ongoing risk assessments and to provide periodic training to employees to ensure that they are able to deliver AML compliance in accordance with the Wwft.