On May 2015 the Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (also known as 4th (AML) Directive) was adopted, but the EU Member States were given a two-year period for bringing their legislation into compliance with this Directive, and to take additional measures for the purpose of battling money laundering and terrorist financing. This had to be done by 26 June 2017.
Due to the initial dissimilarity in national AML/CTF legislation across Europe and ways of regulating the area of financial, corporate and trust services, this Directive impacts different EU Member States also differently. Speaking about the Netherlands, the impact is not too significant due to the fact that the Dutch were traditionally in the front lines of the fight against money laundering and have quite an extensive legislation on this matter already in place. It is worth mentioning that from year to year the Netherlands also maintain a good standing in Corruption Perception Index (CPI) ratings: for example, 8th place in 2016 and 9th in 2015.
The Dutch law on prevention of money laundering and terrorist financing (Wwft) was adopted in 2008 and laid down rules for client identification, know-your-client (KYC) standards and measures. Being amended since, by the year 2017 it already imposed an obligation on the entities involved in financial transactions, legal or bookkeeping services, intermediary services etc. to perform client due diligence (CDD), transaction monitoring and keep records available for the authorities upon request. Since 2014 the current version of the law on trust offices (Wtt) is also in force, setting even more detailed and strict rules for trusts and management companies and corporate services providers. In many ways those businesses were put under regulations in many ways similar by strictness to the rules applied to financial institutions (such as banks). During the past years this area of legislation was further developed and harshened, for example, in the requirements of independent audit. A new version of the law (Wtt 2018) is currently being discussed in the Second Chamber of Dutch Parliament, and still can be adopted before the end of the year.
There are several points of relevance for any business in the 4th AML Directive. For trust offices and service provider the first and foremost is that the threshold of a financial transaction from which a CDD should start has reduced to EUR 10.000.
Another point is a change regarding politically exposed persons (PEPs). The definition now also includes members of the governing bodies of political parties, and the approach is now the same for PEPs who are resident in the same country as the service provider and those who are not.
Finally, the EU Member States are now obliged to create central registers with information on the beneficial ownership. The idea is to improve the quality of the available data on the beneficial owners and to give more instruments to the national government bodies tasked with dealing with unusual or suspicious transactions, bodies such as FIU-Nederland (in action since 2006). These registers are also supposed to meet the demand of the Financial Action Task Force (FATF) for a higher level of transparency in matters of beneficial ownership. As for the Netherlands, creation of this register is currently being delayed, although proposals for the relevant piece of legislation were submitted in the first half of 2017. After its adoption, companies will have one and a half years to comply with the requirement.
It is true that disclosing client information to the authorities now is a requirement rather than a possibility; however, this data does not go public, thus observing confidentiality of the sensitive information. In this regard the anti-money laundering legislation is being affected and complemented by the General Data Protection Regulation (GDPR) which entered into force on 25 May 2018.
There are additional provisions in the 4th AML Directive regarding banks and gambling entities, but these areas are outside of the scope of this article. Banks have always been subjected to special regulations and supervision from the authorities, and the same, but for a different reason, can be said about the gambling industry. Naturally, the strict control over the areas most vulnerable to money laundering and illegal financial activities must be an important part of any state AML/CTF policy, and deserves more detailed approach in a separate article.
As the conclusion, the AML Directive is another step towards harmonization and centralization of the KYC/CDD requirements around Europe. Previously, some of the Member States used to have less strict rules and procedures, and now must adapt. Of course, the AML Directive provides that each Member State still can tailor their legislation on AML according to their needs, but the principles and key points will be the same. While the 4th Directive most likely will not have much impact on international business in the Netherlands, as it already incorporated one of the highest AML standards in Europe in its national legislation, the changes in other parts of Dutch legislation, such as corporate and tax, may actually cause the loss of some of the unique advantages the Netherlands had in the eyes of the international business. At the same time, worldwide developments and changes could bring new opportunities for the Netherlands, especially as the result of Brexit.