Implementation of the Fourth Anti-money Laundering Directive

Under the Money Laundering and Terrorist Financing (Prevention) Act (Wwft), financial institutions and professional service providers have been required for some time to gather certain information about their clients and to report any unusual transactions to the competent bodies. Furthermore, they also have to establish who are the ultimate beneficial owners of the clients.

On 16 October, a legislative proposal was put before the Dutch Lower House for the implementation of the European fourth anti-money laundering directive (which we will refer to as the “implementation act” for the sake of brevity) that will lead to an amendment to the Wwft. The introduction of the legislative proposal is somewhat late as the directive should have been implemented by 26 June 2017.

Oddly enough, this legislative proposal is also lacking arrangements for the introduction of a central register for ultimate beneficial owners of Dutch legal entities (which we will refer to as the “UBO register”). The introduction of the UBO register is after all one of the core points of the implementation of the fourth anti-money laundering directive and is considered an important means of combating money laundering and the funding of terrorism.

The explanatory statement to the proposal for the implementation act casually mentions that the UBO register will be introduced at a later and more opportune moment. This delay is perhaps not so strange, as it is considered in the light of the extremely critical reactions to a draft for a law to introduce the UBO register that was presented for consultation earlier this year. The Secretary of State said in his letter of 12 September 2017 to the Lower House that the aim is to send a draft legislative proposal for the UBO register to the Lower House in early 2018 and to introduce the law in Summer 2018.

The commission tasked by the Lower House to conduct a preparatory study issued a report on 17 November with a large number of questions about the legislative proposal to the cabinet, including:

  • Why is there a separate legislative proposal for the UBO register?
  • What are the differences between EU member states with regard to the implementation of the implementation act?
  • Why are important concepts, such as the concept of ultimate beneficial ownership (UBO) and politically prominent person (PPP) regulated in secondary legislation?
  • Will authorised representatives be included in the UBO register?
  • Why was the choice made for a public UBO register?
  • Can the definition of the concept UBO be further explained and details provided about whether someone who does not hold shares or voting rights is a UBO?
  • Can there be an exception for public interest institutions, as is also the case for religious denominations?
  • Will members of parliament soon be subject to intensified client screening under the Wwft, for instance if they open a bank account or take out a mortgage?
  • What does the risk-based approach of client screening entail?
  • Can the UBO register be evaded via a trust of jointly-held fund?
  • What does it mean that higher level management can designate staff as a UBO?
  • What is the difference between ‘senior management’ and ‘higher level management’?
  • What are the consequences of bringing purchasers of goods under the Wwft?
  • Can the Wwft ultimately lead to (due to ‘appropriate administrative measures’ that are required) the suspension of certain business activities, such as the loss of services to consumers?
  • Can information be provided about how the new Wwft prevents disproportionate consequences for small businesses that fall under the Wwft?
  • Has a privacy impact assessment been conducted on the implementation of the implementation act in the Netherlands that also includes the UBO register?
  • How is the protection of personal data that is exchanged being guaranteed?

The legislative proposal for the implementation act so far leaves many questions unanswered.

We still have to wait for the legislative proposal for the UBO register.

For now, there remains quite some excitement around the implementation of the fourth anti-money laundering act in the Netherlands!

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