Stricter legislation for trust companies

An article that was previously posted on our website (in Dutch) described the revised Money Laundering and Terrorist Financing (Prevention) Act. This Act inter alia sets forth the so-called gatekeeper function to be performed by professional service providers in the financial sector. Part of this gatekeeper function is the obligation for professional service providers to screen clients before and during their relationship with the client.

On January 1, 2019, the Dutch Trust Companies (Supervision) Act 2018 (TCSA 2018) entered into force. In this Act, which replaces the Trust Companies (Supervision) Act from 2004, the performance of the abovementioned gatekeeper function by trust companies is laid down. According to the Dutch legislator, a separate act for trust companies is necessary due to the fact that trust services entail higher integrity risks.    

The purpose of the TCSA 2018 is to improve the integrity of the financial system by further regulating the trust sector. The guiding principle remains that trust companies are responsible for the screening and identification of integrity risks and that they are also required to both identify and manage these risks. In order to improve the integrity of the financial system, the TCSA 2018 includes stricter rules, which include:

  •  the obligation to have a board with two executive board members;
  • the obligation to have an internal compliance function;
  • additional obligations with regard to client screening; and
  • the obligation to request particular information from other trust companies.        

In order to effectively enforce those rules, the powers of the competent regulatory authority – the Dutch Central Bank (De Nederlandsche Bank) – have been expanded. The Dutch Central Bank has, among others, the power to disclose formal measures and the ability to exchange information with both foreign and domestic governmental authorities.