Wwft varia Q1 2023

From unusual to suspicious transactions?

In the Netherlands, Section 16 ‘Wwft’ (The Dutch implementation of the European anti-money laundering directive) requires that unusual transactions be reported to the Financial Intelligence Unit (FIU). In the Dutch Central Bank’s (DNB) study 'from recovery to balance', DNB raised the idea that the legislator could choose to shift the focus when reporting transactions from 'unusual' to 'suspicious' transactions. The background is that this would increase the effectiveness of the reporting chain. In my opinion, this would also address a practical frustration regarding this effectiveness among institutions that fall under the scope of the Wwft. The Court of Audit (‘Algemene Rekenkamer’) concluded earlier last year that the reporting chain does not yet function optimally and cannot yet process transactions optimally, see Wwft varia Q2. In the policy response to DNB's report, Minister of Finance Mrs. Kaag said that although she recognized that the reporting chain could be more effective, she was not currently in favor of revising the reporting system. She explained that "[T]he reporting system in the Netherlands is deliberately designed to be as accessible as possible in order to relieve all gatekeepers (not only banks) as much as possible of the burden of investigating unusual transactions. Reporting suspicious transactions imposes additional burdens on gatekeepers. After all, gatekeepers in such a system need to conduct more in-depth investigations of transactions to determine whether there is more to it than just an unusualness. FIU-the Netherlands is better equipped to do that."

It is good for institutions to have this background again in mind in practice. After all, from a Dutch perspective, this also gives color to the question of how far an institution must - but possibly also may - go to investigate transactions. This could play a role when clients answer questions from institutions, for example banks. It also substantiates the general proposition that, in principle, a report of an unusual transaction does not have to entail the end of the business relationship. This might then be more likely in the case of feedback received from the FIU that the report has been declared suspicious. It thus also raises the interesting question of whether a distinction can/should be made between client due diligence and transaction due diligence. Undeniably, a certain overlap is visible in this, given, for example, the provisions of Section 3(2)(d) Wwft.

From another perspective, this is also interesting. How does an institution's investigation from unusual to suspicious transaction relate to a client's rights under Section 6 of the European Convention on Human Rights, if we can assume that the client's answer will in some way be forwarded directly to the FIU without the client having been given any notification. It could be objected that most of the questions and answers will be in writing, but how will the assessment play out if, for example, the continuation of a bank account is made dependent on the answers to these questions. In other words, what (degree of) pressure does this entail and may it entail? Shouldn't a notification, a warning that the client may incriminate himself by answering these questions, become part of the institution's duty of care, especially where private-public partnerships are intensified?

I read in Minister Kaag's wording ("at this time") that she does not rule out a tour of suspicious transactions in the future. I am therefore very curious whether DNB will take up the offer of a meeting with her to discuss the suggestion. In any case, other member states are fine with a different reporting system.

UBO - registry

On November 22, 2022, the Court of Justice of the European Union issued a judgment on the public accessibility of the UBO register. According to the Court, public access to UBO information constitutes a serious interference with the right to respect for private life and the right to protection of personal data. According to the Court, this restriction of fundamental rights goes beyond what is necessary and is disproportionate to the objective it pursues.

As a result of this ruling, Minister Kaag immediately closed access to the UBO-register until further notice. From answers to Parliamentary questions of December 20, 2022 it follows that authorities do have access again to the information from the UBO-register and that it is being investigated whether and how access can be given to (which) institutions with a duty to report and to organizations with legitimate interest, such as journalists and NGOs. Public access remains excluded in light of the ruling.

It follows from the January 20, 2023 parliamentary letter that the minister will come up with a bill to amend Section 21 of the Trade Register Act 2007 and that access to the UBO register should be limited to competent authorities and the FIU, institutions subject to a reporting obligation and persons and organizations that can demonstrate a legitimate interest. For Wwft institutions, this practically means that access to the UBO register will be restored as soon as practically and operationally possible.

Inquiry duty

In late November, Minister Kaag provided additional clarification on the Money Laundering Action Plan Bill of late September last year. Part of this bill concerns the so-called "duty to inquire". This entails first of all - in case of established high risk - an obligation for an institution within the meaning of the Wwft to investigate whether an (other) institution of the same category (e.g. within the legal profession or brokerage or as another trader) i) provides services to the client, ii) has provided them or iii) has refused them. This duty of inquiry should be reasonable and depends on the context of the situation. You already feel it: it is in accordance with the usual open formulations of the Wwft. If the answer is positive then inquiries should be made with the fellow institution about identified money laundering or terrorist financing risks. The requested institution should provide this information - notwithstanding any applicable duty of confidentiality. Furthermore, please note that institutions should - before entering into a business relationship with a client - inform the client of this obligation. This legal provision aims to prevent "shopping behavior" that allows malicious clients access to the financial system.

Beleidsregel Toezicht Wwft 2023: lapsed generic AML/Wwft training requirement for lawyers

In 2023, the Policy Rule Supervision Wwft 2023 will be published by the Dean's Council. It has already been announced that one of the most important intended changes concerns the AML/Wwft training obligation for lawyers who do not handle Wwft cases. This obligation will lapse as of January 1, 2023. Of course, the AML/Wwft training obligation for attorneys who do handle Wwft cases will apply in full.

We are happy to think with you about Wwft issues. Please feel free to contact Jurjan Geertsma or Oscar Pluimer.