It took a while for the Dutch banks, especially ING and ABN Amro, to catch on. In the international fight against money laundering, they cannot remain on the sidelines. Indeed, since the money laundering process can take place via financial institutions, their involvement is of great importance. They are the first to understand the money flows and the relationships behind them. To give institutions direction, the Prevention of Money Laundering and Terrorist Financing Act (Wwft) was introduced in 2008.
Wwft
The premise of the Wwft is defined in section 2a:_
"To prevent money laundering and terrorist financing, an institution conducts customer due diligence and reports unusual transactions made or planned (...)_In doing so, an institution pays particular attention to unusual transaction patterns and to transactions that, by their nature, pose a higher risk of money laundering or terrorist financing."
The Wwft aims to combat money laundering and terrorist financing and has four core obligations for the institutions covered by its scope:
1. conducting thorough client due diligence on a risk-based basis;
2. reporting unusual transactions to the Financial Intelligence Unit Netherlands (FIU);
3. offering periodic training to employees so that they can recognise unusual transactions and carry out a customer due diligence properly and completely;
4. adequately recording risk assessment results to provide to regulators upon request.
Service institutions thus have a role to protect the financial system from money laundering and terrorist financing and thereby ensure the integrity of the financial system. These institutions act as 'gatekeepers' protecting the integrity, stability and reputation of the financial system.[1]
Failure to comply with this obligation constitutes an economic offence[2]. If this offence is committed intentionally, it is a criminal offence. If the regulations under the Wwft are breached by an institution, fines can be imposed that can amount to 20 % of the offender's net turnover in the previous financial year.[3]
Who enforces the Wwft?
The Ministry of Finance and the Ministry of Justice and Security are jointly responsible for the policy and rules against money laundering and terrorist financing. For each sector, a regulator checks whether all parties comply properly with the Wwft[4]:
- Wwft Supervision Bureau (Inland Revenue) supervises brokers, appraisers, traders, pawnbrokers and domiciliary providers (parties that provide an address or mailing address).
- The Dutch Central Bank supervises banks, credit institutions, exchange institutions, electronic money institutions, payment institutions, life insurers, trust offices and safe deposit box lessors.
- The Financial Markets Authority supervises investment firms, investment institutions, banks and financial service providers that provide life insurance.
- The Financial Supervision Office Supervises accountants, tax advisers and notaries.
- The Dutch Bar Association supervises lawyers.
- The gaming authority supervises gaming casinos.
Investigations against ING and ABN-Amro
Although ING and ABN Amro bank did know these compliance rules, despite warnings they failed to effectively piece together money laundering signals and act on them appropriately. The million-dollar transaction in the Wachovia/USA case should also have been a wake-up call. In this case, US bank Wachovia Corporation settled for $ 160 million because the banks had facilitated business activities of Mexican drug dealers[5]. Nevertheless, these Dutch banks remained 'business as usual'[6] or even 'business over compliance'.[7]
The supervisors and the public prosecutor could have mutually decided to leave it at the finding that the provisions of the Wwft had been violated and impose a hefty fine or periodic penalty under the articles in section 4.2 of the Wwft. Another possibility was a settlement in which the case was settled out of court, but in which it was agreed that the bank would pay sums of money for violating the Wwft provisions. Possibly accompanied by a deprivation claim. The settlement would then be concluded with the public prosecutor and not with the regulator. The regulator enforces mainly through penalty payments and fines, while tailor-made settlements can be made with the OM. Given the Una Via principle, it cannot be both.
But the public prosecutor did not leave it at the conclusion that the Wwft had been violated and went further. The public prosecutor is said to be of the opinion that the banks were so careless with regard to the money flows of certain customers that it would also constitute debt laundering within the meaning of art. 420quater of the Criminal Code. The banks should have reasonably suspected the criminal origin of certain funds. The banks therefore did not do what might be expected of a financial institution in its role as gatekeeper.
Debt laundering is a culpable offence in the penal code that can already occur if there is no adequate response to money laundering indicators through, for example, reporting to the FIU.
Needless to say, this additional charge of money laundering hurts the banks in question a lot. Not only after fines of hundreds of millions, accompanied by similarly high confiscation claims (mainly due to cost savings), but also because, following the Article 12 Sv decision in the case against ING, the public prosecutor looks[8] (the Houston case) also choose to hold de facto executives criminally liable. As in the case against ABN Amro (Guardian) against the sole de facto managers.
Banks are improving their behaviour
Meanwhile, banks have invested hundreds of millions to better fulfil their gatekeeper function and not get involved in money laundering as facilitators. This does put them in a split. Banks (primarily) have a social function in the service of economic trade. Refusing or divesting customers and excluding non-cash payments does not fit in with this.[9] Banks have also already been knocked back by the court that required the bank to provide a checking account to the bank as yet[10].
On top of this, money laundering provisions only seem to be expanding. With the criminalisation in 2017 of simple debt laundering[11] it seems that almost everything can be brought under the money laundering provisions. There is also international pressure, with the introduction of the sixth anti-money laundering directive[12] and the creation of new institutions such as the Anti Money Laundering Authority (AMLA) [13]
Imbalance
In November 2021, Medy van der Laan, president of the Dutch Banking Association (NVB) sounded the alarm. Tackling financial crime must become much more meaningful. She expressed outright shock at the imbalance between what banks do as gatekeepers and the judicial chain that comes after it:[14] According to her, the Justice Department is not doing enough with the valuable money-laundering data provided by the banks:
"Currently, some 12,000 people are checking money laundering situations. Altogether, they now make over a million reports annually to the Financial Intelligence Unit (FIU), where 76 people sit to process all those signals of unusual transactions. Of the tens of billions of criminal money involved in the shadow economy, the Justice Department only manages to get its hands on about €45 mln every year."
'These are numbers we are not steeped in when we invest over a billion,' Van der Laan said recently on BNR Nieuwsradio. 'It's not balanced, it's a mortal sin.'
She also spoke out against the 'zero tolerance policy' among regulators, who have treated banks to high fines in the past for inadequate anti-money laundering policies. 'We have to operate perfectly and that costs a lot of money and manpower. But we have now become so good that police, judiciary and FIU cannot actually keep up.'
And that is surely where the shoe pinches. It is doubtful whether, in prosecuting institutions, imposing sky-high fines, imposing deprivation orders and prosecuting executives, the Public Prosecution Service (and regulators) sufficiently recognises that combating money laundering is an unprecedented job for gatekeepers. The government should certainly know better now that with 76 people apparently at the Financial Intelligence Unit (FIU), it cannot keep up with the flow of reports. That is hardly surprising with 722,247 unusual transaction reports in 2020[15].
Impact on trade
At the same time, banks' actions do have quite an impact on trade. Under threat of prosecution, banks do everything they can to avoid being seen as money-laundering facilitators and may slip up in this.
The Supreme Court anticipated this development in its November 2010 ruling:
'The legislature has thus left it to the prosecution and the courts to ensure that money laundering provisions are not applied in respect of essentially non-criminal provisions. This restrained application is of great importance because too broad a scope of the money laundering provisions could disproportionately impede normal trade.[16]
From chamber documents from 2007/2008 and the covenant ''Enforcement policy of the Financial Markets Authority and the Dutch bank' from 2008 already showed that the prosecution should limit itself to special cases:
The structural nature of the offences committed or the need to launch an investigation so that certain investigative powers can be deployed may be reasons to opt for criminal law. The degree of intent and culpability, connection with other (common) offences (for which only criminal law is available), the extent of the damage, the importance of protecting the public and social unrest may also make it necessary to opt for criminal law.r a criminal justice approach is adopted.[17]
Harmonising instead of criminalising
However, the scope of money laundering provisions has only widened and the end is not yet in sight. At the same time, tough action is being taken against Wwft offenders with the non-reporting project[18]. Thus, it cannot be said that money laundering provisions are being applied with restraint. With great effect, on banks in particular. Wwft institutions are saddled with a huge amount of tasks and associated costs, which hamper trade, while there is still too little capacity in the government to adequately process reports.
There does not seem to be much understanding at the moment, for example at the DNB.[19] Despite efforts to recruit qualified staff and invest large sums of money, the DNB in December 2021 expressed disappointment with the way banks supervise money laundering, crime and terrorist financing.[20] The DNB also points out that banks would mainly clear backlogs and be little proactive. The DNB seems to have little regard for the enormity of the job, the efforts that are being made and the difficulty that, for example, the FIU itself has in investigating the reports more closely.
Prosecutors and regulators also seem to move fairly quickly to subpoena institutions alleged to have breached the Wwft duty[21]. Sometimes too soon and fines for violations are revoked by the court[22].
There is still a long way to go before the money laundering problem will have become manageable.
This calls for an anti-money laundering approach with more attention to the complexity of the problem from the public prosecutor's office. So more support from the government instead of being a watchdog in the hunt for non-reporting institutions. The government could start by criminalising gatekeepers less, but seeing them as an ally in the fight against money laundering.
Mr. D.M. Penn
[1] Guardian investigation, the criminal investigation into ABN Amro N.V. Factual account and assessment by the prosecution, p. 6
[2] Art. 1 under 2 WED in conjunction with Article 2(1) WED
[3] Among others, Section 32 Prevention of Money Laundering and Terrorist Financing Act.
[4] https://www.rijksoverheid.nl/onderwerpen/financiele-sector/aanpak-witwassen-en-financiering-terrorisme/veelgestelde-vragen-wwft
[5] https://www.nbcnews.com/id/wbna35914759
[6] Guardian investigation, the criminal investigation into ABN Amro N.V. Factual account and assessment by the prosecution,
[7] https://www.fiod.nl/wp-content/uploads/2018/09/feitenrelaas_houston.pdf § 5.4
[8] ECLI:NL:GHDA:2020:2347
[9] Mr J.B.S. Dorant and Mr A. Verbruggen, 'Recent developments in money laundering', Journal of Special Criminal Law & Enforcement 2020, pp. 23-30
[10] For example, Rb. Amsterdam 26 April 2021, ECLI:NL:RBAMS:
2021:2098, requiring ABN AMRO to open a checking account for a copfeeshop
[11] art. 420quater.1 Sr
[12] Directive (EU) 2018/1673 of the European Parliament and of the Council of 23 October 2018 on combating money laundering by criminal law
[13] https://ec.europa.eu/commission/presscorner/detail/en/IP_21_369
[14] https://fd.nl/politiek/1420772/banken-witwasaanpak-moet-zinvoller-worden-hfc2caKk4OS
[15] FIU Netherlands 2020 annual review
[16] HR 23 November 2010, ECLI:NL:HR:2010:BN0578
[17] The Wwft: the state of anti-money laundering legislation for the financial sector
[18] https://www.om.nl/onderwerpen/fraude/witwassen/ongebruikelijk-transacties About the non-reporting project
[19] https://www.dnb.nl/betrouwbare-financiele-sector/witwassen-en-crimineel-geld-bestrijden/
[20] https://fd.nl/financiele-markten/1422476/opvallend-harde-kritiek-dnb-op-witwasaanpak-banken-nhc2caKk4OSz#Echobox=1638882057
[21] E.g. ECLI:NL:RBAMS:2021:2600, fine of 40,000 for 6 offences
[22] ECLI:NL:RBOT:2020:9752