Tackling money laundering continues to be a government spearhead in the fight against organised crime. Dutch policy on prevention and repression is based in part on the recommendations of the Financial Action Task Force (FATF). The FATF is an intergovernmental organisation in which the Netherlands is also represented. For EU member states, most of the FATF recommendations have been transposed into several successive anti-money laundering directives. Under these directives, EU member states are required to implement risk-based anti-money laundering policies and biennially conduct a risk analysis National Risk Assessment (NRA) to be implemented. This obligation is also stipulated in the Money Laundering and Terrorist Financing (Prevention) Act (Wwft). On 4 April last, the results of the risk analysis conducted by the Scientific Research and Data Centre (WODC) for the year 2023 were announced.
The highest risks are the threats with high potential impact and where there is low resilience of available policy tools. The latest risk analysis shows that improving supervision of banks and crypto service providers has borne fruit. Improved client investigations and transaction monitoring have made the financial system a lot more compliant and thus more resilient to money laundering threats. Consequently, the latest risk analysis now focuses more on money laundering methods involving cash flows, such as underground and hawala banking.
Underground (and hawala) banking is an informal payment system, outside regular financial services that is not supervised. In its simplest form, it boils down to parties agreeing that if cash is moved in country A, cash will also be moved in country B. The system is based on trust. The system runs mainly on trust, which means that it is not always necessary for cash to physically cross country borders. Overall, drug crime largely involves cash. In theory, underground banking can also take place with legal money, but this too is punishable because a licence is required to bank in the Netherlands. Illegal banking is not yet the same as money laundering.
The Anti Money Laundering Centre (AMLC) indicates that underground banking with criminal money has different characteristics from traditional underground banking with legally obtained money. According to the AMLC, case law suggests that a number of facts and circumstances, including the use of a token and/or a PGP phone could be an indicator of underground banking.
In any case, the fight against money laundering is a kind of cat and mouse game and both money laundering methods and anti-money laundering policies are always adapted to circumstances. Given the threat to the financial system from cash flows, as is the case with underground banking, it would make sense for the government to do away with cash altogether. But that is not going to happen.
As recently as April 2022, the DNB concluded a covenant with banks, cash service providers and representatives of point-of-sale establishments and consumers, among others, agreeing that cash will remain legal tender in the future. The European Commission also expects the Netherlands to continue to ensure the acceptance and accessibility of cash. After all, it should remain not only a legal but also a usable means of payment.
This does not mean that the government will not continue to try to discourage cash payments in other ways. Accordingly, a bill is currently in the pipeline to the effect that cash payments above €3000 will be banned and only allowed to be made by book entry. The proposal is still in preparation and it will be some time before it is put to a vote. Whether the proposal is adopted will partly depend on the composition of the second chamber at the time. Something that is also not so easy to predict these days.
Mr DM. Penn